You know Warren Buffett complains all the time that he doesn’t pay enough taxes. Right, well first of all I’ll let you know a little secret, he’s lying. When Buffett talks about the fact that he doesn’t pay taxes, less than one percent of his income is earned as an individual, ninety nine plus percent of his money is earned through his corporation Berkshire Hathaway.
He owns a third of the stock, they pay thirty five percent tax, they pay billions of dollars a year in taxes, that’s Warrens money! A third of it is his, so he chooses to pay it through his corporation and of course if the corporation does pay a dividend to Buffett, he pays another fifteen percent tax on that. His real tax rate is fifty percent, so when he says he’s only paying fifteen percent, he’s paying less than his secretary, he’s lying and in fact when Warren says he wants to pay more taxes, he’s lying about that too!
He pays himself a salary of only five hundred thousand dollars a year, that’s less than I pay myself, he’s a billionaire I’m not. Why does he work so cheap? Because he doesn’t want to pay the taxes. If he paid himself a big salary he would have to pay alot of money in taxes on it like I do. He would have to pay thirty five percent federal and pay whatever the tax rate is in Omaha and pay Medicare tax. He doesn’t do that, he leaves it in the company where he owns a third of it and get this he’s actually alot smarter.
Berkshire Hathaway trades at twenty times earnings (that’s the PE), so every dollar that Buffett doesn’t pay himself in salary adds twenty dollars to the value of Berkshire Hathaway’s stock. Now if he owns a third of that, that’s seven dollars for Warren, so if he doesn’t pay himself a dollar, he’s seven dollars richer and now when he sells that stock, guess what is tax rate is? Fifteen percent!
He is going out of his way to arrange his income to minimize his taxes. Then he goes and cries that he’s not paying enough taxes and he wants the government to raise them. He can raise his taxes anytime he wants, just pay himself a salary or just write a check to the government. Warren might not be the best the economist and he might not be that savvy in politics but obviously he’s a good businessman. He’s made a lot of money, he’s run a lot of companies successfully. Who do you want to have Warren’s money, him or Brock Obama? What is Obama going to do with it?
Buffett has all this money, he drives a pickup truck and lives in a little house. I mean he’s not an extravagant guy, now when these people say we need to raise taxes, we can’t let the rich have a consumption tax right because then they’re not gonna pay taxes because they’re only gonna pay taxes on the money they spend. Well yeah because that’s the only money that benefits them.
See if Buffet is earning hundreds of millions of dollars a year and if he spent it all then he would pay a big consumption tax. If he only spends a little bit of it, then what is he doing with the money that he’s not enjoying? Well he’s using it to grow his business, he’s growing the economy. Why should the government tax that money? They always say we need to have a tax cut to stimulate the economy, say well we to cut taxes on the middle class because they’ll spend all that money. If we cut taxes on the rich well they won’t spend it. They’ll invest it, they’ll grow the economy, they’ll create jobs, they’ll create products and that’s what we want. We don’t want to tax savings, we want to tax spending because spending isn’t how we grow the economy, spending is the consequence of a growing economy, you have to grow it and you have to produce it before you consume it.