Buffett Speaks The Truth

[nevergaveitathought]

Originally Posted by CaptainMidnight

It is often stated that corporations act more as "tax collectors" than as taxpayers. Analysts and economists speak of "tax incidence." In other words, upon whom does the tax burden really fall?


The shareholders "tax" would be the extent to which the corporate income tax affects the return on capital and isn't borne instead by consumers and employees.

to wit:

should he have been organized in his business as a sole proprietor or partnership, that same argument that tax is truly being paid by customers would still be there. that argument is potentially there for all businesses whereby it is assumed to be a cost of being in business passed on to customers. the only difference is, his (buffett's) claim of paying a lesser tax rate than his secretary would have never been made had that been the case.

either way, corporate or self employment income, the rate tax paid is more or at least as much.

while in fact, the way he is organized, he paid a much higher rate, its just hidden and he should know better. he was not truthful

the increased tax rate comes about due, for the most part, to corporations not being able to deduct dividends paid and there is a double taxation on them, even if the tax rate at the individual level is limited to 15%

had he received the 40 million (or 61 million) as salary, the salary would have been deducted by the corporations paying him and they would have saved 35% (assuming they got by the stupid golden parachute rule, which most do easily enough and if they couldn't, well talk about the ultimate double tax). he on the other hand would have paid 35% and never would have made the false claim that his secretary paid a higher rate. there would have been one 35% paid to the government. but there actually was 46% paid, on a much higher amount i might add, to the government.

[Texas Contrarian]

As I suggested earlier, I think focusing on the $40 million or so that Buffett claimed as "taxable income" is completely pointless. Since that's obviously less than one-tenth of one percent of his net worth, the tax rate he pays on that income hardly affects his wealth-accumulation ability at all. You could tax away 90% of it and it wouldn't make a noticable difference.

Originally Posted by nevergaveitathought

...should he have been organized in his business as a sole proprietor or partnership, that same argument that tax is truly being paid by customers would still be there. that argument is potentially there for all businesses whereby it is assumed to be a cost of being in business passed on to customers.

But if he owned all those businesses as proprietorships or partnerships, he would face big annual tax bills -- probably in the amount of many hundreds of millions of dollars annually.

Berkshire Hathaway, on the other hand, enjoys the dividend tax exclusion, allowing cash to be upstreamed to the parent which in turn can aggressively stay on the acquisition trail.

If you want to build net worth, there's nothing quite like having the ability to avoid sending big checks to the Treasury! That's why Berkshire Hathaway, with Buffett's shrewd selections, has been such an effective compounding vehicle.

I think the question of whether Buffett pays any significant amount of tax revolves largely around the tax incidence question. How much of the corporate tax burden is borne by shareholders? Perhaps not that much, as there seems to be something of a consensus among economists that it's mostly borne by employees and consumers.

Therefore, one can reasonably argue that Buffett and other shareholders pay some invisible tax, to the extent that the corporate tax may affect return on capital. Exactly how much is obviously not easily quantifiable.

But tax-incidence analysis suggests that middle class taxpayers pay tax in three different ways:

1) Directly, in the form of income and payroll taxes.

2) Indirectly, inasmuch as part of the burden falls on employees, causing some to earn lower salaries and wages than would be the case absent the corporate income tax.

3) Indirectly, since they pay more for some goods and services than they would if there were no corporate income tax.

[nevergaveitathought]

Originally Posted by CaptainMidnight

As I suggested earlier, I think focusing on the $40 million or so that Buffett claimed as "taxable income" is completely pointless. Since that's obviously less than one-tenth of one percent of his net worth, the tax rate he pays on that income hardly affects his wealth-accumulation ability at all. You could tax away 90% of it and it wouldn't make a noticable difference.



But if he owned all those businesses as proprietorships or partnerships, he would face big annual tax bills -- probably in the amount of many hundreds of millions of dollars annually.

Berkshire Hathaway, on the other hand, enjoys the dividend tax exclusion, allowing cash to be upstreamed to the parent which in turn can aggressively stay on the acquisition trail.

If you want to build net worth, there's nothing quite like having the ability to avoid sending big checks to the Treasury! That's why Berkshire Hathaway, with Buffett's shrewd selections, has been such an effective compounding vehicle.

I think the question of whether Buffett pays any significant amount of tax revolves largely around the tax incidence question. How much of the corporate tax burden is borne by shareholders? Perhaps not that much, as there seems to be something of a consensus among economists that it's mostly borne by employees and consumers.

Therefore, one can reasonably argue that Buffett and other shareholders pay some invisible tax, to the extent that the corporate tax may affect return on capital. Exactly how much is obviously not easily quantifiable.

But tax-incidence analysis suggests that middle class taxpayers pay tax in three different ways:

1) Directly, in the form of income and payroll taxes.

2) Indirectly, inasmuch as part of the burden falls on employees, causing some to earn lower salaries and wages than would be the case absent the corporate income tax.

3) Indirectly, since they pay more for some goods and services than they would if there were no corporate income tax.

my point was solely limited to the fact a higher tax rate was paid on buffet's income than on his secretary's.

the idea of the holding company neither increases nor decreases the tax burden as compared to a sole prorietorship or partnership and as a sole proprietor or partnership the tax burden would be just about the same as the corporate tax except the ongoing medicare tax perhaps.

of course the whole discussion concerning proprietor/partnership is merely to compare and point out that his dividend, while having a nominal lower rate of tax, actually has a much higher rate. there are many legal and other considerations and those type entities would never be practical.

the 100% dividend exclusion does allow the gathering of money from all the disparate companies into one entity and for central control for further investment purposes assuming 80% or more ownership, or either a 20% or 30% recognition of income if less than 80% ownership.

[juiceman01]

According to a 2009 AP article........ 47% of US Households pay no taxes at all. That is nearly half of all US households.

I think If Warren Buffet or other wealthy americans want to pay more taxes they should lead by example.

[chefnerd]

Originally Posted by nevergaveitathought

the increased tax rate comes about due, for the most part, to corporations not being able to deduct dividends paid and there is a double taxation on them, even if the tax rate at the individual level is limited to 15%

In actuality, dividends paid by a corporation to stockholders are deducted from corporate income.

http://www.law.cornell.edu/uscode/ht...6----000-.html
TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart C > § 316
Prev | Next
§ 316. Dividend defined

(a) General rule
For purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1) out of its earnings and profits accumulated after February 28, 1913, or
(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.

http://www.law.cornell.edu/uscode/ht...1----000-.html

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart B > § 311

§ 311. Taxability of corporation on distribution

(a) General rule
Except as provided in subsection (b), no gain or loss shall be recognized to a corporation on the distribution (not in complete liquidation) with respect to its stock of—
(1) its stock (or rights to acquire its stock), or
(2) property.

http://www.law.cornell.edu/uscode/ht...2----000-.html

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart B > § 312

§ 312. Effect on earnings and profits

(a) General rule
Except as otherwise provided in this section, on the distribution of property by a corporation with respect to its stock, the earnings and profits of the corporation (to the extent thereof) shall be decreased by the sum of—
(1) the amount of money,
(2) the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and
(3) the adjusted basis of the other property, so distributed.

If you have a more current version of the tax laws available, please feel free to post it.

[Laz]

Where is an accountant when you need one. It has been a while since I studied this but I do remember double taxation as being one of the drawbacks to a C corp. An accountant if available needs to chime in on this.

[nevergaveitathought]

Originally Posted by chefnerd

In actuality, dividends paid by a corporation to stockholders are deducted from corporate income.

http://www.law.cornell.edu/uscode/ht...6----000-.html
TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart C > § 316
Prev | Next
§ 316. Dividend defined

(a) General rule
For purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1) out of its earnings and profits accumulated after February 28, 1913, or
(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.

http://www.law.cornell.edu/uscode/ht...1----000-.html

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart B > § 311

§ 311. Taxability of corporation on distribution

(a) General rule
Except as provided in subsection (b), no gain or loss shall be recognized to a corporation on the distribution (not in complete liquidation) with respect to its stock of—
(1) its stock (or rights to acquire its stock), or
(2) property.

http://www.law.cornell.edu/uscode/ht...2----000-.html

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter C > PART I > Subpart B > § 312

§ 312. Effect on earnings and profits

(a) General rule
Except as otherwise provided in this section, on the distribution of property by a corporation with respect to its stock, the earnings and profits of the corporation (to the extent thereof) shall be decreased by the sum of—
(1) the amount of money,
(2) the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and
(3) the adjusted basis of the other property, so distributed.

If you have a more current version of the tax laws available, please feel free to post it.

dividends are not deductible whether a C Corp or an S. you may be confusing the term "distribution out of earnings and profits" with a deduction to arrive at taxable income.

all normal dividends have to be paid out of "earnings and profits" of a C corporation (dividends out of an S Corp to the extent not in excess of basis are not taxable as they have been previously taxed). A dividend isnt a dividend unless it is paid out of net income after tax that has been retained by the corporation. An "earnings and profits" account is similar to retained earnings but not exactly. It is a separate calculation of retained earnings adjusting it for tax preference items or accelerated depreciation, etc. If there aren't sufficient "earnings and profits" then the dividend may become a liquidating dividend but in no case is a dividend a deduction to arrive at taxable income of a corporation.

what you have posted is part of the C chapter or C corporation law and merely a definition of what a dividend is:

1. a dividend is something paid out of "earnings and profits" (earnings and profits are akin to retained earnings, which is earnings after tax of a corporation)

and an ordering rule when a dividend is paid:

1. it is treated as having been paid first out of current year "earnings and profits" and then prior year "earnings and profits"

and that there is no gain, loss deduction, income etc to a corporation on the distribution as a dividend, of its property.

[WTF]

Originally Posted by juiceman01

According to a 2009 AP article........ 47% of US Households pay no taxes at all. That is nearly half of all US households.

I think If Warren Buffet or other wealthy americans want to pay more taxes they should lead by example.

According to Star magazine, three posters in this forum were abducted by aliens, returned as Tea Folks and don't know shit about how the tax system works.

[Laz]

Originally Posted by WTF

According to Star magazine, three posters in this forum were abducted by aliens, returned as Tea Folks and don't know shit about how the tax system works.

You might not want to make to many assumptions about the knowledge levels of other people on this forum. You do not know them or their backgrounds. Based on your posts I suspect some of them know more than you.

[anaximander]

The dl on berkshire hath is that they haven't paid taxes
going back to 2002-03.

As far as the unamerican lefthanded swipe at constitutionalists,
it's no secret(well evidently to some it is) that the
tax code is convoluted and confusing by design.
Every american is in violation of some obscure and
archane code/regulation. You don't make a law
scores of pages thick if your intent is for the people
to understand it. You do that in order to obfuscate
and conceal the true intent....

Reduce the citizens to economic servitude, wards of the state.
Bankrupt the US republic, impose UN socialism.

[JONBALLS]

heres a real FUCKIN SURPRISE!!LOL!!http://www.huffingtonpost.com/2011/0..._n_941099.html