Monday, August 15, 2011

Responding to Buffett

At Forbes, two brief articles responding to Warren Buffett's call for higher taxes on the wealthy.

Warren Buffett's Very Strange Tax Argument, in which Tim Worstall notes that Buffett's comments ignore the effect of corporate income taxes, which are paid before dividends are paid to shareholders.

The Real Reason Warren Buffett's Taxes Are Low in which Peter Reilly makes a very simple point: Berkshire Hathaway, Buffett's company, simply does not pay dividends at all. The company's famous investment strategy is to buy and hold - seemingly forever.

No dividends, no income to tax. No sale, no capital gains to tax.

Another factor that I have not seen addressed in any article: Buffett is famous for limiting his own salary to $100,000 per year. That would again seriously limit his tax liability. If he were to pay himself a $1 million salary, things could be much different.

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