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)."


Larry Elder

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.


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