Last Updated:July 24 @ 12:03 pm

Elder: Buffettitis - Is There a Cure?

By Larry Elder

Once again, billionaire investor Warren Buffett urges his fellow high-on-the-hoggers to pay more in taxes. "Only in Grover Norquist's imagination," says Buffett, do taxes make much of a difference in how people invest. "So let's forget about the rich and ultra-rich going on strike and stuffing their ample funds under their mattresses if -- gasp -- capital gains rates and ordinary income rates are increased. The ultra-rich, including me, will forever pursue investment opportunities. ...

"We need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that."

So taxes, says Buffett, do not deter the ultra-rich "from pursuing investment opportunities." Really?

The Weekly Standard's Adam J. White writes about how tax considerations affect investment decisions by Buffett despite his assertion that tax considerations don't much matter when it comes to investment decisions. White gives examples from Buffett's biography "The Snowball," written by Alice Schroeder:

"Early in his career, Buffett invested heavily -- almost one-third of his early fund's capital -- in Sanborn Map, a company that mapped utility lines and such. ... Buffett amassed more and more stock, and with control of the company finally in hand, he pressed the board of directors to split the company in two. ...

"Finally, the board capitulated. But with victory finally at hand, Buffett nearly scuttled the deal because of ... taxes. As Schroeder recounts, quoting Buffett, one director proposed that the company just cleanly break the company, despite the tax consequences -- 'let's just swallow the tax,' he suggested. To which Buffett replied (as he recounted to Schroeder): 'And I said, 'Wait a minute. Let's -- 'Let's' is a contraction. It means 'let us.' But who is this us? If everyone around the table wants to do it per capita, that's fine, but if you want to do it in a ratio of shares owned, and you get 10 shares' worth of tax and I get 24,000 shares' worth, forget it. ...'

"Later in the book, (Schroeder) recounts how Buffett chose to structure his investments under Berkshire Hathaway's corporate umbrella, rather than as part of his hedge fund's general portfolio, precisely because of the tax advantages (emphasis added)."

White quotes Buffett's 1986 letter to his investors, where Buffett warned about the consequences of the1986 tax reform act: "If Berkshire, for example, were to be liquidated -- which it most certainly won't be -- shareholders would, under the new law, receive far less from the sales of our properties than they would have if the properties had been sold in the past, assuming identical prices in each sale. Though this outcome is theoretical in our case, the change in the law will very materially affect many companies. Therefore, it also affects our evaluations of prospective investments. ... My impression is that this important change in the law has not yet been fully comprehended by either investors or managers."

Taxes matter -- to Buffett.

Harvard's Economic Department chairman, Greg Mankiw, writes that "Mr. Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively. In particular:

"1. His company, Berkshire Hathaway, never pays a dividend but instead retains all earnings. So the return on this investment is entirely in the form of capital gains. By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.

"2. Mr. Buffett is a long-term investor, so he rarely sells and realizes a capital gain. His unrealized capital gains are untaxed.

"3. He is giving away much of his wealth to charity. He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.

"4. When he dies, his heirs will get a stepped-up basis. The income tax will never collect any revenue from the substantial unrealized capital gains he has been accumulating.

"To be sure, there are pros and cons of changing the provisions of the tax code of which Mr. Buffett takes advantage. Tax policy always involves difficult tradeoffs. But it seems odd to me that whenever Mr. Buffett talks about taxing the rich more, the 'loopholes' that he uses never seem to enter into the conversation."

Guess who else thinks Buffett should pay more in taxes: the IRS.

Buffett's Berkshire Hathaway has been fighting the IRS over the $1 billion in taxes the government claims it is owed, dating as far back as 2002. Last year, one of Berkshire Hathaway's companies, NetJets, sued the IRS, demanding that the feds return $642.7 million in already paid taxes. And this year, the IRS sued NetJets, claiming it is owed $366.3 million in unpaid taxes.

Meanwhile, scientists at the National Institutes of Health are working feverishly to develop a cure, vaccine or treatment for this disease -- that appears to afflict guilty/super-wealthy liberals -- known in medical circles as "Buffettitis." It's early, and one risks being premature. But NIH just may have produced a workable solution: "Mr. Buffett, whip out your checkbook, and cut the U.S. Treasury a check. Given the state of the economy, let's hope it doesn't bounce."

---

Larry Elder is a best-selling author and radio talk-show host. To find out more about Larry Elder, or become an "Elderado," visit www.LarryElder.com.

COPYRIGHT 2012 LAURENCE A. ELDER

DISTRIBUTED BY CREATORS.COM

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23 Comments

  1. inluminatuoComment by inluminatuo
    November 29, 2012 @ 11:34 am

    “Buffett’s Berkshire Hathaway has been fighting the IRS over the $1 billion in taxes the government claims it is owed, dating as far back as 2002.”

    Well that explains alot. He cozys up to Obama for a Billion Dollar Tax pardon. Too bad he may have to wait another 4 years to the end of Obama’s reign for the pardon,,,that is unless the Democrats seize the House in 2014 and vote to eliminate the two term Presidency rule and we are stuck with another FDR free stuff giveaway Guy ad infinitum.

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    • powertothepeopleComment by powertothepeople
      November 29, 2012 @ 3:15 pm

      Now…now, no one is supposed to know that!

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    • thedoveComment by thedove
      November 29, 2012 @ 5:29 pm

      >> that is unless the Democrats seize the House in 2014 and vote to eliminate the two term Presidency rule <<

      The House cannot "eliminate" the 22nd amendment to the Constitution.

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    • inluminatuoComment by inluminatuo
      November 29, 2012 @ 7:10 pm

      And nobody thought they would suvive the third rail of a political healthcare push. Times are changing, and the courts are no longer to be relied upon.

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  2. pypypypyComment by pypypypy
    November 29, 2012 @ 2:30 pm

    Yes, there is a cure for Buffettitis, start by paying your “fair share”, you greedy liberals!

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    • inluminatuoComment by inluminatuo
      November 29, 2012 @ 7:17 pm

      Little Miss Buffet, sat on his tuffit, eating his words and having his way,

      Along came Obama who molested our Karma, and frightened his money away.

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  3. jaijacobiaComment by jaijacobia
    November 29, 2012 @ 2:35 pm

    Without doubt, we will be stuck with Obama indefinitely since he’s passing executive order after order to keep himself in power.
    Meanwhile, why is no one investigating him for his numerous crimes? Even the online traffic about Obama’s birth certificate is down and is anyone investigating his involvement in the murder of at least six Americans not to mention his numerous campaign fund violations? Why do we even have laws? He makes his own with executive orders then violates those on the books and no one even takes note. What are we paying the FBI and CIA for? Why do we elect a congress. We might as well give up and admit it. Our government is a dictatorship.

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    • stickmanComment by stickman
      November 29, 2012 @ 4:22 pm

      because Americans do not care – the government of this country means nothing to them. 80% are doing well enough, they have jobs, they pay their rent/mortgages, they send their kids off to school, but all the iPods/iPads and wide screen HDTV’s they want. They care less, individually with any concern about some personal responsibility for those that have not – let the government do it – quit bothering ME about it. That is their attitude.

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    • mikeguntComment by mikegunt
      November 29, 2012 @ 5:46 pm

      I hope so! ALL HAIL King OBAMA! Bow down to your new overlord!

      I read his top secret plans to enslave white people to pick cotton. Then he’s going to takeover all the bank accounts of rich people and burn their money along with all the bibles in America. Then he plans on moving to Africa to sit on a thrown made of the bodies of dead republicans and aborted babies and he will laugh at the destruction of the WORLD! DOOM DOom oh the humanity! 12/21/12! The end of the world will happen for sure due to these top secret plans!

      Seriously just calm the **** down. Obama didnt even want to be President for a second term let alone dictator of the USA. He told the press he was exhausted I think he only ran because of his pure hatred of Romneys principles.

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    • canada3dayerComment by canada3dayer
      November 29, 2012 @ 8:02 pm

      @mikegunt – what colour is the sky on YOUR planet? Obama didn’t want a second term??? are you kidding? the man has an ego the size of the Rose Bowl! I guess, tho, that he’ll change the office from President to Imperial Grand High Poo-Bah. film at eleven.

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  4. fubar22Comment by fubar22
    November 29, 2012 @ 2:39 pm

    Gee Mr. Buffet, Shut up and pay your “fair share”. If you feel rich people should pay more no one is stopping you, open up your checkbook and pay. Since you are not leaving your wealth to your children, give it to Obama to redistribute to his minions.

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  5. dfinchComment by dfinch
    November 29, 2012 @ 3:03 pm

    Once Buffett pays his billion then I’ll send in my $25. That’s all I can afford.

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  6. powertothepeopleComment by powertothepeople
    November 29, 2012 @ 3:14 pm

    The new Buffett rule, “don’t do as I do, do as I say”.

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  7. DudleyComment by Dudley
    November 29, 2012 @ 3:36 pm

    How can a man with soooo much money be soooo stupid?

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  8. popstComment by popst
    November 29, 2012 @ 3:44 pm

    All Buffet has to do is give all of his money and assets to the government. That would keep the government running for a whopping 5 days. This president still hasn’t caught on that people earning $250,000 a year are not in the same group as millionaires and billionaires. But you also have to remember that this guy thought we had 57 states. Only in America could a Buffoon want to enact a Buffet rule.

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  9. bna42Comment by bna42
    November 29, 2012 @ 3:58 pm

    “Buffett’s Berkshire Hathaway has been fighting the IRS over the $1 billion in taxes the government claims it is owed, dating as far back as 2002. Last year, one of Berkshire Hathaway’s companies, NetJets, sued the IRS, demanding that the feds return $642.7 million in already paid taxes. And this year, the IRS sued NetJets, claiming it is owed $366.3 million in unpaid taxes.”

    Buffet is a senile hypocrite who needs to get his own house in order before he tries to tell other people how much they should pay in taxes. Buffet uses tax shelters and other legal gimmicks to keep from paying IRS any more than necessary, so he needs to keep his mouth shut. He is playing Obama just like Obama is playing Buffet.

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    • vevaComment by veva
      November 30, 2012 @ 5:13 pm

      Buffet should sit down and shut up. I think he IS senile. Is the media reporting what he said in his book? Probably not. $250,000 today is peanuts! Depends where you live and how many you have to support. Small businesses may take in 1 million, but that’s not what the owners end up with. Obamas regulating them to death. Write to your newspaper, and comment on Buffet’s hypocrisy. Maybe they will print it.

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  10. gimmesometruthComment by gimmesometruth
    November 29, 2012 @ 4:04 pm

    Class warfare does not end well, especially with the looming economic meltdown. We can learn from history, in particular the French masses under Robespierre Blade sharpening might be a good career opportunity.

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  11. stickmanComment by stickman
    November 29, 2012 @ 4:18 pm

    When you are old and richer by far than many others – and there is no way you can take if from you – what does it matter. Outside of “confiscating” his wealth – the government cannot touch him – or many of the other wealthiest – they don’t “work” anymore – they “invest” and reap the rewards of investing – their assets are worthless until cashed it.

    BUT – I agree – tax the until they bleed red, white and blue. then tax them some more for being so stupid as to back the thieves that take their money and pass it out to those that won’t and don’t work for it.

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  12. clarkentComment by clarkent
    November 29, 2012 @ 7:06 pm

    As he spouts off about the rich paying more taxes, he uses every tax loop-hole in the book. Double speak just like Obama. Some day the tax code will be revised and it will come back to haunt him. With the trouble he has with the IRS now, he should just keep his mouth shut.Also, why hasn’t the IRS pursued more vigorously?

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    • trulyworriedusaComment by trulyworriedusa
      November 30, 2012 @ 2:45 pm

      Hypocrisy! It’s everywhere. My guess as to why they/IRS don’t pursue him “vigorously” or even mildly, would be the same reason they didn’t & still haven’t little Timmy Geithner! Hell, he’s the head of department of Treasury, and he went into the job owing 7 years of taxes not paid! B U T….give him a break he “Forgot!” ???WTH???? So my guess here is Butt-ffet is so much older…. he must have FORGOT also! Look at obama’s tax returns. He took every deduction & loophole he could just like everyone else in America. He gave soooooo very little to charity, so his tax person found everything they could find to lower his liability.
      Frankly, it’s all just so very pathetic. If these “people” really believed a damn word they were saying…they would NOT take ANY deductions, loopholes, etc. AND…they could always just DONATE some of that extra, who needs it money directly to the US Congressional budget. But don’t hold your breath, cause I guarantee THAT is NOT going to happen!

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  13. powertothepeopleComment by powertothepeople
    November 30, 2012 @ 8:45 am

    I have been holding my breath waiting to hear that Warren has sent a check for $1B to the Treasury as his “fair share”! Hurry up Warren…I’m turning blue!

    Really, it just tweaks my spine to hear liberals preaching to us we have to pay more when they exercise every legal and illegal tactic to avoid taxes. As I said earlier, its “do as I say, not as I do” with the progressives.

    The GOP needs to show some guts and stop negotiating with these pricks and go about doing other business. This “cliff” thing is a smoke screen folks…the world is not going to end.

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  14. xman3Comment by xman3
    November 30, 2012 @ 1:17 pm

    Everything about Obama, the Democratic Party, most Democratic Congressmen and Senators is a Deception, Half-Truth, Smoke-And-Mirros or just a Lie. Buffet needs to pay more taxes and I hope the IRS will make him ‘pay his fair share’.
    ——-
    Obama has spent 4 years campaigning on raising taxes and making energy for Americans more expensive. Break out your wallet . . . . . . . . We either witnessed a 2 – 7% Democratic election fraud nationally, or the alternative is 50% of American Voters are idiots (either uninformed due to the lame-stream-media bias, are educated idiots, plain stupid
    or just die-hard Democrats, no matter what).

    Obama has an impressive list of accomplishments these past four years:

    First President to say the killing of an Ambassador, three Americans and the attacking an American Embassy was because of a video, on 9-11 – 2012, not a terrorist attack.

    First President to allow American purchased arms to go to Mexican drug lords resulting in the killing of hundreds of Mexicans and the killing of at least two Americans.

    First President to apply for college aid as a foreign student, then denies he was a foreigner.

    First President to have a social security number from a state he has never lived in.

    First President to preside over a cut to the credit-rating of the United States.

    First President to violate the War Powers Act.

    First President to be held in contempt of court for illegally obstructing oil drilling in the Gulf of Mexico.

    First President to require all Americans to purchase a product from a third party.

    First President to spend a trillion dollars on ‘shovel-ready’ jobs when there was no such thing as ‘shovel-ready’ jobs.

    First President to abrogate bankruptcy law to turn over control of companies to his union supporters.

    First President to by-pass Congress and implement the Dream Act through executive fiat.

    First President to order a secret amnesty program that stopped the deportation of illegal immigrants across the
    U.S., including those with criminal convictions.

    First President to demand a company hand-over $20 billion to one of his political appointees.

    First President to tell a CEO of a major corporation (Chrysler) to resign.

    First President to terminate America’s ability to put a man in
    space.

    First President to cancel the National Day of Prayer and to say that America is no longer a Christian nation.

    First President to have a law signed by an auto-pen without being present.

    First President to arbitrarily declare an existing law unconstitutional and refuse to enforce it.

    First President to threaten insurance companies if they publicly spoke-out on the reasons for their rate increases.

    First President to tell a major manufacturing company in which state it is allowed to locate a factory.

    First President to file lawsuits against the states he swore an oath to protect (AZ, WI, OH, IN).

    First President to withdraw an existing coal permit that had been properly issued years ago.

    First President to actively try to bankrupt an American industry (coal).

    First President to fire an inspector general of Ameri-Corps for catching one of his friends in a corruption case.

    First President to appoint 45 czars to replace elected officials in his office.

    First President to surround himself with radical left wing anarchists.

    First President to golf 73 separate times in his first two and a half years in office, 102 to date.

    First President to hide his medical, educational and travel records.

    First President to win a Nobel Peace Prize for doing NOTHING to earn it.

    First President to go on multiple global “apology tours” and concurrent “insult our friends” tours.

    First President to go on 17 lavish vacations, including date nights and Wednesday evening White House parties for his friends paid for by the taxpayer.

    First President to have 22 personal servants (taxpayer funded) for his wife.

    First President to keep a dog trainer on retainer for $102,000 a year at taxpayer expense.

    First President to repeat the Holy Quran & tell us the early morning call of the Azan (Islamic call to worship) is the most beautiful sound on earth.

    First President to tell the military men and women that they should pay for their own private insurance because they “volunteered to go to war and knew the consequences”.

    Then he was the First President to tell the members of the military that THEY were UNPATRIOTIC for balking at the last suggestion.

    First President to side with a foreign nation over one of the American 50 states (Mexico vs. Arizona).

    How is this hope and change working out for America?

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