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

[Torie]

As long as the folks on my block and other similar blocks do the same. No man is an island.

[blackdog]

He can't just come out and say that brokerage firms have been lying, cheating, crooks for the past ten years, that would be suicide. Shouting from the rooftops about Wallstreet ethics does no good at this point either and he knows it. Way too late for that.

This is that root-type problem solving that creates lasting change. After all, I heard from my brokers a thousand times that dividends were pointless and to be expecting them is so old school.

All those stocks I owned that were not paying dividends and boasting the fact have slid from $18 to $2, $28 to $14, and $63 to $12. They all had to restate earnings several times for periods covering several years. Those which did pay dividends survived the bubble bust just fine. Now what should first hand experience say about my broker/s now?

[supercat]

In all probability, I can afford to pay more of a percentage of my income than you can, and I should, provided that overall it does not kill the goose the lays the golden eggs. That is my value judgment.

The notion that rich people can "afford" to pay a higher percentage of their income in taxes than poor people is insidious. It implies that taxes should be based on what's affordable, rather than being minimized.

Worse, it contributes to the class envy about "tax cuts mainly benefitting the rich", since it hides the imbalanced tax load the rich are already bearing.

[Trailerpark Badass]

In all probability, I can afford to pay more of a percentage of my income than you can, and I should, provided that overall it does not kill the goose the lays the golden eggs. That is my value judgment.

Cute. So you don't think, but emote.

[MississippiMan]

How noble of Buffet. He could be taxed at 75% for the rest of his life and it wouldn't make one tiny bit of difference in his lifestyle. But he wants you and me to ante up a little more.

Of course, I don't remember him being elected to make fiscal or tax policy for this country, either. Do you?

MM

[Trailerpark Badass]

As long as the folks on my block and other similar blocks do the same.

But you can't be sure of that, can you, so you choose to force them by law.

[E. Pluribus Unum]

As long as the folks on my block and other similar blocks do the same. No man is an island.

But you already said you could afford it. You already admitted you are not paying your fair share.

It appears that what you are REALLY interested in is seeing the government confiscate peoples' earnings under threat of violence and/or jail.

You aren't interested in "fairness" at all, otherwise you would already be sending in your fair share.

What you want is CONTROL.

[Torie]

The level of government spending is another issue. But yes, progressive taxation has its downside to the extent that fewer folks pay most of the cost of government. That is an intelligent point. It is, like most public policy issues, a balancing test, about which reasonable folks can disagree, because they see different things in their crystal ball as to what the long term consequences of tax policy might be.

[The South Texan]

Buffet is just another Rat and a Clinton lover. Somebody should ask him to move to New York or Californina if he doesn't mind paying so much taxes. Hypocrite!

[lasereye]

It should be noted that GEICO which is owned by Berkshire Hathaway won't sell auto insurance in New Jersey. Most of Berkshire's profits come from insurance. The NJ Democrats (and in other states) have blocked auto insurance deregulation for years, while claiming the sky high insurance rates there (under THEIR regulations) are due to insurance company profiteering. Somebody should ask Buffet about that. Why aren't they cashing in on the "huge profits" (according to his fellow Dems) there? Does he think deregulation is a good idea?

Note that a key to Buffet's success in insurance is his ability to spot and avoid risks. He's considered a master of that.

[lasereye]

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.

I doubt Buffet takes much of a salary from Berkshire Hathaway. He gets his money in capital gains, which aren't taxable until he decides to sell his holdings, which will be never. So he also doesn't benefit from a cut in income tax rates either, which he also opposes.

[blackdog]

I seem to remember the insurance companies that whined about covering states with mandated coverage racked up the biggest losses in non-insurance investments and blamed it on auto insurance payouts. When challanged over it they refused to let their books be examined.

I think we should all study the Amish sub-economy and modify our positions.

[supercat]

The level of government spending is another issue. But yes, progressive taxation has its downside to the extent that fewer folks pay most of the cost of government. That is an intelligent point. It is, like most public policy issues, a balancing test, about which reasonable folks can disagree, because they see different things in their crystal ball as to what the long term consequences of tax policy might be.

It has been said that democracy is two wolves and a sheep voting on dinner. Accepting the legitimacy of "progressive" taxation creates precisely that danger: 51% of the population deciding to raise the taxes on the other 49%. We are right about at that point now; if we don't do something very soon, the 51% will kill the goose that lays the golden egg [they've already crippled it badly].

[Torie]

Actually, the marginal levels of tax rates these days are fairly modest vis a vis what they have been during the period from WW II to about 1980. What has happened in part is that the top 20% of earners make so much more relatively speaking than they once did, that the government can afford to drop the low earners off the rolls.

[Dolphy]

He can't just come out and say that brokerage firms have been lying, cheating, crooks for the past ten years, that would be suicide. Shouting from the rooftops about Wallstreet ethics does no good at this point either and he knows it. Way too late for that.

I don't think he can do that, nor do I think it's necessary. I am quite certain that the President can find the appropriate language to create greater understanding and public support for the dividend tax cut.

[dwswager]

He favors progessive taxation.

So do I, a flat tax percentage rate. A single rate would be both progessive (the more you make the more you pay) and fair. Eliminate all deductions. No taxes on capital gains, dividends or interest! Charge up that economy. Also, everyone pays. We need to get everyone on the rolls so that they will vote against tax increases and vote for limited government.

[lasereye]

Well heck, Berkshire Hathaway doesn't have any big losses in non-insurance investments. You'd figure they'd have no problem cleaning up in NJ.

[iopscusa]

Sure, "Progressive Taxes"...no such thing, most taxation is only "progressive" if one leans towards the disease of Socialism, like ...Warren Buffett....who needs to return to his Omaha Rabbit Hole and leave his advice out of the public debate...sure he can afford to refute tax cuts, he is a short-timer and will probably give his billions to the USCommunist Party, where the Ford, Pew, DuPont, etal, Trust $$$ are distributed thru the maze to the LEFT and Anti-Freedom groups. Never forget this: the only good tax is no tax and only way to control spending is to stop the flow of dollars to our "representatives" and replace all Congress Critters and other Freeloaders that object to living in the real world. TAX REFORM NOW...Everybody pays taxes, no free rides,no UN payments, no non-profit status for anyone, no NPR, no Farm aid, the Federalies have only a few tasks...primarily defense of the electorate. Every dime spent elsewhere needs a total review from top to bottom....our TAXES are confisculatory, illegal and send our limited resources to the lowest possible ROI for the tax expenditures. I want the highest return on our resources. It is time to invest in the things that maximize the return for America and Americans...I want to invest in American Excellence, there is nothing else in this world that needs my TAX dollars...RANT Off...LOL, IMO of course.