Republican desperation for a legislative win means a tax reform package has a better chance of making it through Congress, Warren Buffett said during a television interview.
But calling it “reform” is disingenuous, the billionaire investor said during an appearance on CNBC Tuesday. It’s not a “not a tax reform act, it’s a tax cut act,” he said.
The new framework for a tax overhaul released by President Donald Trump and Republican leaders last year, calls for changes including a cut in the top corporate tax rate to 20% (from 35%), and lowering the rate for high-earning Americans to 35% from 39.6%.
Buffett has been an outspoken advocate for changes in the tax code, most famously for claiming that his secretary pays a lower tax rate than he does, despite his massive wealth. He was giving the interview, on CNBC Tuesday, to discuss his new investment in Pilot Flying J truck stops.
Investors will know soon though if the tax changes are going to happen Buffett predicts, saying it will be determined “within three months, actually less than that.”
Trump and GOP leaders repeatedly targeted the end of 2017 to get the tax plan through Congress and are trying to get through the initial steps to make that possible including passing a budget, hammering out the details of the legislation, and winning over interest groups and the American public.
‘A terrible mistake to start with’
Despite these challenges, Buffett said it’s “a real possibility” that Congress will pass a bill and the chances are “higher than most people think.”
“Any politician that can’t pass a tax cut is probably in the wrong line of work,” Buffett said.
Buffett also said that he would wait and see how the tax push played out before doing any significant selling of Berkshire Hathaway stock in order to avoid paying unnecessary taxes on his gains.
“I would feel kind of silly if I realised $US1 billion worth of gains and paid $US350 million in tax on it if I just waited a few months and would have paid $US250 million,” Buffett said.
In terms of the actual details of the plan, Buffett did not appear as sold on the proposal.
For one thing, he disagrees with the idea of eliminating the estate tax — which is paid by people inheriting more than $US5.7 million in assets. Buffett said that eliminating the tax would reinforce a “dynastic” system that ran counter to American values.
“That’s not good for capitalism, it’s not good for the children, and I sure don’t think it’s good for society where there’s already a ton of inequality to start with,” Buffett said, referring to the heirs of large estates. “I think that’s a terrible mistake to start with.”
Buffett has already committed to the Giving Pledge, which means he will give away at least half of his wealth during his life and after death.
Additionally, while Buffett agrees that lowering the federal corporate tax rate to 20% from the current 35% would be beneficial to Berkshire shareholders and corporate profits, he doesn’t think taxes are holding American businesses back.
“We have a lot of businesses, 60 or 70, and I don’t think any of them are non-competitive in the world because of the corporate tax rate,” Buffett said.
Watch Buffett’s comments via CNBC: