Buffett (not Jimmy) slams dividend tax cut

BDawg

Lifer
Oct 31, 2000
11,631
2
0
CNN Link

Buffett posed a hypothetical situation in which Berkshire Hathaway, which does not currently pay a dividend, paid $1 billion in dividends next year.

Through his 31 percent ownership of the company, Buffett said he would receive an additional $310 million in income that would reduce his tax rate from about 30 percent to 3 percent, while his office secretary would still have a tax rate of about 30 percent.

"The 3 percent overall federal tax rate I would pay -- if a Berkshire dividend were to be tax free -- seems a bit light," Buffett wrote.
 

sMiLeYz

Platinum Member
Feb 3, 2003
2,696
0
76
I'm already too disgusted by this administration to formulate a response.

edit: To think that people bought Bush's speech about the tax cut was "for blue collar workers".

 

BDawg

Lifer
Oct 31, 2000
11,631
2
0
Originally posted by: sMiLeYz
I'm already too disgusted by this administration to formulate a response.

edit: To think that people bought Bush's speech about the tax cut was "for blue collar workers".
Just say you're disappointed that you didn't find out what Mr. Cheeseburgers in Paradise thinks. :)
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Like corps already don't have enough advantage over sole proprietorships, partnerships and LLCs lets give them more.

No need for income shifting anymore. (dividing income between the corporation and its shareholders in a manner that lowers overall taxes) Just pay yourself entirely with Dividends and aviod taxes all together. Did you know the more a corp makes the lower thier tax rate is?

Here are the Federal rates:

Corporate Income Tax Rates--2003, 2002, 2001, 2000, 1999, & 1998
Taxable income over Not over Tax rate

$ 0 $ 50,000 15%
50,000 75,000 25%
75,000 100,000 34%
100,000 335,000 39%
335,000 10,000,000 34%
10,000,000 15,000,000 35%
15,000,000 18,333,333 38%
18,333,333 .......... 35%

 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Here is a link which shows the gravey train real Corporations enjoy but LLC's and SPs don't. 1
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Buffet's office secretary is in the 30% bracket??? Man, she must be making so good money. You think he would be nice enough to pay her in dividends, though, don't ya?

And while he's right in that extreme example, he doesn't mention that dividends are already taxed once at the corporate level.
 

cpumaster

Senior member
Dec 10, 2000
708
0
0
Originally posted by: CPA
Buffet's office secretary is in the 30% bracket??? Man, she must be making so good money. You think he would be nice enough to pay her in dividends, though, don't ya?

And while he's right in that extreme example, he doesn't mention that dividends are already taxed once at the corporate level.

dividends are never taxed twice under current system (prior to this tax break), it's only taxed once,
you probably meant to say that the corporate profit was taxed prior to the dividend being distributed to stockholders... for a cPA you're kinda clueless or just lazy to type?

I don't mind not having the dividend taxed, instead, raised the profit-tax/gross taxes for the corporation, thereby solving the no double taxation problem and at the same time balance the budget...
 

Christoph

Senior member
Jan 9, 2001
217
0
0
I think it would've been much more stimulating to eleminate the tax on unemployment benefits than the tax on dividends.
 

Lucky

Lifer
Nov 26, 2000
13,126
1
0
Originally posted by: cpumaster
Originally posted by: CPA
Buffet's office secretary is in the 30% bracket??? Man, she must be making so good money. You think he would be nice enough to pay her in dividends, though, don't ya?

And while he's right in that extreme example, he doesn't mention that dividends are already taxed once at the corporate level.

dividends are never taxed twice under current system (prior to this tax break), it's only taxed once,
you probably meant to say that the corporate profit was taxed prior to the dividend being distributed to stockholders... for a cPA you're kinda clueless or just lazy to type?

I don't mind not having the dividend taxed, instead, raised the profit-tax/gross taxes for the corporation, thereby solving the no double taxation problem and at the same time balance the budget...


I think what he said was perfectly clear, unlike your engrish.

And let me get this straight-you are advocating raising the corporate tax rate? We are already taxing them at nearly the highest levels in the world.
 

Amused

Elite Member
Apr 14, 2001
55,200
11,610
146
Originally posted by: Lucky


And let me get this straight-you are advocating raising the corporate tax rate? We are already taxing them at nearly the highest levels in the world.
Not to mention corporations don't pay taxes. They simply pass them on to the consumer. The higher you make business taxes, the higher prices YOU pay for goods and services. Moreover, high taxes hurt our ability to compete overseas, thus costing us jobs here at home.

Corporate taxes are just a tax on us.
 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
76
www.ShawCAD.com
[dolt mode]

Yeah yeah - screw da "MAN" - tax him ... yeah yeah man

Corps get away with everything man... yeah...

Where do these rich people get off thinking that they shouldn't have to pay a higher rate on thier taxes than me man... he makes more so he should have to pay more...screw da "MAN"...

[/dolt mode]

Question to dolt: "where do you work?"

Answer: "McDonalds" (or insert any other big company - like say: Walmart, Spencer Gifts:p, Pizza Hut........)

Question to dolt: "So if we increase taxes on BIG businesses like McDonalds, you realize that they will either pass the increase on to the consumer, not increase workers wages, or cut jobs and make you work harder - right?"

Answer: "well, F@#$ the MAN...yeah man....screw em"


The above was a dramatic recreation of a real conversation with a guy I know:p

CkG
 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Just wait till executives start laying people off to pay themselves a fat divident. tax free. Why invest the money in new production and hope you get a 30% return, when you can just pay it all in divident and get a 30% return right away in saved taxes.
Hey, I am gonna demand the companies whose stock I own pay me a divident instead of investing in growth, if it ever comes up for a vote. It it costs some of you your jobs, too bad, as long as I get my tax free divident.
 

charrison

Lifer
Oct 13, 1999
17,033
1
81
2 things that Buffet is unlikely to do with his tax cut.

1. Give the money to people who are in a lower tax bracket
2. Stuff the saving in a matress.


Buffet will do something with this money that is productive.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
I love this no tax on dividends thing... Lets see what I'll do..

If I were a corporate finance person I'd go gamble on the company stock... that is; create bad news so the price drops... run out and buy lots of stock which becomes treasury stock
(cr cash dr treasury stock for the purests) then next year the fake bad does not materialize so the stock price climbs... I sell all the Treasury stock (dr cash cr tstock) the difference is not profit. It is gain on tstock transactions... now we have untaxed dollars available to use as dividends... I pay dividends equal to the tstock gain (for example) owner of the stock gets tax free dividends from untaxed gain. And everyone loves me and gives me more stock options... and next year I do the same thing...
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: cpumaster
Originally posted by: CPA
Buffet's office secretary is in the 30% bracket??? Man, she must be making so good money. You think he would be nice enough to pay her in dividends, though, don't ya?

And while he's right in that extreme example, he doesn't mention that dividends are already taxed once at the corporate level.

dividends are never taxed twice under current system (prior to this tax break), it's only taxed once,
you probably meant to say that the corporate profit was taxed prior to the dividend being distributed to stockholders... for a cPA you're kinda clueless or just lazy to type?

I don't mind not having the dividend taxed, instead, raised the profit-tax/gross taxes for the corporation, thereby solving the no double taxation problem and at the same time balance the budget...

"kinda clueless" - hey, thanks for the compliment.

But, I'll take lazy, only because I thought the majority of us on the Politics and News forum were smart enough to know the difference. If this was the OT forum, I would have spelled it out clearer, I just assumed you were smart enough to know the inference. Interesting too, how you attack me by my way of stating the means of dividend taxation at the corporate level, but then you turn around and use the misleading "double taxation" description. Are you clueless or just lazy?
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: charrison
2 things that Buffet is unlikely to do with his tax cut.

1. Give the money to people who are in a lower tax bracket
2. Stuff the saving in a matress.


Buffet will do something with this money that is productive.
Agreed Buffett knows how to make a buck and really grow companies. (my hero) exept for his lack of philanthropy. Saw a forbes list he was dead last in the billionares catagory,
 

Michael

Elite member
Nov 19, 1999
5,435
234
106
SuperTool - I make my investment decisions based on total return. Taht means dividends + stock price appreciation.

If you do not grow the company long term, you have no way of increasing dividend payments.

Paying out your earnings to shareholders can be good for capital managment within the company. There are tons and tons of examples of companies that generate a ton of cash during whatever business cycle they're in. Since they can't grow their core business any faster, they do M&A deals outside of their space. In most cases, this turns out poorly.

It would be better for them to give me the money (in the form of a dividend) and let me make the capital allocation decision.

Michael
 

bigdog1218

Golden Member
Mar 7, 2001
1,674
1
0
Originally posted by: charrison
2 things that Buffet is unlikely to do with his tax cut.

1. Give the money to people who are in a lower tax bracket
2. Stuff the saving in a matress.


Buffet will do something with this money that is productive.
Then why is he saying its a bad thing, Buffet is probably one of, if not the smartest investor in the US. If he says theres a problem with it, theres a problem with it. When are you going to realize that Bush doesn't have the greatest plans for the future of our economy.
 

charrison

Lifer
Oct 13, 1999
17,033
1
81
Originally posted by: bigdog1218
Originally posted by: charrison
2 things that Buffet is unlikely to do with his tax cut.

1. Give the money to people who are in a lower tax bracket
2. Stuff the saving in a matress.


Buffet will do something with this money that is productive.
Then why is he saying its a bad thing, Buffet is probably one of, if not the smartest investor in the US. If he says theres a problem with it, theres a problem with it. When are you going to realize that Bush doesn't have the greatest plans for the future of our economy.
Micheal Dell thinks the dividend tax cuts are a great idea. My guess is they both have an agenda to goes along with their opinion of the tax cuts. Bush may not have a great plan, but he at least has a plan. The democratic tax plan that has been offered does little to get money in the hands of investors and does a lot to help grow state goverment.

 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: Michael
SuperTool - I make my investment decisions based on total return. Taht means dividends + stock price appreciation.
Stock price appreciation is taxed, dividents aren't. I know which one I would pick. The company value would have to go up by $1.3 for each $1 invested to compete with the divident tax break. That's a 30% ROI. I'll take the cash.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: HJD1
I love this no tax on dividends thing... Lets see what I'll do..

If I were a corporate finance person I'd go gamble on the company stock... that is; create bad news so the price drops... run out and buy lots of stock which becomes treasury stock
(cr cash dr treasury stock for the purests) then next year the fake bad does not materialize so the stock price climbs... I sell all the Treasury stock (dr cash cr tstock) the difference is not profit. It is gain on tstock transactions... now we have untaxed dollars available to use as dividends... I pay dividends equal to the tstock gain (for example) owner of the stock gets tax free dividends from untaxed gain. And everyone loves me and gives me more stock options... and next year I do the same thing...

While your scenario is doable, the materiality of such a transaction would be neglegible, at best, for most companies and most shareholders. Plus, many states have limits to the amount of treasury stock that can be purchased. And how long do you suspect this ruse would continue before analysts and investors wise up and then the SEC files an investigation into false releases (illegal in most states).

Also, just being picky, but there is no "gain" on the reissue of treasury stock, it's Paid In Capital, a stockholder's equity adjustment. Gain would imply that there is a taxable transaction, which in this case is not.
 

CPA

Elite Member
Nov 19, 2001
30,322
4
0
Originally posted by: Michael
SuperTool - I make my investment decisions based on total return. Taht means dividends + stock price appreciation.

If you do not grow the company long term, you have no way of increasing dividend payments.

Paying out your earnings to shareholders can be good for capital managment within the company. There are tons and tons of examples of companies that generate a ton of cash during whatever business cycle they're in. Since they can't grow their core business any faster, they do M&A deals outside of their space. In most cases, this turns out poorly.

It would be better for them to give me the money (in the form of a dividend) and let me make the capital allocation decision.

Michael
My company has awesome cash flow, about $1B a year, but we only pay an annual dividend of $.01 per share (over 600 million shares outstanding), sometimes. Bush's plan would NOT change my companies dividend payout. And since a company can not pick and choose who it pays out, it would not benefit the company to change the method in which in compensates it's highly paid employees.

 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: charrison

Micheal Dell thinks the dividend tax cuts are a great idea. My guess is they both have an agenda to goes along with their opinion of the tax cuts. Bush may not have a great plan, but he at least has a plan. The democratic tax plan that has been offered does little to get money in the hands of investors and does a lot to help grow state goverment.


Dell spends 4% of their budget on R&D. They don't invest in big job creating projects stateside, they just build cheap pc boxes on low margins. Companies that invest their money in R&D (and hire engineers and scientists to that end) instead of paying dividents would get hurt. We are incouraging divident payments job creation and investments in growth.
 

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