Warren Buffett's pleas to increase taxes for high earners evidently don't include taxes on dividends paid by his own company.
Buffett’s recent decision to invest in Bank of America means Berkshire Hathaway will enjoy an effective tax rate of 10.5 percent on the $300 million in dividends it will receive each year from BofA, The Wall Street Journal reports.
Though U.S. corporations are subject to a top federal income tax rate of 35 percent — the second highest in the world — Buffett and the Berkshire investors won't pay anything close to that on their investment in Bank of America preferred shares.
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The reason? Corporations can exclude from taxation 70 percent of the dividends they receive from an investment in another corporation.
This exclusion was intended to prevent double, or even triple, taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders.
Buffett’s BofA purchase is another tax-avoidance triumph for the company’s CEO.
The Sacramento Bee reported that Buffett’s company was the fifth largest beneficiary of the Troubled Asset Relief Program (TARP) government bailout in 2008 and 2009.
Though Berkshire didn’t directly receive funds from the government, Buffett had negotiated stock purchases of more than $13 billion in the top recipients of TARP funds, including Goldman Sachs Group, US Bancorp, American Express and Bank of America, which analysts all thought were in deep trouble at the time.
Berkshire’s TARP holdings then constituted 30 percent of its publicly disclosed stock portfolio, a proportion that reflects at least twice as much dependence on bailed-out banks as any other large investor.
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