Buffett Trump Rebuttal

[Parsad]

Buffett responded to Trump calling him out during the debate:

 

http://www.businesswire.com/news/home/20161010005859/en/Tax-Facts-Donald-Trump

 

Cheers!

[John Hjorth]

Certainly expected!

[Valuebo]

Hah. Just awesome.

[aws]

Trump was clearly BSing when he said Buffett took a similar deduction, because it just wouldn't make sense for Warren to ever have a substantial loss on his personal return.  99+% of his assets are in C-Corporation stock and so none of the activity would end up on his 1040.  We don't know what makes up the remaining 1%, but it's likely mostly publicly traded stocks which can never result in more than a $3,000 net loss on your taxes in a given year.  The returns of people that own lots of privately held investments (such as real estate partnerships or small business s-corporations), are much lumpier and can often result in NOLs in some years.

 

Simply taking an NOL like Trump did is not dishonorable, and Buffett certainly used them over the years in his corporations.  Dempster Mill and Berkshire Hathaway itself both had substantial (relative to their size) NOLs when Buffett took over which allowed him to earn some very useful tax-free cash to fund future investments.  Trump may have used some shady paper losses to inflate the totals though, which is another issue entirely.

[John Hjorth]

aws,

 

What's your source for your post?

[beerbaron]

Sometimes it amazes me how Trump can lack proper judgment for lack of better words. Of all the Hilary supporter he had to name the only one that 2 years ago was showing it's tax return on air to make a point...what were the odds of Buffett showing them again... like 100%!

 

BeerBaron

[CorpRaider]

Damn.  He David Winterized him.

[aws]

aws,

 

What's your source for your post?

 

For Buffett using NOLs?  Buffett mentions using Dempster NOLs in the partnership letters.  The Berkshire NOL you can find in the early annual reports.

[Cardboard]

If Trump was smarter, he would have pointed out how Buffett and his holding company avoided a massive tax bill by allowing Gillette to merge into P&G, then to swap his P&G shares for Duracell in a tax free exchange. Try doing the latter as a regular investor.

 

Cardboard

 

 

[Mephistopheles]

^agreed; except that is too smart for most people to understand, particularly his supporters.

 

FWIW, Trump is absolutely right when he says Buffett pays as little as possible. Trump has so much material from BRK letters if he wanted to pick a fight on this point.

[EliG]

Trump may have used some shady paper losses to inflate the totals though, which is another issue entirely.

 

This is the best theory I've seen that explains how Trump did it.

 

http://www.businessinsider.com/why-did-trump-pay-so-little-tax-2016-10

 

[Txvestor]

A few points.

 

1)Buffett speaks of his PERSONAL tax returns. The vast majority of his wealth is tied up in his stake in Berkshire, what he does with its tax returns is far more pertinent than what he does with the peanuts in his personal tax returns.

 

2)The P&G share swap for duracell was mentioned. He has done many such deals over the years. His recent swap of the majority of his Washington post stake for Berkshire Hathaway shares in that company's overfunded pension plan and a few profitable local TV channels was another. Considering his Washington post stake appreciated something like 100x. Pretty much the entire stake was taxable, and the treasury got nothing.

 

There is a lot of hypocrisy in the system. Hard working professionals pay marginal rates approaching 50%(state and federal). And these corporate entities, and owners of capital who spend their time growing it, pay 24% or less if and when they choose. Its a bit rich of them to lecture those trying to climb the ladder, about "fair share" economics. When I see a wealth tax of 2% on assets above a Billion, Buffett can lecture the rest of us about paying more in taxes. Why does the media not point out that someone with 60000Million, whose net worth grew to 66000Million paying 1.8M is personal income taxes is insane.  Buffett amd co. are amazing escape artists and sivert the publics attention very well.

 

And like someone pointed out above, the vast majority of the public are completely ignorant about these issues.

 

[Txvestor]

A few points.

 

1)Buffett speaks of his PERSONAL tax returns. The vast majority of his wealth is tied up in his stake in Berkshire, what he does with its tax returns is far more pertinent than what he does with the peanuts in his personal tax returns.

 

2)The P&G share swap for duracell was mentioned. He has done many such deals over the years. His recent swap of the majority of his Washington post stake for Berkshire Hathaway shares in that company's overfunded pension plan and a few profitable local TV channels was another. Considering his Washington post stake appreciated something like 100x. Pretty much the entire stake was taxable, and the treasury got nothing.

 

There is a lot of hypocrisy in the system. Hard working professionals pay marginal rates approaching 50%(state and federal). And these corporate entities, and owners of capital who spend their time growing it, pay 24% or less if and when they choose. Its a bit rich of them to lecture those trying to climb the ladder, about "fair share" economics. When I see a wealth tax of 2% on assets above a Billion, Buffett can lecture the rest of us about paying more in taxes. Why does the media not point out that someone with 60000Million, whose net worth grew to 66000Million paying 1.8M is personal income taxes is ludicrous.  Buffett and co. are amazing escape artists and divert the public attention very well.

 

And like someone pointed out above, the vast majority of the public are completely ignorant about these issues. The media is a pitifully failed institution in the republic.

[arbcon]

Just from memory, does anyone remember how he effectively sold Berkshire's stock portfolio to General Re through the share swap?

[Ballinvarosig Investors]

When I see a wealth tax of 2% on assets above a Billion, Buffett can lecture the rest of us about paying more in taxes. Why does the media not point out that someone with 60000Million, whose net worth grew to 66000Million paying 1.8M is personal income taxes is insane.  Buffett amd co. are amazing escape artists and sivert the publics attention very well.

Or even just look at the blended tax rate on his income. $11.5M income, $1.8M in income tax.

[EliG]

Another shameless ego trip by buffett.

 

He also put words on Trump mouth, just hide the fact that this is just his personal ego trip. buffett reminds me about mark cuban & other shills. This is not about them, this is about next POTUS.

 

"Mr. Trump says he knows more about taxes than any other human." [who has ever run for president]

 

https://twitter.com/realdonaldtrump/status/782541307168391168?lang=en

 

Here's another quote from Trump:

 

"I think nobody knows more about taxes than I do, maybe in the history of the world. Nobody knows more about taxes."

 

http://www.pbs.org/newshour/rundown/trump-says-his-tax-rate-is-none-of-your-business/

 

And another one:

 

"I understand the tax laws better than almost anyone which is why I'm the one who can truly fix them."

 

http://www.nydailynews.com/news/politics/trump-brilliantly-tax-laws-paying-article-1.2816127

 

Whatever his claim is, it's laughable. His accountant said in an interview that Trump was completely disinterested when he came in to sign the tax returns. Never paid any attention to any details. His wife asked more questions than he did.

[Cardboard]

I used to have a lot of respect for Buffett. A lot.

 

I was admiring him when he talked about the low returns in the years ahead (1999), underfunded pension plans and the need to expense stock options.

 

He also wrote a great piece when he talked against U.S. trade deficit (2004?).

 

All of this was happening under Democrat and Republican administrations. His logic was top notch.

 

Then a lot changed with the 2008 election and after. As an example, why is he not criticizing the U.S. trade deficit as he used to?

 

Cardboard

[Dynamic]

That sounds like a good question for the AGM:

 

"You frequently criticized the US trade deficit in the past but have not done so to my knowledge for the last few years. Has your view changed or softened in recent years, and if so, what factors have affected it?"

[shalab]

An update here:

 

http://fortune.com/2016/04/29/warren-buffett-foreign-trade/

 

 

I used to have a lot of respect for Buffett. A lot.

 

I was admiring him when he talked about the low returns in the years ahead (1999), underfunded pension plans and the need to expense stock options.

 

He also wrote a great piece when he talked against U.S. trade deficit (2004?).

 

All of this was happening under Democrat and Republican administrations. His logic was top notch.

 

Then a lot changed with the 2008 election and after. As an example, why is he not criticizing the U.S. trade deficit as he used to?

 

Cardboard

[wabuffo]

Just from memory, does anyone remember how he effectively sold Berkshire's stock portfolio to General Re through the share swap?

 

Summary:

1) Buffett issued (ie, sold) overvalued BRK shares (instead of selling overvalued KO, G) to buy fair-valued Gen Re (an insurer with basically a big bond portfolio).

2) After the Gen Re purchase, Buffett had exchanged overvalued assets for fair-valued ones and reduced equity % of BRK's portfolio from 80% to 60%, IIRC. 

 

He didn't sell his overvalued KO, G stock directly, but reduced his exposure to them in a tax-free, value-added way (though Gen Re did end up creating some headaches for him down the road).

 

wabuffo

[glorysk87]

I used to have a lot of respect for Buffett. A lot.

 

I was admiring him when he talked about the low returns in the years ahead (1999), underfunded pension plans and the need to expense stock options.

 

He also wrote a great piece when he talked against U.S. trade deficit (2004?).

 

All of this was happening under Democrat and Republican administrations. His logic was top notch.

 

Then a lot changed with the 2008 election and after. As an example, why is he not criticizing the U.S. trade deficit as he used to?

 

Cardboard

 

Why would he criticize the trade deficit? Interest rates are at record lows and our currency is currently stronger than average. Our buying power is at a historic high while debt is the most inexpensive it's been in history. Running a trade deficit isn't only not a problem right now, it's likely the right thing to at this point in time.

 

Now, if the deficit is perpetual and never shifts back the other way to neutral or a surplus over the years, then that begins to be an issue. But at the current time, I simply don't understand the criticism that's levied at the deficit.

[Cevian]

Over the last 40 years, how many years has the US had a trade surplus or a budget surplus?

 

 

[Investor20]

I used to have a lot of respect for Buffett. A lot.

 

I was admiring him when he talked about the low returns in the years ahead (1999), underfunded pension plans and the need to expense stock options.

 

He also wrote a great piece when he talked against U.S. trade deficit (2004?).

 

All of this was happening under Democrat and Republican administrations. His logic was top notch.

 

Then a lot changed with the 2008 election and after. As an example, why is he not criticizing the U.S. trade deficit as he used to?

 

Cardboard

 

Why would he criticize the trade deficit? Interest rates are at record lows and our currency is currently stronger than average. Our buying power is at a historic high while debt is the most inexpensive it's been in history. Running a trade deficit isn't only not a problem right now, it's likely the right thing to at this point in time.

 

Now, if the deficit is perpetual and never shifts back the other way to neutral or a surplus over the years, then that begins to be an issue. But at the current time, I simply don't understand the criticism that's levied at the deficit.

 

I don't think trade deficits are related to interest rates like budget deficits.  It is a matter of consuming more than producing.  Actually, it is not as simple because companies like Microsoft have few revenues from China. It is not like Microsoft does not produce, but they are not paid.

 

The balance of trade is given here.  Yes the longer we consume more than we produce, the more of our country foreigners own.  Its being going on for a while and Buffett said it has to be fixed now in 2003!

 

http://www.tradingeconomics.com/united-states/balance-of-trade

[glorysk87]

Over the last 40 years, how many years has the US had a trade surplus or a budget surplus?

 

We've run a trade deficit since the late 70s I believe.

[glorysk87]

Why would he criticize the trade deficit? Interest rates are at record lows and our currency is currently stronger than average. Our buying power is at a historic high while debt is the most inexpensive it's been in history. Running a trade deficit isn't only not a problem right now, it's likely the right thing to at this point in time.

 

Now, if the deficit is perpetual and never shifts back the other way to neutral or a surplus over the years, then that begins to be an issue. But at the current time, I simply don't understand the criticism that's levied at the deficit.

 

I don't think trade deficits are related to interest rates like budget deficits.  It is a matter of consuming more than producing.  Actually, it is not as simple because companies like Microsoft have few revenues from China. It is not like Microsoft does not produce, but they are not paid.

 

The balance of trade is given here.  Yes the longer we consume more than we produce, the more of our country foreigners own.  Its being going on for a while and Buffett said it has to be fixed now in 2003!

 

http://www.tradingeconomics.com/united-states/balance-of-trade

 

Take this for what it is - an opinion. I won't say I'm right and you're wrong. So here are my thoughts:

 

People commonly yell about the trade deficit being a terrible thing. They say foreigners will own our country, it's a sign of a weak GDP, the US loses influence, etc.

 

But to me, it's like anything else.  If you run a deficit at the appropriate times, it's simply smart investing.  If the USD is strong, then our purchasing power globally is increased significantly. During those times, we should be buying more from foreign countries than we sell. We get more for each dollar spent. It's awesome. If/when the dollar weakens, we should increase output to export more than we spend so that we get those dollars back on the cheap.

 

Aside from the theoretical scenario above, consider this.  The balance of trade figure is inherently flawed, because it only shows the import/export of physical goods/merchandise. It doesn't give any perspective on value generated any other way.  Consider another theoretical scenario:

 

You're a 18 year old kid living out in Houston Texas. Since the US is able to put its strong USD to use importing oil, it means that you don't have to go work in the oil fields. This frees you up to go to college, go on to get a graduate degree, and then you move out to Silicon Valley and start the next Facebook.  Now, through your life you've been an obvious net importer of goods, because you haven't really contributed to creating anything for export. But does that mean you didn't add value to the country? No way.

 

Just another simplistic example, and by no means is it comprehensive - but I think it illustrates the fact that the balance of trade is just a number, and that number doesn't even come close to accurately representing the shifts of power between the US and foreign countries as you state.