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The Real Reason Warren Buffett's Taxes are Low
Yahoo News ^ | 08/17/11 | Peter J. Reilly

Posted on 08/17/2011 9:03:24 AM PDT by MissesBush

Warren Buffett was in the New York Times today bragging about his low effective tax rate and saying how he would like to be paying more. Fellow Forbes contributor Tim Worstall weighed in quibbling about Mr. Buffet not factoring in the corporate taxes on Berkshire Hathaway's earnings. I'm just a simple CPA, whose firm won't even let him sign audit reports anymore. (That's true of all tax partners here by the way. I don't take it personally). I don't want to quibble with a quibble but apparently economists have a hard time figuring out the incidence of the corporate income tax (i.e. who is really paying it), so I think we can let go of that piece of the analysis.

Still Mr. Buffet is not sharing the real reason that he doesn't pay much in the way of income tax relative to his great fortune. The secret is hidden in plain sight. Mr. Worstall alludes to it when he mentions that Berkshire Hathaway does not in fact pay dividends. Mr. Buffet's secret which you can find blasted all over the Internet is one of his famous quotations:

Our favorite holding period is forever

You only pay income taxes at any rate on realized appreciation. An investment with a holding period of forever incurs a capital gains tax of 0%, while all along the holder can be getting wealthy from appreciation. That's the real reason Mr. Buffet does not pay a lot of income taxes.

(Excerpt) Read more at news.yahoo.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: buffett; oracle; taxes; warrenbuffett
Buffett is a phony and a fraud. Typical "Do as I say, not as I do" DemoCrite. But the media as always refusing to look an 8th of an inch under the surface will use Buffett as an example of the wealthy "not paying their fair share" and take him at his word.
1 posted on 08/17/2011 9:03:31 AM PDT by MissesBush
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To: MissesBush

If Warren Buiffet wants to give more money to the government I’d like to know who’s stopping him from doing so?


2 posted on 08/17/2011 9:04:48 AM PDT by MeganC (Are you better off than you were four years ago?)
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To: MissesBush

Hey, Warren, you could pay mine.


3 posted on 08/17/2011 9:09:23 AM PDT by bgill (just getting tagline ready for 6 months after you vote in Perry - Tried to warn you he's a RINO.)
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To: MeganC
That's because he actually wants one or more of the following:
4 posted on 08/17/2011 9:11:50 AM PDT by douginthearmy (lifetime registered republican)
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To: MissesBush

Is it really “giving from the goodness of your heart” if you’re giving money so you can write it off on your taxes? Let’s see old Warren be a real philanthropist and take no tax write-offs for charity. Whoops! The old tightwad doesn’t believe in that kind of charity. Have some more tapioca Warren.


5 posted on 08/17/2011 9:12:21 AM PDT by blueunicorn6 ("A crack shot and a good dancer")
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To: bgill
The higher the taxes the more Buffett can steal from taxpayers as he has done with Net Jets and many companies he bought on death taxes unable to be paid.

The more taxes the more money his companies get from the Federal Government.

6 posted on 08/17/2011 9:13:11 AM PDT by scooby321
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To: MeganC

obozo is STILL repeating the same old tripe that Buffet’s secretary pays more in income taxes than Buffet does. It really gets old. Why isn’t there even one person with an ounce of common sense in that administration that can say - hey - you said that 3 years ago, think of something new!

THINK? What’s that?


7 posted on 08/17/2011 9:15:50 AM PDT by Thank You Rush
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To: MissesBush

There should be an “idiot tax” for any rich person advocating higher income taxes. The idiot tax would tax 25% of ASSETS, but only for idiots saying we need higher taxes..


8 posted on 08/17/2011 9:17:38 AM PDT by rokkitapps ( Hearings on healthcare waivers NOW! (If you agree make this your tagline))
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To: Thank You Rush

Time to levy a “wealth” tax on the super rich..rather than a higher income tax on the struggling small business’s in the country. If that were the way we taxed the rich..Buffet would become a conservative real quick.


9 posted on 08/17/2011 9:19:55 AM PDT by Oldexpat
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To: MeganC

how to make a contribution to reduce the debt

You can make a contribution online either by credit card, checking or savings account at Pay.gov
You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it’s a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188

http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm

maybe he’s out of stamps


10 posted on 08/17/2011 9:20:11 AM PDT by WOBBLY BOB (My mind is like a steel trap: rusty and illegal in 37 states.)
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To: MissesBush
I'll bet Warren also employs an army of accountants and lawyers to keep his tax rate low. He knows that the tax code will always contain loopholes, no matter what the rates are. So increase the rates, keep the loopholes, and Warren still doesn't pay. The ones paying are the schmucks who can't afford the army of tax help.

Typical limousine lib. "Tax increases and privileged status for thee and not for me."

As has been said before -- Warren, ya want a tax increase? Fine, write a check and leave the rest of us the h@ll alone.

11 posted on 08/17/2011 9:21:24 AM PDT by Emile (Leftists are so 'open-minded', their brains have fallen out. -- (HT to GOPJ))
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To: Emile
Meh. Should have read:

"Tax increases for thee and not for me, privileged status for me and not for thee."

12 posted on 08/17/2011 9:23:52 AM PDT by Emile (Leftists are so 'open-minded', their brains have fallen out. -- (HT to GOPJ))
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To: MissesBush

It begs to wonder - if back in the day, we did what Buffett now wants, would Buffett have ever become what Buffett is now.


13 posted on 08/17/2011 9:26:21 AM PDT by tentmaker
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To: MissesBush

Warren Buffet is well known in Texas for talking his book. Nothing more than that.

You can bet that he has a payoff in mind down the road.


14 posted on 08/17/2011 9:31:03 AM PDT by texmexis best
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To: MissesBush

How many Samll to Medium sized businesses can afford to hire a full time tax lawyers and finanacial planners to not pay as much taxes?

Would a small business hire a tax lawyer for 90,000 a year to save even 80,000 a year on taxes?

Would a big business like G.E. hire a hundred tax lawyers and Financial Officers for $30 million to save 5 BILLION in taxes? They would be stuipid NOT to.

This is one of the reasons the economy is so far out of whack.

We need simplified tax laws with a lower rate that is applied EQUALLY across the board.

Otherwise the tax code becomes a make work program for accoutnants, a tax loophole for the big boys, and a burden on the back of the small and mid sized businesses.


15 posted on 08/17/2011 9:37:34 AM PDT by GraceG
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To: MissesBush
Suprisingly good article to make it into Yahoo-- although I understand the original article was printed in Forbes magazine.

Japan's economy boomed until they started listening to economic advisors foisted on them by the Clinton administration. It has been downhill ever since.

Still, I am in awe of how the corporations there still manage to stay healthy despite a higher tax rate than ours. They basically do what Buffett does-- they pay little or nothing in dividends on capital gains and hide their assets in more tax friendly countries abroad, repatriating portions of them basically only once per year to dress up their coroprate balance sheets for the end of the March 31 fiscal year.

If you sell yen in March and buy it almost any other time of the year, you are virtually guaranteed to make money in FOREX because almost all Japanese companies are buying yen in March to dress up their financial statements. You can't make as much as you used to because traders are very much aware of this technique, but you still can make it trading FOREX. At one time, even the Japanese Government's Bank of Japan did exactly that to get a double helping of revenues around the March 31 fiscal year end:

  1. Money made by selling yen in March.
  2. Money made by collecting taxes in April from repatriated corporate profits.

    The dirty little secret is that Japan muddles through this little game of state sponsored socialism and keeps individual income taxes comparatively low for the middle class precisely because they have such a small portion of their society on the government teat. Almost everyone pays taxes.

    There is not an army of imported ethnic lobbies which take far more in public services than they pay in taxes. Guest workers are tolerated only to the extent that they pay as much or more into the system as they take out. You might even call them racist and most Japanese won't even flinch if you did. They are proud of having a country which is overwhelmingly middle class and foreign workers who mostly appreciate the opportunities which Japanese society offers, rather than hating them for not giving them more. IOW, it could even be said that lack of diversity is their strength.


16 posted on 08/17/2011 9:38:25 AM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Oldexpat
Time to levy a “wealth” tax on the super rich..rather than a higher income tax on the struggling small business’s in the country.

Damn good idea. Let them exempt the first five million or so and make it modest until it gets to 50 million or so, then confiscatory after a half billion.

You wouldn't even have to pass the tax bill, just introduce it and move it along toward passage before the Warren Buffet's and Teresa Heinz Kerry's of this country would start changing their tune really quick.

17 posted on 08/17/2011 9:45:56 AM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: douginthearmy

Can we abolish the use of the term loophole?

What we really mean is that a part of the tax code was written to allow [fill in the blank].

When we use the term loophole the suggestion is that it something unethical, illegal, or misused. The people who save taxes based on these regulations are just following the law. Nothing more or less. And, in fact, if a corporation did not use every deduction or exemption the managers and officers would be negligent in their fiduciary responsibility.

This is why we need to fix the regs, not get angry at people who follow them.


18 posted on 08/17/2011 9:47:22 AM PDT by Vermont Lt (George Lopez is the black hole of funny. Nothing funny can escape his suck.)
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To: MissesBush
If Buffett's sooooooo concerned about paying 'his share' he needs to take out his checkbook, write a damn check and shut up.

If he wants to go further he can fire all the CPA's he employs and hire H&R block to do his taxes... I suspect the group at the mall won't be able to 'save' him quite as much...

19 posted on 08/17/2011 10:01:47 AM PDT by GOPJ (One ring to rule them/one ring to find them/one ring to tax them/and in indebtedness bind them.)
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To: MissesBush
There's a fairly simple to understand reply and I am deeply, deeply saddened to have never heard it uttered:

Buffet is in fact subject to a much higher marginal tax rate on his income than is his secretary. However, Congress has seen fit to incentivize certain economic behavior by offering tax breaks as a means to achieve their result. Think about the deductability of charitable contributions as a prime example. Now Warren can instruct his accountants to stop taking advantage of theses tax breaks, take the standard deduction, and pay his full "fair" share. There is nothing stopping Buffet from doing that. Why doesn't he?

20 posted on 08/17/2011 10:17:57 AM PDT by NonValueAdded (Murray / Baucus / Kerry / Upton / Clyburn? I've had better picks come out of my nose.)
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To: NonValueAdded; All

Berksire-Hathaway has been in the Life Insurance business for decades.

BH sells various life insurance and annuity products - and the very purpose of those products -

LOWERING ONE’S TAX LIABILITY IF ONE HAS SIGNIFICANT WEALTH AND INCOME THAT WOULD BE SUBJECT TO HIGH TAXES DURING ONE’S LIFE AND AFTER ONE’S DEATH WHEN ONE’S HEIRS INHERIT THE WEALTH.

So of course Mr. Buffett wants tax rates to go up like crazy - that will drive TONS OF NEW CUSTOMERS to look for products that Berkshire-Hathaway sells.

Just in case you have some wealth that you want to pass on to your heirs and need to lower your tax liability, here’s a link to brkdirect...

http://www.brkdirect.com/

MY SINCERE THANKS to everyone in the SCP (so-called press) for pointing out the fat, stinking, hairy elephant of a conflict of interest on Mr. Buffetts’ populism.


21 posted on 08/17/2011 10:27:43 AM PDT by PieterCasparzen (We need to fix things ourselves)
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To: MissesBush

bm


22 posted on 08/17/2011 12:39:24 PM PDT by Para-Ord.45
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To: Vermont Lt
Vermont Lt said: "The people who save taxes based on these regulations are just following the law. "

You're exactly right.

Not only that, but people who save taxes based on these regulations are doing EXACTLY what Congress and the President who signed the law want them to do.

The government decides to encourage people to buy homes by providing a tax deduction for home interest. Nobody deserves blame for doing exactly what the government intended.

The government decides to encourage investment in corporations by providing a lower tax rate on capital gains. Nobody deserves blame for doing exactly what the government intended.

If the government eliminated these two laws, I would sell stocks the day before the rates were to rise and pay off my home mortgage. Though this is what ought to be happening, if everybody did this on the same day it would be quite exciting. We are so constrained by these kinds of laws that there is no simple way to get back to the small-government that our Founders intended. It's going to be very painful.

23 posted on 08/17/2011 1:43:13 PM PDT by William Tell
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To: William Tell

Quite honestly, for the first two years I was in business I paid no taxes on pretty decent EBIDA. I took accelerated depreciation for small businesses during those two years. One year we got back everything I would have paid, and what my wife paid into the system.

Not so lucky in the past couple of years. Although this year has been a capital upgrade year.


24 posted on 08/17/2011 2:27:14 PM PDT by Vermont Lt (George Lopez is the black hole of funny. Nothing funny can escape his suck.)
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