Robert Willens

More Hypocrisy from Warren Buffett as He Structures Deal to Avoid $400 Million in Taxes

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Warren Buffett epitomizes everything that is wrong with the global economy, and the U.S. economy specifically. He is the consummate crony capitalist, a brilliant yet conniving oligarch who intentionally plays on the gullibility of the masses to portray himself as one thing, when in reality he is something else entirely.

He publicly talks about how rich people need to pay more in taxes, then turns around and pioneers new ways for his company Berkshire Hathaway to avoid hundreds of millions in taxes. He thinks that by going on television stuffing ice cream cones and hamburgers in his mouth and acting all grandfatherly that no one will notice who he is really is and the incredible hypocrisy of his actions.

I’ve pointed out “Uncle” Warren’s hypocrisy previously on these pages, most recently in my post from last March titled: Crony Capitalist “Uncle” Warren Buffett Drives Company Profits Using Derivatives.

While that was pretty blatant hypocrisy, Buffett’s latest elaborate scheme to avoid $400 million in capital gains taxes from the disposition of a large chunk of Berkshire Hataway’s Washington Post stake (which was acquired in the 1970s for $11 million) absolutely takes the cake.

The Street published an excellent article on the topic. Their conclusion at the end of the piece says it all:

Bottom Line: Warren Buffett is pioneering new ways to avoid capital gains tax, even as he is President Obama’s richest spokesperson for progressive income tax policy. 

More from The Street:

NEW YORK (TheStreet) – Berkshire Hathaway may have avoided about $400 million in taxes by exiting its long-time stake in Graham Holdings – formerly known as The Washington Post Company – through an asset swap with the company that will add Miami-based TV station WPLG and hundreds of millions in cash to Berkshire’s coffers. Wednesday’s transaction also may also break new ground in how large investors structure deals to avoid taxes on their investment gains.

Berkshire’s deal with Graham Holdings is structured in a way that may allow the Warren Buffett-run conglomerate to exit a multi-decade investment in Graham Holdings without paying any capital gains tax, Robert Willens, an independent tax expert, said in a Friday telephone interview.

The cost-basis for Berkshire’s 1,727,765 million shares was $11 million, Warren Buffett said in Berkshire’s 2000 annual letter to shareholders. Now, Berkshire is seeking to exit Graham Holdings at a value in excess of $1.1 billion.

Applying a 38 percent tax rate (federal plus state and local taxes) would bring Berkshire to about $400 million in tax liability, Willens said. The swap orchestrated between Berkshire and Graham Holdings, however, is likely to reduce Berkshire’s tax liability to $0.

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Shocker! Multinational Corporations Don’t Pay Taxes

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One of the strangest things about the corporate tax debate is that it is nearly impossible to figure out the amount companies are actually paying. Nowhere is there a straightforward number showing how much in federal taxes a firm pays to the U.S. Treasury every year.

– From a recent Washington Post article published March 26

Back in March 2011, I first discussed the extreme extent to which the largest corporations in America go in order to avoid paying taxes, when I highlighted how GE has a unit of 975 people devoted entirely to achieving this end.  It was clear back then that the biggest multinational companies in the nation take advantage schemes and loopholes that would never be available to the average citizen.  Tactics such as the “Double Irish” and the “Dutch Sandwich,” which these corporations expend considerable resources implementing.  Well, now we have an update on the story courtesy of the Washington Post.  We learn that:

Companies have also found ways to shift their income across national boundaries, roving from country to country in search of the lowest tax burden. Ed Kleinbard, a tax professor at the University of Southern California Gould School of Law, has dubbed these movable earnings “stateless income.”

The trend has revolutionized company tax planning, especially in businesses that rely on intellectual property. The Senate Permanent Subcommittee on Investigations found that from 2009 to 2011, Microsoft, a member of the Dow 30, was able to shift offshore almost half its net revenue from U.S. retail sales, or roughly $21 billion, by transferring intellectual-property rights to a Puerto Rican subsidiary. As a result, the subcommittee found that Microsoft saved up to $4.5 billion in taxes on products sold in this country.

Robert Willens, who has been a corporate tax expert for more than 40 years, said he has noticed an unprecedented level of enthusiasm for reducing taxes.  “Maybe it’s just the pressure to produce profits,” Willens said. “I think people realize now that it’s not difficult to avoid U.S. taxes . . . and investors are demanding ­consistently improving performance.”

According to a Congressional Research Service report from January, U.S. multinationals in 2008 reported 43 percent of their overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland, all places famous for having among the lowest tax rates in the world.

The same report noted that profits reported in Bermuda rose from 260 percent of the country’s economic output in 1999 to more than 1,000 percent in 2008.

Complaints voiced, heard

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