The suggestion that a company should pay taxes it doesn’t believe it rightly owes merely to show solidarity with its majority shareholder and support for his pronouncement that he should pay more taxes is downright silly.
Yet, that is precisely what Netright Daily has done in a post titled Warren Buffett’s Taxing Hypocrisy:
[Warren Buffett] wrote of the so-called “super-rich,” which he apparently defines as households earning $1 million or more a year: “Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.” Isn’t that nice of Mr. Buffett?
But if he were truly sincere, perhaps he might simply try paying the taxes the IRS says his company owes? According to Berkshire Hathaway’s own annual report — see Note 15 on pp. 54-56 — the company has been in a years-long dispute over its federal tax bills.
According to the report, “We anticipate that we will resolve all adjustments proposed by the IRS for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months. The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years.”
Although I disagree with Buffett’s claim that he and other multi-millionaires are under-taxed, his personal hypocrisy is not proven by the fact that his company continues to dispute an IRS assessment. Berkshire Hathaway’s IRS dispute has nothing whatsoever to do with Warren Buffett’s claim that he is personally under-taxed.
If Berkshire Hathaway’s Board of Directors and Officers believe that the IRS assessment is incorrect and that the company does not owe the taxes the IRS claims it owes, they would be breaching their fiduciary duty to the shareholders if they did not dispute it.
And remember, just because the IRS says you owe a tax doesn’t make it true.
(Hat Tip: Paul Caron)
7 responses so far ↓
1 Now This Is Hypocrisy // Aug 26, 2011 at 1:55 pm
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2 Patrick // Sep 19, 2011 at 1:12 pm
You are wrong. Buffett is a hypocrite. He runs the company, and they are dodging their taxes and have skated on a number of issues, with long-standing disputes with the IRS.
No, it doesnt prove the IRS right, but it sure doesnt prove them wrong.
Buffet knows that he IS taxed via his ownership of BRK at more than a billion a year, so the idea that he is taxed less than his secretary is absurd. Buffett also knows that taxing dividends is double-taxation, so even if dividend tax rate was 0% he would not be giving less to the IRS than his secretary.
he needs to fess up and get BRK to pay the IRS what they owe.
3 Peter // Sep 19, 2011 at 3:09 pm
Patrick,
It’s silly to suggest that Buffett be in favor of having his corporation pay taxes it doesn’t owe.
The only issue here is whether the IRS’s assessment against Berkshire Hathoway is correct. If the assessment is proven to be correct, it should, and I have no doubt will, be paid. If the assessment is proven to be incorrect, it should not be paid.
If the members of the Board of Directors recommend that the company pay the IRS assessment knowing that it is incorrect, they should all be fired.
4 Dean // Sep 21, 2011 at 2:51 pm
Peter,
And if Buffett convinces the feds to raise the capital gains tax rate then he, as CEO of BRK, ought to be fired for selling out his shareholders…
5 Peter // Sep 21, 2011 at 4:21 pm
Dean,
Interesting question. Does a Board member have a duty to personally promote tax policies that help his company’s shareholders?
6 William // Sep 24, 2011 at 9:02 pm
Peter,
Well put…:) As a shareholder of Berkshire, I would fully expect that the company will promptly pay any taxes the company is shown to owe. The members of the Board (including Mr. Buffett) have a fiduciary responsibility to shareholders to not pay if they, in good faith, do not believe the company is responsible for paying it.
Whether Berkshire is disputing a tax bill or not is not actually relevant to whether Mr. Buffett is correct in his assessment. This man has demonstrated himself to be an exceptionally good businessman and investor… I am willing to bet that he knows far more about what tax policies would be good for businesses (and our economy) than most talking heads on TV or in the Tea Party.
William
7 Peter // Sep 25, 2011 at 11:19 am
William,
Thanks for visiting.
Judging from Buffett’s recent silly suggestions I think it would be foolish to make that bet.
And I certainly don’t think we should make Mr. Buffett King.