(April 11, 2015) Warren Buffett’s Nifty Tax Loophole

Barrons ^ | April 11, 2015 | Morris Propp

[CruiseMates]

Warren Buffett is fond of saying his tax rate is lower than his secretary’s. He does not publicize his tax returns, but for the tax year 2010, he paid $6.9 million on taxable income of $39.8 million, according to partial disclosures he made in 2011.

What is astounding about those numbers is not the 17.3% tax rate, but that Buffett’s $39.8 million of taxable income is only about 0.05% of his reported net worth ($71 billion according to Forbes, which put him third on its list of the 400 wealthiest people in the world for 2015).

[CruiseMates]

This is an older piece, but it is timely with Buffet calling out DJT to compare tax records. It seems both Billionaire's are paying what the law dictates, but in Buffet's case he is holding back far more revenue for the "Military, Vets and Children of America" than DJT.

[Lurking Libertarian]

Headline is terribly misleading— “income” and “net worth” are very, very different things.

[Toddsterpatriot]

Warren Buffet Only Pays .05% tax on his income....Buffett’s $39.8 million of taxable income is only about 0.05% of his reported net worth

Income is not net worth......

And you shouldn't alter the title.....aside from your error.

[Campion]

Conservatives should boycott every part of Buffett’s empire at every opportunity.

[Admin Moderator]

Please do not alter the title. It makes Search not work and results in duplicate postings. Thanks.

[God luvs America]

posted these yesterday:

Warren Buffett’s Nifty Tax Loophole

Warren Buffett has backed higher individual tax rates–while ensuring that his vast wealth in Berkshire Hathaway is almost immune.

http://www.barrons.com/articles/warren-buffetts-nifty-tax-loophole-1428726092

Warren Buffett’s Berkshire Hathaway Owes Taxes Going Back To 2002

http://www.huffingtonpost.com/2011/08/29/warren-buffett-taxes-berkshire-hathaway_n_941099.html

Buffett’s Billions Can’t Buy Him Exemption From His Tax-Averse Past

http://www.forbes.com/sites/realspin/2012/11/30/buffetts-billions-cant-buy-him-exemption-from-his-tax-averse-past/#76a8cbb449b0

Warren Buffett’s Tax Whopper
Obama’s business front man finances ‘corporate deserters.’

http://www.wsj.com/articles/warren-buffetts-tax-whopper-1409095917

[DoodleDawg]

...but in Buffet's case he is holding back far more revenue for the "Military, Vets and Children of America" than DJT.

How do we know that?

[Intolerant in NJ]

If I understand Buffet’s scam correctly, basically the value of his stock is so high because he doesn’t distribute many dividends or capital gains brought in by the underlying assets which are held in his shares - thus he doesn’t have to pay taxes on that income and it is built up instead in the value of his shares - pretty slick - he could certainly pay lots more if he were really concerned about “fairness” in the tax code......

[july4thfreedomfoundation]

I think Buffet also purchases tax-free municipal bonds.....as per their name, no tax is due.

A net worth of $71 billion? Wow.

[norwaypinesavage]

The article should also point out the lie about Buffet’s “secretary's” salary. He brags that the “secretary” pays a higher tax rate than he pays. His “secretary” is actually an executive at his company. The total salary is north of a quarter million a year, making the secretary a “one percenter”. There is little to dodge for someone on a salary, so the “secretary” pays the top income tax rate in the country.

[Svartalfiar]

If I understand Buffet’s scam correctly, basically the value of his stock is so high because he doesn’t distribute many dividends or capital gains brought in by the underlying assets which are held in his shares - thus he doesn’t have to pay taxes on that income and it is built up instead in the value of his shares - pretty slick - he could certainly pay lots more if he were really concerned about “fairness” in the tax code......

That's not a scam. Having things that change in value isn't income until they're sold.

[Intolerant in NJ]

Yes of course - the scam is he locks up the value of his assets in the price of his stock - Berkshire-Hathaway climbs into the thousands of dollars per share range and everybody says he must be a financial genius - he cashes out behind advantages such as the evil Donald Trump used - loss carryovers and depreciation deductions and pays the rest at low long term gain rates - then he goes all self-righteous complaining that his “secretary” pays more taxes than he does and that rich people should be paying more of their fair share......

[Svartalfiar]

Yes of course - the scam is he locks up the value of his assets in the price of his stock... loss carryovers and depreciation deductions and pays the rest at low long term gain rates...

I don't know the full complexities of the tax code, and I'm sure he has plenty of shady stuff going on. But the loss carryover isn't really shady, it's lost money that he actually lost. Not just numbers on paper. And as much as I think tax code needs to change, removing that from the code as it stands now will do way more damage to small businesses and individuals than the amount it's currently helping the billionaires. Depreciation is just stupid as well.

thus he doesn’t have to pay taxes on that income and it is built up instead in the value of his shares - pretty slick - he could certainly pay lots more if he were really concerned about “fairness” in the tax code......

This isn't a scam, owning something that increases in value isn't income. When he does cash out, he'll be taxed on that actual income. I don't think people should be taxed on their land property either.

[Intolerant in NJ]

I have no problem with the tax code - it doesn't bother me that Buffett uses the code to the max - my complaint is that having used it, he turns around and self-righteously proclaims that he doesn't pay enough taxes, that his tax bill is less than his "secretary's" (really a highly-paid administrator) and that the rich in general should be paying more of "their fair share" (even though the top 1% of earners pay 40% of the federal income tax, easily more than their "fair share") - it's deceitful, done to help Buffett shield himself from criticism from the public who resent the rich - if he wants to pay lower taxes, he should just abandon some of the tax breaks he takes.

When an asset is held as an investment and increases in value, and is then cashed out (sold), tax is owed on the difference between the purchase and the sale prices - if the asset is held for less than a year in most cases this is considered a short-term gain and is taxed at ordinary income rates - if held for more than year it is a long term gain and is taxed at a considerably lower rate than ordinary income - this is another place where Buffett probably uses the tax code to his advantage - by keeping assets locked up in his shares for years and years he undoubtedly pays taxes on the sales of the shares at long term rates - then turns around and complains about it.....