Investors undertook their annual pilgrimage to Omaha this weekend to hear Warren Buffett opine on markets and the world. One surprise is that the Berkshire Hathaway CEO seems to have adapted his famous Buffett Rule of taxation when it applies to his own company.
Readers may recall the original Buffett Rule that President Obama offered as part of his re-election campaign that essentially posited a minimum tax rate for the rich of about 30%. Mr. Buffett heartily endorsed the idea and Mr. Obama hauled out St. Warren as a soak-the-rich cudgel to beat up Mitt Romney in countless speeches.
So it was fascinating to hear Mr. Buffett explain that his real tax rule is to pay as little as possible, both personally and at the corporate level. “I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe. And that’s very simple,” Mr. Buffett told Fortune magazine in an interview last week. “In my own case, I offered one time to match a voluntary payment that any Senators pay, and I offered to triple any voluntary payment that [Republican Senator] Mitch McConnell made, but they never took me up on it.”
The billionaire was even more explicit about his goal of reducing his company’s tax payments. “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” he said. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
Think about that one. Mr. Buffett says it makes no economic sense to build wind farms without a tax credit, which he gladly uses to reduce his company’s tax payments to the Treasury. So political favors for the wind industry induce a leading U.S. company to misallocate its scarce investment dollars for an uneconomic purpose. Berkshire and its billionaire shareholder get a tax break and the feds get less revenue, which must be made up by raising tax rates on millions of other Americans who are much less well-heeled than Mr. Buffett.
This is precisely the kind of tax favoritism for the wealthy that Mr. Romney’s tax reform would have reduced, and that other tax reformers want to stop. Too bad Mr. Buffett didn’t share this rule with voters in 2012.
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