Buffett (not Jimmy) slams dividend tax cut

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SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: CPA
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.
You don't own your company, the investors do. And if the investors demand that your company pay more dividents because they want some tax free income, your company will either pay a divident, or the investors will sell your stock and buy some divident paying one, bringing down the value of your company.
Supply and demand. If there is demand for divident paying companies over growth companies, companies will be pay more dividents and grow less.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76


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.[/quote]

have a nice day.
 

charrison

Lifer
Oct 13, 1999
17,033
1
81
Originally posted by: SuperTool
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.


Why dont you tell Austin and Nashville(I think this where Dell's new facilities went) that Dell does not create jobs. I watched North Austin/Round Rock explode in population because of Dell.
 

Michael

Elite member
Nov 19, 1999
5,435
234
106
SuperTool - Stock appreciation is taxed at the lower capital gains rate. The profits that dividends are paid out of have already been taxed at the corporate rate. The stock price of dividend paying companies should rise (as the dividends are worth more). You'll get both benefits in the short run and then the prices will have adjusted and long term discounted cash flow will take over again.

Michael
 

Shantanu

Banned
Feb 6, 2001
2,197
1
0
LOL.

I can't believe you all are so naive to just blindly accept what good ol' Buffett feeds you. Buffett's company, Berkshire Hathaway, does not pay dividends. His company just has a bunch of non-liquid assets, so I don't think they could pay much of a sustainable dividend even if they wanted to. He has a lot to lose if the dividend tax cut goes through, because dividend paying stocks will - relatively - be worth more, and non-dividend paying stocks will - relatively - be worth less then. As the biggest stockholder of Berkshire Hathaway, Buffett could lose billions.

That said, though, if Buffett has so much concern for the working man out there, I don't understand why he doesn't just dig deep into his own pocket and show his generosity instead of preaching others on it. Quick, Buffett, before the dividend tax cut hits the value of your stocks!
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,168
7,526
126
i never really understood stocks that don't pay dividends... the only reason to own it is because you think the price of the stock will go up, which only happens if the company can convince more people that its stock will keep going up...
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: Shantanu
LOL.

I can't believe you all are so naive to just blindly accept what good ol' Buffett feeds you. Buffett's company, Berkshire Hathaway, does not pay dividends. His company just has a bunch of non-liquid assets, so I don't think they could pay much of a sustainable dividend even if they wanted to. He has a lot to lose if the dividend tax cut goes through, because dividend paying stocks will - relatively - be worth more, and non-dividend paying stocks will - relatively - be worth less then. As the biggest stockholder of Berkshire Hathaway, Buffett could lose billions.

That said, though, if Buffett has so much concern for the working man out there, I don't understand why he doesn't just dig deep into his own pocket and show his generosity instead of preaching others on it. Quick, Buffett, before the dividend tax cut hits the value of your stocks!
Hmm more BS BRK profits are in excess of 3 Billlion a year (that's pretty liquid and a lot of corporate taxes are paid on it. PDF File

Buffett has demonstrated a sense of integrity in his dealings over 50 years and even more so recently with the market collapse. Unfortunately, this apparently has not earned him enough respect for some to accept his arguments at face value, and so underhanded or conniving motives are invented so that his actions may be attributed to them. I think you're mistaken in your assumptions about Buffett's motives, and I think an examination of his history (takes a miniscule salary where he could easily justify millions, eats his own cooking, has never sold a share) demonstrates a sense of fairplay.

His basic argument is that dividends, by and large, go to the wealthy, not the middle class of America. Much of the benefit that wealthy individuals will receive from the dividend tax break will not get spent, it will be socked away. On the other hand, the middle class generally spend a greater portion of any tax break you give them, spurring additional consumption and economic growth.
 

Shantanu

Banned
Feb 6, 2001
2,197
1
0
We're not living in a communist country. It's not the business of the government to redistribute wealth. Double taxation of dividends is a fvcked up policy that's wrong on multiple levels. It doesn't matter if the beneficiary from it is Bill Gates or Mother Teresa's living American counterpart.

The whole double taxation of dividends policy encourages companies to swap debt for equity. That increases risk, and leads to more bankruptcies. If that wasn't bad enough, it employs a massive industry of investment bankers, accountants, and tax lawyers, who help companies alter their capital structure in order to enhance their profits. I'm not seeing the great benefit to society in that. An enormous amount of productivity is totally wasted in trying to beat a stupid tax code.

With the dividend tax gone, it'll put pressure on companies to payout their earnings instead of hording it. Companies will be forced to demonstrate real cash flows. The whole tech bubble and subsequent collapse probably wouldn't have happened if these companies were pressured into paying dividends, because people would have noticed their lack of cash flow (instead of being duped by their income statements). It will force much needed corporate accountability.

Buffett has demonstrated a sense of integrity in his dealings over 50 years and even more so recently with the market collapse. Unfortunately, this apparently has not earned him enough respect for some to accept his arguments at face value, and so underhanded or conniving motives are invented so that his actions may be attributed to them.
Warren Buffett is a businessman. He does not give two sh|ts and fvck about you. If all it took to get rich was to listen to Warren Buffett, then we'd all be billionaires. Everyone on Wall St. is interested in what Warren Buffett has to say, but nobody accepts at face value what he's telling them. There are some things which Warren Buffett says that are true (like his buy-and-hold theory of investing). But the rest is just stuff said to inflate the value of his stock. A dividend tax cut is going to hit his net worth hard, which is based largely on B-H stock holdings, a company that does not pay dividends.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,168
7,526
126
whats being lost is one of the big reasons for doing this is to move companies away from the easily manipulated earnings per share. and obviously a company that is paying dividends actually has that money and probably isn't cooking the books so much as say... enron, worldcom, xerox. in addition to what michael said about companies experimenting in field outside their core businesses because they don't have anything better to do with the money.
 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: charrison
Originally posted by: SuperTool
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.
Why dont you tell Austin and Nashville(I think this where Dell's new facilities went) that Dell does not create jobs. I watched North Austin/Round Rock explode in population because of Dell.
All while paying precisely zero dividend. THat's right, big dividend supporter Michael Dell never paid a dividend himself (at least as of a couple months ago). Would you rather Dell paid a dividend all those years back instead of creating jobs in Texas?
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: Shantanu
We're not living in a communist country. It's not the business of the government to redistribute wealth. Double taxation of dividends is a fvcked up policy that's wrong on multiple levels. It doesn't matter if the beneficiary from it is Bill Gates or Mama Teresa's living American counterpart.

The whole double taxation of dividends policy encourages companies to swap debt for equity. That increases risk, and leads to more bankruptcies. If that wasn't bad enough, it employs a massive industry of investment bankers, accountants, and tax lawyers, who help companies alter their capital structure in order to enhance their profits. I'm not seeing the great benefit to society in that. An enormous amount of productivity is totally wasted in trying to beat a stupid tax code.

With the dividend tax gone, it'll put pressure on companies to payout their earnings instead of hording it. Companies will be forced to demonstrate real cash flows. The whole tech bubble and subsequent collapse probably wouldn't have happened if these companies were pressured into paying dividends, because people would have noticed their lack of cash flow (instead of being duped by their income statements). It will force much needed corporate accountability.

Buffett has demonstrated a sense of integrity in his dealings over 50 years and even more so recently with the market collapse. Unfortunately, this apparently has not earned him enough respect for some to accept his arguments at face value, and so underhanded or conniving motives are invented so that his actions may be attributed to them.
Warren Buffett is a businessman. He does not give two sh|ts and fvck about you. If all it took to get rich was to listen to Warren Buffett, then we'd all be billionaires. Everyone on Wall St. is interested in what Warren Buffett has to say, but nobody accepts at face value what he's telling them. There are some things which Warren Buffett says that are true (like his buy-and-hold theory of investing). But the rest is just stuff said to inflate the value of his stock. A dividend tax cut is going to hit his net worth hard, which is based largely on B-H stock holdings, a company that does not pay dividends.
err....how does swapping debt for equity increase risk? Debt gets you into bankruptcies not equity. Company doesn't have to pay anything to the stock (that's equity) holders if they do not want to, unless the stock is preferred stocks. But they do have to pay for the money they borrowed (that's debt) or else they have to file for bankruptcy protection.

The whole double taxation thing is not exactly right either. Yes company profit is taxed, but there are million ways to get tax credit/shelter. For example, last year Marriot (the hotel chain) reduced their effective tax rate from 36.1% to 6.8% by getting tax credit from investing in coal-treatment machinery to take advantage of a tax code meant to encouraging production of fuel from no conventional source. (Source: Businessweek) . Also, if you know anything about financial analysis, you should know that profit and dividend are two different things. Company with lots of profit, such as Microsoft, may not pay dividend. Companies with little or no profit can still pay dividend as long as they have the cash flow to support it.

Finally, how is dividend tax going to hurt Buffett?s net worth? Worse case, he is in the same position as he is now. He can do anything he want with the company, like start paying dividend and get his tax free cash, he does own the company. He is smart enough to know what is good for him and powerful enough to make things happen.


 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: Michael
SuperTool - Stock appreciation is taxed at the lower capital gains rate. The profits that dividends are paid out of have already been taxed at the corporate rate. The stock price of dividend paying companies should rise (as the dividends are worth more). You'll get both benefits in the short run and then the prices will have adjusted and long term discounted cash flow will take over again.
Michael
I am just saying that reducing dividend taxes will increase the pressure from the shareholders to pay more dividends. And every dollar paid out in dividend is a dollar that the company could be using to buy equipment, hire people and grow it's business. That is all.
 

SuperTool

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

Warren Buffett is a businessman. He does not give two sh|ts and fvck about you. If all it took to get rich was to listen to Warren Buffett, then we'd all be billionaires. Everyone on Wall St. is interested in what Warren Buffett has to say, but nobody accepts at face value what he's telling them. There are some things which Warren Buffett says that are true (like his buy-and-hold theory of investing). But the rest is just stuff said to inflate the value of his stock. A dividend tax cut is going to hit his net worth hard, which is based largely on B-H stock holdings, a company that does not pay dividends.
Bush is a businessman too. I don't think he gives two sh|ts and fvck about you unless you contributed to his campaign.
I trust Buffett way more than Bush. Bush never had a busines that he didn't ruin that didn't rely on taxpayer money. Buffett made 20Bil and is one of the most respectable people in the business for a reason. Buffett is the guy who never bought into the whole Tech bubble, while everyone was making fun of him for not getting on the bandwagon. Frankly I don't buy your theory that he's doing it to inflate his stock. You don't have a good response to what he's saying, so you question his motives. Typical.

 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,168
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Originally posted by: SuperTool

All while paying precisely zero dividend. THat's right, big dividend supporter Michael Dell never paid a dividend himself (at least as of a couple months ago). Would you rather Dell paid a dividend all those years back instead of creating jobs in Texas?
pretty much all dell ever did with its excess cash was buy back its own stock
 

cpumaster

Senior member
Dec 10, 2000
708
0
0
Originally posted by: CPA
"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?

CPA no problem, I luv to dispense compliment anyway possible...
the term "double taxation" is widely used by Bush campaign about corp. profits being taxed twice (not the dividens), and is not exactly the same as in your previous comments suggesting that div. are presently taxed twice, which is not true...

me no turn around... :)

Lucky sooner or later govt will have to raise taxes anyway to cover for the expenses & debts they acquired and who's better target? beside if the corps. enjoyed many tax break & cuts now, why shouldn't they pay for it later? I hope you understand my engrish though I don't necessarily assume you'd understand my argument...
 

Alistar7

Lifer
May 13, 2002
11,983
0
0
Originally posted by: Lucky
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.
and yet they still contribute the smallest portion to the federal coiffers, while pulling down the majority of profits. They barely contribute 10% right now BTW.

Why are they still here if we tax them at the highest rate? Quality of workers, education levels, security, inside access to the largest market in the world, etc.
 

Lucky

Lifer
Nov 26, 2000
13,126
1
0
Lucky sooner or later govt will have to raise taxes anyway to cover for the expenses & debts they acquired and who's better target? beside if the corps. enjoyed many tax break & cuts now, why shouldn't they pay for it later? I hope you understand my engrish though I don't necessarily assume you'd understand my argument...

I dont understand a word of it. Gov't will have to raise taxes for what expenses and debts? What target are you referring to?
 

Michael

Elite member
Nov 19, 1999
5,435
234
106
SuperTool - The pressure to pay dividends is currently pressure to buy back stock. Usually when a corporation buys back stock it causes the stock price to rise (EPS goes up as long as new stock from options is not diluting faster than the buyback) and shareholders get to enjoy the lower capital gains rate.. Dell, Microsoft, and others have poured tons of money into buying back stock.

Management usually pays dividends at a rate that takes into account the investments they need to make to make. The need to pay dividends often imparts needed fiscal discipline. Dividend rates can be reduced as well if cash flow and earnings change.

Buffet also doesn't like stock splits and doesn't really give out many options in his companies. I do tend to listen to him carefully when he speaks, but he does have his own agenda as well.

I received about $550 in dividends last year, so this will put a couple hundred dollars in my pocket. I'm pretty sure I'll just take that money and invest it. I have 2 daughter's I'm saving for college right now. One has only 13 more years to go.

Michael
 

Ferocious

Diamond Member
Feb 16, 2000
4,584
2
71
It's time for the Republican's assault on the middle class to let up a bit.

Yeah right. :frown:
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
The following link will provide some insight into the basic recording of Treasury Stock Transactions. Note: The gain or loss on treasury stock transactions IS a gain or loss, it is simply not a reported gain or loss, and, therefore not taxed. Additionally, The repurchase by a company of its capital stock is a typical alternative use of its funds. It is done often as a means to increase EPS if the intention is to retire it, but, there are many reasons to acquire TStock. TStock transactions are reported in the Balance Sheet as a Conta Equity account apart from the 'normal' issued and outstanding stock accounts, although the Retained Earnings account may be used to record a loss if the appropriate TStock account has been zeroed out. The Cash activitiy related to TStock is also reported on the Statement of Cash Flows as a separate line item for its inflows and outflows. If it Materially affects the Financials it must be footnoted. But, this is rare. Typically, if the gains (but, not the loses) on TStock occur over a prolonged period of time the SEC, IRS and other jurisdictions will look at the activity to determine if the company is acting in a manner that should record the activity as Investments and have the gain REPORTED on the Income Statement and thus taxable. This is rare. We tend NOT to try and outwit the taxing authority.
The lark I posted earlier seems to have not had the intended result so I've posted this.
Final note: Most states are in sync with the Federal Authority regarding tax reporting for corporations. I say most because some minor difference may be present.

Edit: the link recording outline
 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: Michael
SuperTool - The pressure to pay dividends is currently pressure to buy back stock. Usually when a corporation buys back stock it causes the stock price to rise (EPS goes up as long as new stock from options is not diluting faster than the buyback) and shareholders get to enjoy the lower capital gains rate.. Dell, Microsoft, and others have poured tons of money into buying back stock.

Management usually pays dividends at a rate that takes into account the investments they need to make to make. The need to pay dividends often imparts needed fiscal discipline. Dividend rates can be reduced as well if cash flow and earnings change.

Buffet also doesn't like stock splits and doesn't really give out many options in his companies. I do tend to listen to him carefully when he speaks, but he does have his own agenda as well.

I received about $550 in dividends last year, so this will put a couple hundred dollars in my pocket. I'm pretty sure I'll just take that money and invest it. I have 2 daughter's I'm saving for college right now. One has only 13 more years to go.
Michael
You could just open an IRA and have the dividents reinvested tax free anyways.
A couple hundred dollars is worth having this country getting deeper in debt?
Again, someone will have to pay for all the spending, social, WoT, defense, etc, so if you cut taxes in one place, you'll have to pay more eventually in another place.
Now
 

Michael

Elite member
Nov 19, 1999
5,435
234
106
I can't open an IRA.

I have a 401(K) at work and I'm maxed out.

I make too much for Roth IRAs.

Reinvested dividends are eventually taxed as ordinary income when I pull them from the IRA (or 401K for that matter). I prefer to get them tax free now.

Michael
 

BDawg

Lifer
Oct 31, 2000
11,631
2
0
IMHO, if you're going to drop the taxes on dividends, then you should drop it for DRIPs only. That seems fair to me since it encourages re-investment in the company who made the money.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
Supertool,

You could just open an IRA and have the dividents reinvested tax free anyways.
A couple hundred dollars is worth having this country getting deeper in debt?
Again, someone will have to pay for all the spending, social, WoT, defense, etc, so if you cut taxes in one place, you'll have to pay more eventually in another place.
Now[/quote]

I attempted to use the reasoning you posted in another thread to indicate the tax dividend issue would only benifit those holding dividend paying stock out side IRA, 401k, Roth etc., the big players and holders. For instance, Gates owns a gazillion shares of MS and they are going to begin using that 40 billion cash and near cash to pay dividends. He will then use the money that didn't go into the Treasury coffers to fund his various philantropic concerns. This is a noble use of the money and I'd be all for it except at the end of the day I'm actually making a prorata share of that donation and incurring my prorata share of the debt to do it.
I'd like to see a new interstate or some event that has a high multiple payback instead. I'd even go for a tax credit to hire a unemployed person above the already existing credits. Anything, that does the right thing for the economy. Keynes is upset!
 

burnedout

Diamond Member
Oct 12, 1999
6,249
2
0
Originally posted by: Shantanu

LOL.

I can't believe you all are so naive to just blindly accept what good ol' Buffett feeds you. Buffett's company, Berkshire Hathaway, does not pay dividends. His company just has a bunch of non-liquid assets, so I don't think they could pay much of a sustainable dividend even if they wanted to. He has a lot to lose if the dividend tax cut goes through, because dividend paying stocks will - relatively - be worth more, and non-dividend paying stocks will - relatively - be worth less then. As the biggest stockholder of Berkshire Hathaway, Buffett could lose billions.

That said, though, if Buffett has so much concern for the working man out there, I don't understand why he doesn't just dig deep into his own pocket and show his generosity instead of preaching others on it. Quick, Buffett, before the dividend tax cut hits the value of your stocks!
Non-liquid assets? Sustainable dividend? You are kidding, right? BRK owns 11.5% of AXP, around 8% of KO, 10% of G, and nearly 3.5% of WFC as of Dec 31, 2002. The yearly dividend income from just the ownership of AXP is worth over $41 million cash. BRK's total cash, by the way, is $16.1 billion.

No, Buffett has maintained for many years that he doesn't believe in either dividends or stock splits. And if dividend paying stocks will be worth more, BRK has a lot to gain. BRK has over $20 billion invested up in AXP, G, KO and WFC. All pay dividends.
 

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