Buffett Opposes Dividend Tax Cut

Reuters ^ | 5/5/03 | Bill Rigby

[lasereye]

OMAHA, Neb. (Reuters) - Warren Buffett, the billionaire investor, urged big shareholders on Sunday to get together to tackle bad chief executives and dismissed President Bush's dividend tax-cut plans as unfair.

He also said he had named four potential successors to lead his Berkshire Hathaway Inc. insurance and investment company after him, and was looking at making more investments in Asia.

Buffett, who has built up a devoted following for the success of his investing style and firm stance on ethics in business, was speaking at a press conference in Omaha, Nebraska, the day after Berkshire Hathaway's annual meeting attracted a record 15,000 shareholders.

The 72-year-old Omaha native, the second-richest man in the world behind Bill Gates, said it was time for large shareholders to force change in U.S. boardrooms, as new rules and individual shareholders alone could not.

Companies saw large shareholders as ``the 800-pound gorilla they don't want to have mad,'' Buffett said, suggesting institutions get together to present a set of principles to companies they invest in, threatening to withhold support if the companies do not comply.

Buffett, a long-time critic in his widely read annual reports of corporate greed, played down his own role in the process, saying his efforts to rein in wayward chief executives would take place behind closed doors.

``I've said my piece basically. I'm not going to lead a revolution.''

BAD BEHAVIOR ON WALL STREET

He singled out accountants and Wall Street bankers for their role in the decline in corporate ethics.

``You would be amazed how compliant auditors have been in the past decade, not only co-operating but suggesting techniques for making numbers less useful -- less truthful -- to investors.''

Buffett, who started his career as a broker and was once chief executive at Salomon Brothers, said the recent settlement by Wall Street firms over their misleading use of research was welcome.

``It's a step in the right direction,'' said Buffett. ``It tells them (Wall Street firms) that someone is watching them. It forced them to acknowledge certain behavior -- which they would have carried on doing -- was unacceptable.''

ASIA IN SIGHTS

Buffett said he was interested in investing in Asian companies, following the recent increase of his stake in Chinese oil company PetroChina Ltd, but said bargains were hard to find.

``We've been looking at companies there,'' Buffett said of Asia. ``We are open to buying stocks in them, and where there is a possibility -- not in China -- we would buy entire businesses.''

There are restrictions in China on foreign ownership in many industries.

Buffett, who said he owns several Asian equities in addition to PetroChina, said he monitors Japanese companies frequently, but hasn't seen many buying opportunities there, despite the slide in stock prices.

``The returns on equity are very low in Japan,'' he said. ``I would have thought I would find more bargains -- I would have thought there would be a plateful -- but we don't find lots.''

He conceded that acquisitions or stock purchases in Asia were more risky than in the United States: ``There's a little more chance of making a mistake. But we're willing to do it.''

ATTACKS TAX PLAN

Asked about President Bush's plan to eliminate the tax on companies' dividends, Buffett said it would unfairly benefit rich people like himself, at the expense of ordinary workers.

``He (Bush) is not changing the amount the American public sends the government,'' Buffett said, ``just changing who does it.'' The only way to cut taxes is to cut government spending, Buffett added.

Buffett, who plans to give away his more than $30 billion fortune after his death, campaigned several years ago against phasing out certain estate taxes, arguing that it would unfairly benefit rich families.

Planning his own company's future, Buffett said he has named four potential successors to run Berkshire after he dies or is unable to run the company, but said those names could change.

Buffett did not identify the candidates, but said he did not want someone in their 60s to succeed him.

Buffett, who has run Berkshire for almost 40 years, has no plan to retire, unless forced to by physical or mental incapacity.

© 2003 Reuters

[lasereye]

They interviewed the Sage of Omaha on NBC News tonight. He said the dividend tax cut won't create any jobs. If he meant it won't directly create any he's right. In the long run it will create a ton of jobs. Buffet's just being ideological like any Democrat, which he is.

"This is an extremely radical proposal," said Glenn Hubbard, who spoke at the conference hosted by Gabelli Asset Management. Now a professor at Columbia University and director of the program on tax policy at the American Enterprise Institute in Washington, D.C., Hubbard just finished a two-year stint as chairman of the president's Council of Economic Advisers.

"As proposed, this plan could add a full percentage point to GDP growth," Hubbard said, countering the argument that the proposal won't stimulate the economy.

"Eliminating the tax on dividends will raise share prices anywhere from 5% to 15%, lowering the cost of capital. An 8% to 9% rise in the stock market will translate to $800 billion or $900 billion in market value -- equal to a third of a percentage point rise in GDP.

[dinok]

great...another Billionaire who wants me and my family to eat cake.

Kiss off Warren

[Nick Danger]

Buffett said it would unfairly benefit rich people like himself, at the expense of ordinary workers.

What is this about? Buffett himself doesn't believe this. Warren Buffett is a huge employer. Every dollar he gets goes into something that provides jobs for people. He himself lives very simply for a guy with $30 billion. What, he's threatening to go on a conspicuous consumption binge if his taxes are lowered? Even that creates jobs for people.

It is precisely the guys who don't have to spend every nickel they get, who create jobs for the rest of us. Who the hell cares whether Warren Buffett has $30 billion or $35 billion? Almost all of it is invested in job-creation activities. The more money we throw at him, the more job creation activities he can engage in. He's good at it -- we should let him do more of it. It's sure a hell of a lot better for us than putting it in the hands of Senator Snowjob, who will just toss it on the pork pile.

This is about something else, and I suspect that what we have here is a guy using the rhetoric of class warfare -- apparently against himself -- to do the exact opposite of what he's saying. He's trying to keep his own taxes down.

What's that? How could avoiding a tax cut lower his taxes? In Buffett's case, if money goes out of the corporation and into his personal pocket in the form of dividends, his behavior will be to pour it right back into the corporation, i.e. to buy stock with the dividends. Many of his shareholders would do the same. To them, this looks like taking money that had long since gone into the "long term capital gain" bucket and transferring it into the "just bought this" bucket. That reduces his flexibility to sell, by exposing him to higher short-term capital gains taxes.

He isn't going to "benefit" at all from a cut in dividend taxation. Berkshire Hathaway does not pay dividends. It's a 100% capital appreciation play. The tax he and his shareholders are worried about is capital gains, not the double taxation of dividends.

The people who will benefit most from a cut in dividend taxation are people who live off them, which is a whole bunch of retired people with a lot less money than Warren Buffett. This may sound like Warren trying to help the poor, but he's only trying to help himself.

[Torie]

Buffet is by and large a liberal on economic issues. He favors progessive taxation. So do I. The trick is just what is the the fairest and more econmically nuetral and least economically depressive way to achieve such progessive taxation. That is where the heavy lifting begins in trying to intelligently answer that question.

[E. Pluribus Unum]

So a guy with billions and billions thinks people with thousands and thousands don't need the hard-earned money they actually worked for.

Isn't that special?

[republicanwizard]

If he loves taxes so much, then why not move to Massachusetts? I'm assuming he still lives in Nebraska for a reason.

[Use It Or Lose It]

Just so you know, I'm embarrassed that Warren Buffett is from Omaha.

[blackdog]

Warren Buffet should be indicted for being an accessory to fraud. What Buffet knew about Wallstreet and the investment banking world and when he knew it served to position him and his interests. He had begun to warn the regular folk in the end of 1999 of a tech bubble burst and an overvalued market. Not once did he meet with SEC investigators or congressional banking committees to drop a dime on what he knew.

I thought we had good samaratin laws in this country? He just watched passively for ten years and then has to say something that dresses up his eulogy. The man is an ass facing his mortality and has some second thoughts now.

[Trailerpark Badass]

He favors progessive taxation. So do I. The trick is just what is the the fairest and more econmically nuetral and least economically depressive way to achieve such progessive taxation. That is where the heavy lifting begins in trying to intelligently answer that question.

So, I guess what you're saying is that anyone who disagrees with you and Warren is just plain wrong.

Is that about it?

[WOSG]

Warren Buffet is a Liberal Democrat, folks.

Liberal Democrat Opposes Republican Tax Cut

How surprising is that? This is news?

[E. Pluribus Unum]

He favors progessive taxation. So do I.

So did Marx.

The Principles of Communism by Fredrick Engels

"Democracy would be wholly valueless to the proletariat if it were not immediately used as a means for putting through measures directed against private property and ensuring the livelihood of the proletariat. The main measures, emerging as the necessary result of existing relations, are the following:

(i) Limitation of private property through progressive taxation, heavy inheritance taxes, abolition of inheritance through collateral lines (brothers, nephews, etc.) forced loans, etc.

(ii) Gradual expropriation of landowners, industrialists, railroad magnates and shipowners, partly through competition by state industry, partly directly through compensation in the form of bonds.

(iii) Confiscation of the possessions of all emigrants and rebels against the majority of the people.

(iv) Organization of labor or employment of proletarians on publicly owned land, in factories and workshops, with competition among the workers being abolished and with the factory owners, in so far as they still exist, being obliged to pay the same high wages as those paid by the state.

(v) An equal obligation on all members of society to work until such time as private property has been completely abolished. Formation of industrial armies, especially for agriculture.

(vi) Centralization of money and credit in the hands of the state through a national bank with state capital, and the suppression of all private banks and bankers.

(vii) Education of the number of national factories, workshops, railroads, ships; bringing new lands into cultivation and improvement of land already under cultivation -- all in proportion to the growth of the capital and labor force at the disposal of the nation.

(viii) Education of all children, from the moment they can leave their mother's care, in national establishments at national cost. Education and production together.

(ix) Construction, on public lands, of great palaces as communal dwellings for associated groups of citizens engaged in both industry and agriculture and combining in their way of life the advantages of urban and rural conditions while avoiding the one-sidedness and drawbacks of each.

(x) Destruction of all unhealthy and jerry-built dwellings in urban districts.

(xi) Equal inheritance rights for children born in and out of wedlock."

Such fine company you keep.

[WOSG]

"So, I guess what you're saying is that anyone who disagrees with you and Warren is just plain wrong."
"

ROFLMAO!

A flat tax is a fair tax. "progressive taxation" is a regressive and old-fashioned idea that is morally and economically WITHOUT MERIT.

[SBprone]

Buffett likes the tax system the way it is because he is the absolute master of tax planning under the current system. Berkshire Hathaway doesn't pay dividends. It retains all of its earnings in order to fund new investments, mostly in acquired companies. On those rare occasions when Buffett realizes a capital gain he is able to offset it with a capital loss on one of his losers.

Rich folks not paying any tax is mostly a myth. Except for really smart guys like Buffett.

Buffett is unique in that he has been able to re-invest earnings profitably, which most CEOs are unable to do over the long term. If all public corporations were forced to re-invest earnings, as Buffett does, it wouldn't make these investments any more profitable than they are now.

It comes down to this: Buffett wants the tax code to continue to punish investors in companies that pay dividends. I'm not sure why he thinks this way but I suspect it is because of his scornful hatred of the majority of corporate CEOs and their directors. Whatever the reason, Buffett's campaigning on this issue is despicable!

[PhiKapMom]

This is news?

You have that right! Why anyone would be shocked at Buffet is beyond me!

[E. Pluribus Unum]

He favors progessive taxation. So do I.

So did Marx.

[Torie]

Maybe I missed something, but your post seems wholly inapposite. If is amuses you to label me a Marxist, be my guest. LOL.

[fieldmarshaldj]

Torie digs himself a hole, part 20,697. *snickers*

[fieldmarshaldj]

Yeah ! How dare he call you a Marxist ! :-)

[Torie]

No, that is not it. The issue of within certain constrainst of progressive taxation is a value judgment. It is neither right nor wrong. And I disagreee with Buffet because I don't think he is sensitive to the issue of how to make the rich pay more in the most economically effective way from the standpoint of protecting and increasing the size of the overall economic pie. Eliminating the double taxation of dividends does by and large strike me as a good idea in and of itself. Sorry, but I don't quite fit into your little matrix of boxes you have constructed for yourself. I build my own boxes.

[Torie]

At least I gave you some pleasure this evening. For some reason, I find it impossible to dislike you. It must be a character flaw. Regards and cheers.