Warren Buffett, Tax Hypocrite

 

The Buffett Rule, named after its impresario, billionaire investor Warren Buffett, is simply this: a guaranteed minimum tax for individuals who “make” over $1 million per year.

Warren likes it, Obama likes it — it’s a very popular rule. Forget, for a moment, that the rule doesn’t really specify what “make” means. Rich people tend to make a lot of money in a lot of different ways. Some of it is “income,” but a lot of it is other stuff, like capital gains. Investors and hedge fund dudes make it and call it “carried interest,” which (as far as I know) isn’t taxed as income. Okay, well, forget those troublesome details. Focus just on the “fairness” issue that the Buffett-Obama axis likes to use.

“It’s not fair,” they say, “that the richest among us pay such a small amount into the national kitty.”

From Bloomberg, via the Zero Hedge blog:

President Barack Obama has criticized American companies that move to other nations in search of lower corporate tax bills. Between mid-June and late July, at least five large American companies announced plans to make such a shift — known as an inversion. That includes AbbVie Inc. and Medtronic Inc.

Buffett has supported Obama’s push to increase personal income taxes for the wealthiest individuals while striking deals that reduce Berkshire’s obligations to the government. This year, his company limited taxes on more than $1 billion of gains in Graham Holdings Co. stock by swapping the shares for assets owned by the former Washington Post publisher.

And now Buffett is helping finance the “inversion” deal joining Burger King and Canadian doughnut empire Tim Horton’s — a business move that makes sense only as a way to minimize the company’s (US) tax bill, again from Bloomberg:

Warren Buffett is helping to finance Burger King Worldwide Inc.’s planned takeover of Tim Hortons Inc., according to people familiar with the matter, backing a buyer that would move its headquarters to Canada where corporate taxes are lower.

You see, taxes are something that you should pay. Higher ones, especially. Tax avoidance, tax-related economic behavior, the basic conservative idea that low taxes create (and higher taxes destroy) incentives to build businesses and take financial risk — these are all things that, according to Buffett, only apply to gajillionaires. From Zero Hedge:

…the “Buffett Rule” appears to have one caveat… if you are making over a $1 billion, you’re good to go with tax-avoidance strategies. In one of his career’s most hypocritical moves Warren “tax-me-more” Buffett has decided that putting his money where his mouth is no longer makes sense.. and is funding $3 billion of Burger King’s “tax-inversion” takeover of Canada-based Tim Hortons. Somewhere on a golf course, a Presidential Putter is being snapped across a knee…

Look, this isn’t wrong: any company should be allowed to do whatever it wants to maximize its value. What’s wrong is the way pious and smug billionaires talk about “paying more” when they know that they’re not going to.

If Buffett thinks that corporate tax rates are too high (and they are), have him call his friend Barack Obama and get them lowered. 

If Barack Obama thinks tax moves like this are “unpatriotic” — and he’s said that before — have him announce to the world that his friend Warren Buffett is un-American.

I won’t hold my breath. Both of these guys understand each other.

There are 59 comments.

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  1. KC Mulville Inactive

    Well, surely Obama is going to direct bureaucrats to find some loophole in the deal, right? Invalidate it? Use the bureaucracy as he does for every other business, i.e., throw roadblocks to make sure that his high ideals are carried out?

    Because otherwise, that would show that his use of bureaucracy is purely political, and he wouldn’t want that, right?

    • #1
    • August 26, 2014, at 10:13 AM PDT
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  2. liberal jim Inactive

    Rob Long: a business move that makes sense only as a way to minimize the company’s (US) tax bill,

     This clearly is not an accurate statement. Are there tax advantages to the merger/buy-out?- Yes, but that is a far cry from what you assert. You have a valid point, but statements like this detract form it.

    • #2
    • August 26, 2014, at 10:33 AM PDT
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  3. Marion Evans Inactive

    As a percent of his net worth, Buffett pays very little in taxes, a rate that is well below yours and mine. If he was real about raising taxes on the super wealthy, he would advocate a tax on wealth, say 1% of net worth per year. Some countries have it or have had it in the past. I think it is a terrible idea but at least Buffett would appear sincere in his appeal for higher taxes: his annual bill would be… $585 million, instead of the small $7 million he paid in 2010.

    • #3
    • August 26, 2014, at 10:37 AM PDT
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  4. MSJL Thatcher

    I’m still stuck at the idea that Progressives demand that corporations should not have civil liberties (such as freedom of speech), but should be required to be patriotic.

    • #4
    • August 26, 2014, at 10:44 AM PDT
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  5. Great Ghost of Gödel Inactive

    The sheer incoherence of left-wing economic “thinking” is high on the list of things that prevented me from ever veering left.

    • #5
    • August 26, 2014, at 10:50 AM PDT
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  6. MLH Inactive
    MLH

    I kind of think Buffet has been saying, between the lines, “I double dog dare you to make it so that I can’t pay less tax than my secretary.”

    • #6
    • August 26, 2014, at 10:53 AM PDT
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  7. EJHill Podcaster

    President Obama has drawn a red line in the sand on this. The White House has announced that Obama is prepared to “unfriend” Buffett on Facebook.

    • #7
    • August 26, 2014, at 10:55 AM PDT
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  8. Randy Weivoda Moderator

    It’s not just the tax rate that’s the problem, it’s the double taxation. If you are a Canadian company with international operations, you pay taxes in each of the countries where you made a profit and when the after-tax profits are sent back to Canada, they are not taxed by Canada. That money has already been taxed in the countries where it was initially earned. The company only pays Canadian taxes on Canadian earnings. But the U.S. is different from almost every other country. When foreign offices send after-tax profits back to their U.S. headquarters, it gets taxed again.

    Warren Buffett is a phony on the issue of taxes. He is like Al Gore giving a speech for two hours bashing people who drive non-electric cars, while his Suburban is left idling so it’s nice and cool for him when the speech is done and it’s time for the ride to the airport, where a private jet awaits.

    • #8
    • August 26, 2014, at 11:31 AM PDT
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  9. RushBabe49 Thatcher

    I have heard that Warren Buffett draws Social Security. Can that be confirmed? If true, his SS payments wouldn’t be taxed, because most of his income is dividends and capital gains, not “earned” income which makes SS benefits taxable.

    • #9
    • August 26, 2014, at 11:48 AM PDT
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  10. Profile Photo Member

    bring back our burgers

    • #10
    • August 26, 2014, at 11:52 AM PDT
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  11. Joseph Stanko Member

    Would you like poutine with that, eh?

    • #11
    • August 26, 2014, at 12:03 PM PDT
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  12. Marshall Member

    Canadian Doughnut Empire would be a good album title.

    • #12
    • August 26, 2014, at 12:06 PM PDT
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  13. Joseph Stanko Member

    I don’t really think Buffet is a hypocrite, though. Is a conservative who believes Social Security is unsustainable a hypocrite if he cashes his Social Security check?

    I think Buffet is entitled to minimize his taxes under the current tax laws while also calling for those laws to be changed.

    • #13
    • August 26, 2014, at 12:10 PM PDT
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  14. rico Inactive

    Buffett should be applauded for minimizing his business’s tax liability within the laws that Congress has written. In raising the profile of tax inversion as a legal and legitimate tax avoidance strategy, Buffett highlights the need for Congress to lower the corporate tax rate.

    The fact that Buffett is betraying O by directly defying O’s core beliefs is of far greater benefit than any demerit for perceived hypocrisy. Shout it from the rooftops!

    • #14
    • August 26, 2014, at 12:25 PM PDT
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  15. Bob Wainwright Member

    I love the 1 million dollar threshold. I wonder how they came up with that number. Some sort of complicated tax or economic analysis?

    Buffett is evil anyway. He gave a billion dollars to Planned Parenthood.

    • #15
    • August 26, 2014, at 12:39 PM PDT
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  16. Frustrated iPad User Inactive

    Hypocrite is too mild, actually. The man is two faced with each face containing its own forked tongue. Much of his money is made selling tax avoidance services and financial products. The higher the taxes and the more regulations passed the more he can make helping clients avoid them.

    Besides that, the whole Midwestern humble guy in an average home driving cheap Cadillac is a lie he has spent a lot of money putting forward. You never hear about his jet and California mansion. Why he finds value hiding them is a mystery. Surely anyone of note he deals with would find the duality concerning.

    • #16
    • August 26, 2014, at 1:28 PM PDT
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  17. Misthiocracy secretly Member

    Up here in the Great White North, conservatives love this news. It’s free tax revenue for the treasury, and it vindicates the policy of reducing the corporate tax rate to 15% (it was 21% in 2008. Conservatives were elected in 2006. Do the math.)

    Increased revenue from lower rates. What could be finer?

    The socialist NDP is, of course, trying to paint this as a “hostile American takeover” of a “Canadian cultural icon”. Apparently, they’d rather we drive Canadian businesses under with higher tax rates than increase tax revenue if it means letting dirty stinking Yankee corporations deflower our virginal doughnut providers.

    Seeing the socialist NDP claim to fight for the “integrity” of Tim Hortons makes me laugh, a lot. Tim Hortons isn’t unionized. It doesn’t sell “fair trade” coffee. It makes money selling deep-fried processed flour and sugar to the obese. It’s operations are about as far from the socialists’ ideal as one could possibly imagine!

    I, for one, welcome our new burger royalty overlords.

    • #17
    • August 26, 2014, at 1:37 PM PDT
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  18. Joseph Stanko Member

    Misthiocracy: I, for one, welcome our new burger royalty overlords.

    Burger King makes more sense as a Canadian corporation anyway. We Americans rejected royalty back in 1776, but up north you’ve still got royal highways and such.

    We’re more of a Burger Republic.

    • #18
    • August 26, 2014, at 1:52 PM PDT
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  19. Instugator Thatcher

    Actually I am in favor of a maximum tax, not a minimum one.

    • #19
    • August 26, 2014, at 1:57 PM PDT
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  20. Bob Wainwright Member

    Instugator:

    Actually I am in favor of a maximum tax, not a minimum one.

     That’s right, because at some point, a taxpayer has paid their FAIR SHARE and shouldn’t have to pay more ad infinitum. Just like the social security tax cutoff at $110,000 or whatever it is. This is the whole aspect of fairness that is utterly lost when Buffett opens his mouth: in theory the most fair system would be to make everyone pay their FAIR SHARE of the national expenses equally. That’s not workable of course, but a flat tax or a cap on yearly taxes paid would be the next best thing, if fairness was the real point. But of course, it’s not. 

    • #20
    • August 26, 2014, at 2:04 PM PDT
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  21. Randy Weivoda Moderator

    Misthiocracy:

    Up here in the Great White North, conservatives love this news. It’s free tax revenue for the treasury, and it vindicates the policy of reducing the corporate tax rate to 15% (it was 21% in 2008. Conservatives were elected in 2006. Do the math.)

    Increased revenue from lower rates. What could be finer?

    The socialist NDP is, of course, trying to paint this as a “hostile American takeover” of a “Canadian cultural icon”. Apparently, they’d rather we drive Canadian businesses under with higher tax rates than increase tax revenue if it means letting dirty stinking Yankee corporations deflower our virginal doughnut providers.

    Seeing the socialist NDP claim to fight for the “integrity” of Tim Hortons makes me laugh, a lot. Tim Hortons isn’t unionized. It doesn’t sell “fair trade” coffee. It makes money selling deep-fried processed flour and sugar to the obese. It’s operations are about as far from the socialists’ ideal as one could possibly imagine!

    I, for one, welcome our new burger royalty overlords.

    Comment of the month!

    • #21
    • August 26, 2014, at 2:08 PM PDT
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  22. Misthiocracy secretly Member

    Joseph Stanko:

    Misthiocracy: I, for one, welcome our new burger royalty overlords.

    Burger King makes more sense as a Canadian corporation anyway. We Americans rejected royalty back in 1776, but up north you’ve still got royal highways and such.

    We’re more of a Burger Republic.

    As long as its a constitutional burger monarchy, s’fine with me, especially if the alternative means a Burger Supreme Court.

    • #22
    • August 26, 2014, at 2:08 PM PDT
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  23. Joseph Stanko Member

    Misthiocracy: As long as its a constitutional burger monarchy, s’fine with me!

    Really it’s Queen Elizabeth II who should feel most threatened by this development — after all, there’s a new pretender moving into her realm! Any day now the visage of the Burger King might replace hers on loonies and toonies…

    • #23
    • August 26, 2014, at 2:18 PM PDT
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  24. Misthiocracy secretly Member

    Joseph Stanko:

    Misthiocracy: As long as its a constitutional burger monarchy, s’fine with me!

    Really it’s Queen Elizabeth II who should feel most threatened by this development — after all, there’s a new pretender moving into her realm! Any day now the visage of the Burger King might replace hers on loonies and toonies…

    Liz’s job is secure. Charles, on the other hand…

    • #24
    • August 26, 2014, at 2:27 PM PDT
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  25. Amy Schley Moderator

    Misthiocracy:

    Joseph Stanko:

    Misthiocracy: As long as its a constitutional burger monarchy, s’fine with me!

    Really it’s Queen Elizabeth II who should feel most threatened by this development — after all, there’s a new pretender moving into her realm! Any day now the visage of the Burger King might replace hers on loonies and toonies…

    Liz’s job is secure. Charles, on the other hand…

     Oh dear … the idea of Charles’ face on that creepy Burger King mask in the commercials …

    • #25
    • August 26, 2014, at 2:33 PM PDT
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  26. The Question Inactive

    Perhaps this is off the subject, but it amazes me that people just accept that the GOP is the “party of the rich.” They actually believe that the GOP’s grand strategy is to lower taxes so that rich people will like them better. How’s that working out for them? Warren Buffett and all the other Democrats and lefties on the Forbes 20 richest list haven’t been moved to switch sides yet.

    • #26
    • August 26, 2014, at 2:51 PM PDT
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  27. flownover Inactive

    When Walgreens threatened to pull out of Illinois as they purchased Swiss based Boots, they were threatened with their Obamacare based compensation for scripts. I imagine that they also were treated with some Chicago style pleasantries from Emanuel and Co. Strangely enough the CFO was sacked a couple of days ago with the excuse of erroneous forecasts of Medicare revenues….hummm.
    Guess that Uncle Sam just doesn’t buy enough whoppers . 

    In other news, Chick Fila has announced the planned takeover of Just Falafel based in Abu Dhabi….

    • #27
    • August 26, 2014, at 3:15 PM PDT
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  28. James Gawron Thatcher

    This is a re-comment from Οἰκονομία‘s Buffet Burgers and Taxes,

    Rob,

    This is the spastic lunatic economics you get when you replace free enterprise with goofy left wing ideology. Our corporate tax rate is at 40%. This is from the Marshall Plan when we were subsidizing the rest of the world’s economy. If our corporate tax rate was at 27% (the world average I think) Burger King wouldn’t have thought about the move period. Also, capitol from all over the world would be flowing in to the USA.

    Of course, to make these simple, obvious, but necessary changes the first change we would need is to get rid of the dead wood at 1600 Pennsylvania Ave.

    Regards,

    Jim

    • #28
    • August 26, 2014, at 3:20 PM PDT
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  29. Elephas Americanus Inactive

    Joseph Stanko:

    Really it’s Queen Elizabeth II who should feel most threatened by this development — after all, there’s a new pretender moving into her realm! Any day now the visage of the Burger King might replace hers on loonies and toonies…

    In 1988, Burger King became a British subject when Grand Metropolitan bought Pillsbury, which owned the chain. Grand Metropolitan merged with Guinness in 1997 to form Diageo, which sold off Burger King five years later. So this move to Canuckistan wouldn’t be the first time Burger King has been part of the Commonwealth. 

    • #29
    • August 26, 2014, at 4:00 PM PDT
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  30. Spin Inactive

    Horton hears a who’s running this show anyway?

    • #30
    • August 26, 2014, at 4:22 PM PDT
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