Bill Clinton just made headlines by referring to Texas Gov. Rick Perry as a “good looking rascal.” But the real rascal of the moment is not Perry or any other political candidate.
It’s Warren Buffett.
He may be one of the richest men in the country, but the Sage of Omaha wins the Rascal of a Lifetime Award. Don’t get me wrong, I admire Buffett. But you can’t deny he is a “money-making rascal.” His latest “rascality” takes the cake.
Last weekend, Buffett made headlines when, in Sunday’s edition of The New York Times, he called for increasing taxes on the wealthy and argued that even he was not paying enough.
He despaired that people like himself are not paying their fair share. His Times Op-Ed screamed this headline: “Stop Coddling the Super-Rich.”
I read the article and smirked.
For many years now Buffett has pointed out that he pays less tax than his secretary. How could the country’s most well-known billionaire, worth $50 billion, get away with that?
Here’s the significant reason — one that Buffett omits from his Op-Ed: He has traditionally drawn a tiny salary from his company Berkshire Hathaway and gives no dividends to shareholders like himself.
So, even if Buffett raised income tax rates on the wealthy, he might not pay significantly more in taxes. By keeping his wealth in his company, Buffett has discovered one of the best tax avoidance schemes ever invented. And Buffett never suggests that corporate loopholes that he’s personally taken advantage of for decades should be closed.
For example, his Berkshire Hathaway company has acted as an effective holding company for his vast investment portfolio. Last I checked, Berkshire Hathaway was generating over $7 billion in dividend income each year from stocks the company owned.
Due to a special exemption (read: loophole) Buffett enjoys, his company benefits from the fact that nearly 90 percent of the dividend income is exempt from any corporate tax! (I do too, as I am a shareholder as well.)
Buffett is then able to take these wads of tax-free cash and re-invest them, buying more stocks or whole companies — a strategy he’s been employing for decades as part of his wealth-creating money machine.
So Buffett knows that even if tax rates were raised on the income of the so-called “wealthy,” it would have little or no effect on the “super-rich” like himself who put a corporate shell around their assets and never disburse much cash to themselves in the form of income or dividends.
In fact, in the storied history of Berkshire Hathaway, Buffett has only once granted a dividend.
In his Times article, Buffett maintains that investors do not make decisions based on tax rates. This is simply absurd and flies in the face of his own actions over a lifetime.
If Buffett really wanted to tax the rich and make them pay their fair share, as he says, he could do one of two things.
First, he could call for the closing of big corporate loopholes and have companies like Berkshire treated like investment holding companies, so their dividend income would be payable each year by the stockholders.
Second, Buffett could easily call for a “net asset tax” that would require him and other mega-rich people to pay an annual tax on the value of their assets.
Frankly, I don’t like any more taxes on corporations, nor do I believe taxing the wealthy is the way to economic prosperity.
Buffett has made one of the greatest fortunes playing the system, one he really doesn’t want to change.
To his credit, Buffett is giving his immense fortune back to charity, so my hat is off to him, even if he didn’t fess up to his rascal-like behavior in The New York Times.
© 2021 Newsmax. All rights reserved.