But a picture (series of pictures?) really is worth a thousand words!
Source: www.comics.com/creators/wizardofid/
Posted on 05/20/2003 9:25:14 AM PDT by nicollo
Dividend Voodoo
By Warren Buffett
Tuesday, May 20, 2003; Page A19
The annual Forbes 400 lists prove that -- with occasional blips -- the rich do indeed get richer. Nonetheless, the Senate voted last week to supply major aid to the rich in their pursuit of even greater wealth.
The Senate decided that the dividends an individual receives should be 50 percent free of tax in 2003, 100 percent tax-free in 2004 through 2006 and then again fully taxable in 2007. The mental flexibility the Senate demonstrated in crafting these zigzags is breathtaking. What it has put in motion, though, is clear: If enacted, these changes would further tilt the tax scales toward the rich.
-----snip
(Excerpt) Read more at washingtonpost.com ...
The writer is chief executive officer of Berkshire Hathaway Inc., a diversified holding company, and a director of The Washington Post Co., which has an investment in Berkshire Hathaway.
Buffet claims the dividend tax would bring his effective tax rates from 30% to 3%. He claims the tax cut would be a give-away to the rich, that,
Supporters of making dividends tax-free like to paint critics as promoters of class warfare. The fact is, however, that their proposal promotes class welfare. For my class.
A couple things:
1) He admits that tax policy influences behavior. While he claims that tax-free dividends would somehow force him to take all his income in dividends, he does not admit that his present behavior is influenced or, as we shall see, built around, present tax law. Berkshire Hathaway does not pay dividends. Can we infer, then, that it does not pay out earnings because of the current dividend tax?
2) He admits that he pays an effective Federal rate of 30% of his income. He claims this is the same rate as his receptionist, although she pays far greater proportion of her income in payroll taxes:
The taxes I pay to the federal government, including the payroll tax that is paid for me by my employer, Berkshire Hathaway, are roughly the same proportion of my income -- about 30 percent -- as that paid by the receptionist in our office.
This is great. Aside from the “duh” factor, Buffett has now admitted the great lie of tax demagogues and Democrats: the rich don’t pay top rates. Since his receptionist pays an effective rate of 30% of her income, we can assume she’s paying only about 15-20% in income taxes. Buffet’s total tax is 30% of all income. Guess what, he’s not living on payroll. He continues,
My case is not atypical -- my earnings, like those of many rich people, are a mix of capital gains and ordinary income -- nor is it affected by tax shelters (I've never used any). As it works out, I pay a somewhat higher rate for my combination of salary, investment and capital gain income than our receptionist does. But she pays a far higher portion of her income in payroll taxes than I do.
Read this carefully: As it works out...”. It “works out,” Warren, because your accountants make it work out that way.
The Great Screwed of American taxpayers are not you, and they are not your secretary, Warren. Go through your payroll and find me the analyst whose income is entirely based upon a $150,000 salary. This is the guy whose being screwed by current tax policy -- which you, Warren, avoid. Your analyst probably has a mortgage deduction, a couple kids, and some tax-free investments, but guess what, he’s paying far closer to Clinton’s 39% top income tax than you ever will, or did, Warren.
Any guesses at Buffett’s salary? Guess again. $296,000. That’s right. That’s the all the income the “income tax” will screw him on. I don’t otherwise know, but it is clear this man doesn't live off income, salaried or otherwise. I'd also bet that most of his fellow billionaires don't pay anywhere near 30% of their income in taxes. It all depends on what "income" is. Believe me you, income for the rich comes in many other forms, tax shelters (which Buffett claims not to use) or otherwise. Besides, tax shelters are legal. It's only illegal tax shelters that are illegal. Your corporation, Buffett, is a tax shelter.
Whatever his “effective income” is, I can guarantee that if we were to include his asset growth he’d be paying far less than the 3% category he claims he’d pay if his company paid out all its earning in tax free dividends. Until he takes his money in income, he doesn’t pay taxes.
That’s call Screwing the Salary Taxpayer, Warren. If only all the $80-$400K salary earners could take that as “investment” income, there’d be no top marginal rate for anybody (and no payroll taxes on it). As it is, you don’t pay it, and the lesser rich do. Hear up, Warren, for you said it but you weren’t listening to yourself:
3) Not once does he mention the little problem of double-taxation. A corporation is an artificial entity. When Berkshire Hathaway pays taxes, it is not an “it” that is paying taxes, it is Warren Buffett and a cumulation of people who own it. Corporations don’t exist. They are living ghosts for people who don’t want to be held to account for doing things to which people are normally held account. Berkshire Hathaway is Warren Buffet’s ghost, signed, sealed, and granted by -- you guessed it -- the Great Corporate State of Delaware (whatya doing hiding in Dover, Warren?).
When Berkshire-Hathaway pays income tax, people pay it, not Berkshire-Hathaway. If you want tax reform, Warren, start in that self-portrait you keep in a Delaware attic. It keeps getting richer for you, and paying nothing of the taxes your employees pay and you don’t. And all you want to do is blame us for it. No, Warren, tax reform starts in the corporation.
Free the people of the dividend tax, and we’ve got one hell of a start on fixing corporate welfare.
Whatever the reason, Buffett likes the politics of high taxes. I won’t guess. I will say that in preaching the art he avoids the practice.
It's either a lie or massive self-delusion. I'm inclinded to credit the guy with honesty, which only makes it worse: he's guilty not of deceipt, but of stupidity.
But a picture (series of pictures?) really is worth a thousand words!
Source: www.comics.com/creators/wizardofid/
He also opposes the elimination of the inheritance tax, and to prove what a swell guy he is, none of his money (or so he says) will go to his children.
I am also beginning to think that Berkshire Hathaway is some sort of giant scam, but that's just me. I like to understand what companies I invest in do or make.
Dividends are paid on non-growth stocks, old tried and true stable stocks with little risk, but limited upward mobility. These are the stocks to put your retirement into when you can't afford to risk losing it. They will pay quarterly divends which will supply an income and allow you to live comfortably without dipping into your principle, but not if you are taxed at 40%.Exactly. Only remember that those dividends are being paid under existing tax law. They're nothing compared to actual earnings. Corporations not only don't give their earnings to the owners, they hide their income in, among things, lifestyle payments for management and employees.
With the tax incentive to take dividend income, there will be much greater investor focus on what is actually going on in Corporate America. If you want growth, fine, leave your money in the Company. The difference will be that investors will no longer have the choice made for them. The greater lesson here is that the tax code favors corporations over individuals. Buffett is a hypocrite.
What's the problem with the emetic dribble his puts into the Washington Post? Well, nicollo has pointed out a bunch of things, but there are two more items I'd add to that list. They are:
(1) In the truly tasteless comparison between himself and his receptionist, ol' Warren leaves out such poor taxes as Social Security. The SS tax is 15.3% on income up to $87,000. In other words, the tax levied on any person never exceeds $13,311. Therefore, as a person's income exceeds $87,000, their effective SS tax rate declines. Let us assume that Warren's receptionist makes $87,000 and pays $13,311 in SS taxes (an effective rate of 15.3%). If Warren makes $10,000,000, he also pays only $13,311, an effective rate of 0.13%. Is that fair? In Warren's World, it's excellent.
(2) Warren also chooses to ignore the entire point of eliminating the double taxation of divivdends. It is not aimed at individual tax payers, rather, it is intended to change corporate financial policy. Under the current Internal Revenue Code, it pays companies to borrow money and use their profits to pay-down that debt. This allows companies to build large financial empires on small amounts of equity. Japan's moribund economy is the clasic example of this approach. If dividends are not taxed, then there is increasing pressure on companies to pay out profits to shareholders rather than using the profits to build debt-bloated empires. However, Warren doesn't want to have to pay out much of Berkshire-Hathaway's profits to his shareholders when he can go on building a personal empire on corporate debt.
What a jerk...
It's the same reason Amazon supports taxing internet sales. Out of pure selfishness, they want to burden the little guy with tax compliance, so they never become serious competitors.
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