Buffett's Doublespeak On Taxes

[Conan71]

While Warren Buffett cozies up to President Obama and says it's unbelievable that he pays a lower tax rate than his secretary, he's not pointing out that Berkshire Hathaway may owe over $1 billion in back taxes.  Nor does he seem to want anyone to know that he's constantly coming up with new tax-avoidance schemes in his investments.

A little over two weeks ago, Berkshire Hathaway CEO Warren Buffett, the third-richest person in the world, penned an op-ed critical of the low tax rates for the superrich. It would seem his own company hasn't prioritized paying its rightful share in a timely fashion either.

Berkshire Hathaway, the eighth-largest public company in the world according to Forbes, openly admits to still owing taxes for years 2002 through 2004 and 2005 through 2009, according to the New York Post. The company says it expects to "resolve all adjustments proposed by the US Internal Revenue Service" within the next year.

But The Post doesn't focus on the issue of a major corporation not paying its correct amount in taxes in a timely manner. Instead, the newspaper criticizes Buffett's position that America's rich should be taxed at a higher rate, taking issue with Buffett's claim that he gave 17 percent of his income to the government in 2010. The Post contends that since the majority of his income comes from dividends and capital games -- taxed indirectly through the corporate income tax -- "his effective rate would really be well north of 40 percent for a big chunk of his income."

"And if [Buffett's] firm wants to keep its tax bill low, well, that's its right," The Post editors write. "But it would be nice if this 'pro-tax-hike' tycoon were a bit more honest about it."

This isn't the first conservative criticism of Buffett since his Op-Ed. Jon Stewart recently singled out one Fox News commentator who asked if Buffett was "completely a socialist?" Yes, the same man who last week dreamt up a $5 billion BofA deal in the bathtub

What The Post hence assumes is that Berkshire Hathaway pays taxes at the top marginal rate of 35 percent. The corporation's effective tax rate was last put at 29 percent, according to Forbes. More generally, due to a variety of breaks and loopholes, many U.S. corporations don't pay the top marginal rate. Over one-fourth of the U.S. corporations comprising the S&P 500 paid a corporate tax rate below 20 percent over the last half-decade, The New York Times recently reported.

At a minimum, "United States corporations pay only slightly more on average than their counterparts in other industrial countries," according to The New York Times. Indeed, corporate tax revenues are now nearing historic lows as a percentage of GDP.

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

[Conan71]

And you want to know why I say Mr. Buffett is disingenuous?

Billionaire investor Warren Buffett triggered a major debate over taxes recently when he wrote in The New York Times that he should be paying more to the federal government. He called on Washington lawmakers to up tax rates on the rich.

But it turns out that Buffett's own company, Berkshire Hathaway, has had every opportunity to pay more taxes over the last decade. Instead, it's been mired in a protracted legal battle with the Internal Revenue Service over a bill that one analyst estimates may total $1 billion.

Yes, that's right: while Warren Buffett complains that the rich aren't paying their fair share his own company has been fighting tooth and nail to avoid paying a larger share.

The story of Berkshire's years-long tax battle, which is generally known in business circles, took on new life this week when a group called Americans for Limited Government (ALG) reported that, according to Berkshire Hathaway's own annual report, the company is embroiled in an ongoing standoff over its tax bills.

That report, in turn, was cited in an editorial in The New York Post.

"Obvious question: If Buffett really thinks he and his 'mega-rich friends' should pay higher taxes, why doesn't his firm fork over what it already owes under current rates?" the Post opined.

"Likely answer: He cares more about shilling for President Obama -- who's practically made socking "millionaires and billionaires" his re-election theme song -- than about kicking in more himself."

Using only publicly-available documents, a certified public accountant (CPA) detailed Berkshire Hathaway's tax problems to ALG. AlG President Bill Wilson cites the company's own 2010 annual report, which states at one point that "At December 31, 2010... net unrecognized tax benefits were $1,005 million", or about $1 billion."

"Unrecognized tax benefits represent the company's potential future obligation to the IRS and other taxing authorities," ALG explained in its report. "They have to be recorded in the company's financial statements."

"The notation means that Berkshire Hathaway's own auditors have probably said that $1 billion is more likely than not owed to the government," the ALG report explained.

That $1 billion represents about 0.2 percent of the company's $372 billion in total assets, according to ALG.

As Wilson points out, "On one hand Buffett advocates for paying more taxes, but when it comes to his own company's taxes, he has gone through great lengths to pay less. That's rich."

Here's the key section from Berkshire's report:

"We anticipate that we will resolve all adjustments proposed by the U.S. Internal Revenue Service ('IRS') for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months," the report states. "The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years."

Wilson also points to a prior tax fight the company fought. "Apparently, this is not the first time that Berkshire Hathaway has tangled with the IRS. They fought a 14-year battle over the dividends received deduction. That case was just resolved in 2005," Wilson reports..

"Although the prior case was settled in Buffett's favor, it demonstrates a decades-long pattern of behavior by Buffett to minimize his taxes. That's the important part of the story," Wilson writes.

And Buffett this week is at the center of another tax controversy, according to The Wall Street Journal. His recent decision to invest in Bank of America "represents another tax-avoidance triumph for the Berkshire chief executive," the Journal wrote in an editorial Wednesdy.

It turns out that U.S. corporations are subject to a top federal income tax rate of 35 percent, the second highest in the world. But Berkshire won't pay anything close to that on their investment in BofA preferred shares.

"Berkshire will hold the investment in a property-casualty insurance subsidiary. Such corporations can exclude from taxation 59.5% of the dividends they receive from an investment in another corporation," the Journal reported. "This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn't 100%.

"With the exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 14.175% on the $300 million in dividends it will receive each year from Bank of America," the Journal reported.

These new revelations about Buffett's tax practices have only furthered enraged conservatives at the hypocrisy being shown by the famed "Oracle of Omaha."

Writing in the conservative website Human Events, John Hayward added that analysts should look at the "value of the time IRS agents have invested trying to collect it – they don't work cheap, and we pay their salaries – and the resources Buffett's people have invested fighting back. All of which would have been saved if Buffett simply practiced what he preached, and willingly handed over his fortune to the brilliant and compassionate 'leaders' he commands the rest of us to support without resistance.

"Warren Buffett is no different from the other liars and frauds orbiting Barack Obama​. His hypocrisy just runs billions of dollars deeper. When it comes to 'shared sacrifice,' you do the sacrificing, and they do the sharing," Hayward writes.

Read more on Newsmax.com: Report: Buffett's Berkshire Owes $1 Billion In Back Taxes

http://www.newsmax.com/Headline/buffett-irs-back-taxes/2011/09/01/id/409520

[Teatownclown]

Villify Buffet....that's the ticket. 

[Townsend]

Should we trust any of them?

He's a guy.  There are lots of guys like him.

There's lots of guys making choices for all these other guys in order to run these companies.

There's also lots of guys making choices on how to run the government.

None of these guys are making choices to benefit us.  They are making choices to benefit them.

I would never say I trust any of them to do anything for my benefit.

Does he tell untruths?  Do the pundits, govt officials and everyone else with even a wee bit of power tell untruths?  #youbetyourasstheydo

[Conan71]

It simply shows Buffett as being a useful tool in class warfare.  Obama and his cronies don't really care about raising taxes, they simply want to frame an argument about the evil rich getting all the breaks on the backs of the working poor to retain power.  Buffett being compliant makes him one of the "nice" rich I suppose.

[Townsend]

It simply shows Buffett as being a useful tool in class warfare.  Obama and his cronies don't really care about raising taxes, they simply want to frame an argument about the evil rich getting all the breaks on the backs of the working poor to retain power.  Buffett being compliant makes him one of the "nice" rich I suppose.

That "class warfare" thing throws me.  Why is it being used?  Is that really going on or is it a buzzword being tossed about by media and the GOP?

I don't hear any of my friends refer to a war of the classes.  I'm not hearing it in the non-profit meetings or being used in local stories.

Is it a national political class war?

[Conan71]

That "class warfare" thing throws me.  Why is it being used?  Is that really going on or is it a buzzword being tossed about by media and the GOP?

I don't hear any of my friends refer to a war of the classes.  I'm not hearing it in the non-profit meetings or being used in local stories.

Is it a national political class war?

What is the point in vilifying the wealthy as not paying their fair share when 1/2 of all Americans pay no income tax?  What do you think the invention of the 1%'er rhetoric is all about?  "He" is nothing more than a bogeyman to direct ire away from the incompetent leadership of this administration and Congress. 

It's a lot easier than simply explaining to the American worker: "Look we sold you out via a myriad of free trade accords and spreading money around with our preferred contributors rather than areas which might have actually created jobs via government investment the last three years."

What would be the point in obsessing about the rich and including it in political speeches?  Why not silently go about raising their taxes instead of making it a campaign issue? 

[swake]

And you want to know why I say Mr. Buffett is disingenuous?

Newsmax Conan? Really?

Large companies have tax disagreements all the time. Berkshire Hathaway is a very large and complex company and is not Buffett's personal piggybank. He has a responsibility to his shareholders to maximize profits and to not pay more in taxes than is reasonable and necessary. That is just good business.

It's stupid to merge Berkshire Hathaway's tax burden with Buffett's personal tax burden to show that Buffett has a reasonable tax burden. The company as an entity is not the same as the person Warren Buffett. The company as an entity has a tax responsibility. Warren Buffett is a person who has a separate tax responsibility, the same as any other investor or employee does. Should I merge my employer's tax burden with my own to show what rate I pay?

[Townsend]

What is the point in vilifying the wealthy as not paying their fair share when 1/2 of all Americans pay no income tax?  What do you think the invention of the 1%'er rhetoric is all about?  "He" is nothing more than a bogeyman to direct ire away from the incompetent leadership of this administration and Congress. 

It's a lot easier than simply explaining to the American worker: "Look we sold you out via a myriad of free trade accords and spreading money around with our preferred contributors rather than areas which might have actually created jobs via government investment the last three years."

What would be the point in obsessing about the rich and including it in political speeches?  Why not silently go about raising their taxes instead of making it a campaign issue? 

It reminds me of "take our country back".  I was told by a co-worker that we needed to "take our country back" two years ago.  I asked him "from what?"  He was unable to tell me.

I imagine if I asked most people I knew which classes were at war they would have a tough time telling me.

I'm guessing many people who might come up with a class warfare situation to tell me about would not belong to the wealthy class.  The ones in the wealthy class would just titter and say "I have no idea."

[Conan71]

Newsmax Conan? Really?

Large companies have tax disagreements all the time. Berkshire Hathaway is a very large and complex company and is not Buffett's personal piggybank. He has a responsibility to his shareholders to maximize profits and to not pay more in taxes than is reasonable and necessary. That is just good business.

It's stupid to merge Berkshire Hathaway's tax burden with Buffett's personal tax burden to show that Buffett has a reasonable tax burden. The company as an entity is not the same as the person Warren Buffett. The company as an entity has a tax responsibility. Warren Buffett is a person who has a separate tax responsibility, the same as any other investor or employee does. Should I merge my employer's tax burden with my own to show what rate I pay?

I also cited a similar article from Huff-Po.  Happy?  Facts are facts.

It's simply fascinating to see Buffett used as a poster child for a just tax code when businesses he wholly controls engage in expensive tax-avoidance schemes.  How do you not see the irony and hypocrisy in that?

[Conan71]

It reminds me of "take our country back".  I was told by a co-worker that we needed to "take our country back" two years ago.  I asked him "from what?"  He was unable to tell me.

I imagine if I asked most people I knew which classes were at war they would have a tough time telling me.

I'm guessing many people who might come up with a class warfare situation to tell me about would not belong to the wealthy class.  The ones in the wealthy class would just titter and say "I have no idea."

Take a look at voting demographics, lower income overwhelmingly vote Democrat in national elections.  Who do you think Obama is talking to when he engages in this rhetoric of the rich not paying their share?  He's rallying the troops to come out and vote next November.  The point will be that the rich man is standing on the heads of the poor for the reason they are still not working or are severely underemployed.

[Townsend]

I also cited a similar article from Huff-Po.  Happy?  Facts are facts.

It's simply fascinating to see Buffett used as a poster child for a just tax code when businesses he wholly controls engage in expensive tax-avoidance schemes.  How do you not see the irony and hypocrisy in that?

Would it be better that he hide 100% behind the tax codes like other wealthy folks?

[Townsend]

Take a look at voting demographics, lower income overwhelmingly vote Democrat in national elections.  Who do you think Obama is talking to when he engages in this rhetoric of the rich not paying their share?  He's rallying the troops to come out and vote next November.  The point will be that the rich man is standing on the heads of the poor for the reason they are still not working or are severely underemployed.

Who are the republican candidates talking to when they say their rhetoric?

I'm not poor but I'm not rich either.  I want everyone to pay fairly but I'm at war with no-one.

The wealthy and powerful are able to get air-time so they get a point out to the masses.  The points getting out to us pretty much mean jack-squat to our betterment.

In Oklahoma, our problems are bigger than "class wars" or who Gingrich was banging when.  The presidential race doesn't mean anything to us.  Our vote won't count no matter what we do. 

I'll still vote though.

[Townsend]

Seems to me the people with the bigger guns would win any battle in a war or class war.

Look at me.  Standing here in a corner with a pop-gun.

[Conan71]

Look at me.  Standing here in a corner with a pop-gun.

Is that what that was?  I thought you farted.

Your vote always counts, Townsend.  It puts you in the process.  Of course Oklahoma will never be a pivotal state in a national election, or at least not in our lifetime.