- ProPublica reported this week that Warren Buffett pays relatively little income tax despite huge gains in wealth.
- The investor pays minimal tax by owning Berkshire Hathaway shares and not paying a dividend.
- Buffett stressed that shareholders do not want a dividend and that he is giving his fortune.
- See more articles on the Insider business page.
Warren Buffett minimizes his personal tax bill by keeping his fortune in Berkshire Hathaway shares and not paying a dividend, ProPublica said in an investigative report released on Tuesday.
The billionaire investor and Berkshire CEO defended himself in a detailed statement to the media, explaining that his shareholders do not want a dividend and saying he is on track to donate virtually all of his money to good causes.
ProPublica analyzed Buffett’s tax returns between 2014 and 2018 and determined that although his fortune had increased by $ 24 billion during that period, he had only reported $ 125 million in income and had paid that $ 24 million in taxes.
“No one of the richest 25 has avoided as much tax as Buffett, the hundred-billion-dollar grandfather,” ProPublica said. He added that Buffett’s annual income of $ 12 to $ 25 million between 2015 and 2018 was minimal; more than 14,000 U.S. taxpayers reported more income than they did in 2015.
Buffett responded to ProPublica’s main claims – that he is saving his money in Berkshire stocks and avoiding a dividend to keep his tax bill low – with 23 pages of documents. They included a written statement, as well as excerpts from several Berkshire annual reports, press releases and photocopies of newspaper and magazine articles.
The investor pointed out that Berkshire shareholders overwhelmingly prefer the company to reinvest its profits instead of paying a dividend because they know that a large chunk of funds will ultimately go to good causes.
“Many large shareholders, including me, enjoy the accumulation of long-term value, knowing that it is for philanthropy, not consumerism or dynastic aspirations,” said Buffett.
The investor pointed out that holders of Berkshire “A” shares voted 87-1 against a dividend in 2014, and “B” shareholders voted 47-1. He probably wanted to show that Berkshire doesn’t pay a dividend because the vast majority of its shareholders don’t want them, not because he wants to lower his personal tax bill.
Buffett defended his decision to keep nearly all of his fortune in Berkshire stocks. The 90-year-old billionaire has pledged to donate over 99% of his net worth to philanthropic causes and has already donated around half of his nearly 475,000 “A” shares since 2006, he said. he declares.
Additionally, Buffett has calculated the tax benefits of his donations to date to be less than 50 cents for every $ 1,000 he has given. He also prefers to donate his money to charity, instead of giving it to the federal government to pay off the national debt.
“I think the money will be more useful to society if it is donated in a philanthropic way than if it is used to slightly reduce ever-growing US debt,” he said.
Buffett reiterated his support for tax code changes that would reduce wealth inequality.
“I hope that the labor income tax credit will be greatly expanded and furthermore I believe that enormous dynastic wealth is undesirable for our society,” he said.
Buffett attached photocopies of a 1986 Fortune cover story to his statement. It was titled “Should You Leave Everything to the Children?” And included his advice on how much to pass on: “Enough money to make them feel they can do it all, but not so much that they can’t do anything.”