Buffett Trump Rebuttal

[Investor20]

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.

 

As given in the link above in trading economics it started in 1997 and increased rapidly. I think the technology enabled this, IMO.

[rb]

Ok, here's current account for US going back a lot. It's been getting better lately.

 

https://fred.stlouisfed.org/series/BPBLTT01USQ188S

 

If you use balance of trade. That's fine too. They mainly tell the same story. By the way, BoT also includes services as well, not just goods and money that technology companies make are included as services exports so that's not the issue.

 

In addition, as Investor 20 alluded, deficits are driven by the difference between production and consumption. To put this in more concrete terms trade balances are mainly driven by the savings rate and the US for a long time has had a negative savings rate, consistently consuming more than it produces.

 

Eliminating trade deficits in my opinion in harder IMO because it would involve deeply unpopular political decisions: devaluation of the USD, or other measures that could be dressed a million ways but are actually a tax in one form or another.

[Cardboard]

While I agree that Trump should have disclosed his tax returns, this guy is right about Buffett:

 

http://www.cnbc.com/2016/10/11/trump-doesnt-have-to-release-his-taxes-and-warren-buffett-should-zip-it-commentary.html

 

Buffett is a master at using the system to avoid taxation and I see nothing wrong with that.

 

However, I have a real problem with him on his hypocrisy. Condemning others when you are doing something similar is disgusting.

 

Cardboard

[Txvestor]

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.

 

You can't be serious. By your logic, a weak and moribund economy causing low interest rates, a fed policy of buying Trillions of dollars in long dated bonds, international insecurity and feudalism, causing a temporary fleeing of non entrepreneural capital to the US, justify running a trade deficit 'as the right thing to do'. With logic like that, who needs any planning. Markets have long been known to indulge in mass insanity and when the wake up cometh, its very quick, dramaric and draconian. Volatility is a function of such excesses.

The US should absolutely be aiming to grow BALANCED and hence SUSTAINABLE trade. We have not done that and we quite simply mst course correct.

[Liberty]

While I agree that Trump should have disclosed his tax returns, this guy is right about Buffett:

 

http://www.cnbc.com/2016/10/11/trump-doesnt-have-to-release-his-taxes-and-warren-buffett-should-zip-it-commentary.html

 

Buffett is a master at using the system to avoid taxation and I see nothing wrong with that.

 

However, I have a real problem with him on his hypocrisy. Condemning others when you are doing something similar is disgusting.

 

Cardboard

 

Does it matter to you that Trump said he would release his taxes and that he blamed Mitt Romney for not releasing his taxes quickly enough and that all presidential candidates tend to release their tax reports to show transparency?

 

Buffett is not being a hypocrite; he's not running for president and he's more transparent than Trump. Buffett never said that people shouldn't legally minimize his taxes, he's said he wished the tax system was different for everyone (it's not something that can work on a voluntary, one-by-one basis). And Trump is the one that brought Buffett into this by implicitly comparing himself to him (a laughable concept).

 

At least when Buffett minimizes taxes it means more money for the Gates Foundation down the line; When Trump does it, it mostly means more golden thrones and giant portraits of him.

[Cardboard]

What Trump does is what Trump does. But, Buffett is a total hypocrite not only in this discussion but, also when he was comparing his tax rate vs his secretary. He did not take into account payroll tax. He does not take into account that he does not get enough of a salary to truly pay for his lifestyle: who pays for the private jet? The company. And how many other perks is he getting for free and hence not needing a large salary that would be fully taxable?

 

Cardboard

[Cardboard]

"At least when Buffett minimizes taxes it means more money for the Gates Foundation down the line"

 

And on that one, why is Buffett allowed to make that choice while he wants all other citizens to pay higher income tax to send it directly to the government instead? Why is it that other people who cannot evade from taxation subject to send the money to a dictated charity?

 

When Hillary says that Trump is not contributing enough to the military and other services, can't the same be said of Buffett?

 

Cardboard

[rb]

What Trump does is what Trump does. But, Buffett is a total hypocrite not only in this discussion but, also when he was comparing his tax rate vs his secretary. He did not take into account payroll tax. He does not take into account that he does not get enough of a salary to truly pay for his lifestyle: who pays for the private jet? The company. And how many other perks is he getting for free and hence not needing a large salary that would be fully taxable?

 

Cardboard

If you want to know the perks that Buffett gets and doesn't pay for they're in the proxy. There aren't that many and it's mostly security.

[Liberty]

What Trump does is what Trump does.

 

So you're excusing his lying and hypocrisy, but the perception of it outrages you in Buffett?

 

 

But, Buffett is a total hypocrite not only in this discussion but, also when he was comparing his tax rate vs his secretary. He did not take into account payroll tax. He does not take into account that he does not get enough of a salary to truly pay for his lifestyle: who pays for the private jet? The company. And how many other perks is he getting for free and hence not needing a large salary that would be fully taxable?

 

Cardboard

 

Pretty sure Buffett pays for all of his private use of the jet (he pays for Netjets time), and the company pays for company use. His salary doesn't pay for his lifestyle, the hundreds of millions that he made in his PA investing on the side pays for that stuff.

 

But do you really want to attack the guy who doesn't even get a million in salary when the CEOs of companies a 100th the size of Berkshire, and that aren't getting nearly as good returns for shareholders, are paying themselves 100x what he's paying himself with huge perks and fancy offices?

 

As for the rest, it doesn't make him a hypocrite, it just means that he made the comparison in a different way than you would've (it's arguable that payroll taxes are paid by employers, not by employees, even if the economic effect is probably the same). Regardless of the specifics, do you disagree that the current tax code could use an overhaul and that it currently allows certain privileged groups to pay much lower % than other groups, which might not be seen as fair?

 

Personally, I get the feeling that he could've given any example to illustrate his point and you still wouldn't have accepted it, so it's not the flaw in his example that is problematic.

 

"At least when Buffett minimizes taxes it means more money for the Gates Foundation down the line"

 

And on that one, why is Buffett allowed to make that choice while he wants all other citizens to pay higher income tax to send it directly to the government instead? Why is it that other people who cannot evade from taxation subject to send the money to a dictated charity?

 

When Hillary says that Trump is not contributing enough to the military and other services, can't the same be said of Buffett?

 

Nobody's taking a choice away. All that Buffett is saying is that he thinks the current system favors the very rich and people in finance too much. Hedge fund billionaires pretending that what they earn isn't actually income isn't some law of nature, it's a system that was created a one point (back when nobody knew what a hedge fund was) and it can be readjusted. Everyone is still able to optimize their taxes, and they'd still be able to with a different system. And once you've paid your taxes under the law of the land, as Buffett does, then if you want to donate the rest, more power to you.

 

I realize that higher taxation of the wealthy might negatively affect you and you have an emotional stake in this, but Buffett has a right to his opinion and he's stated it clearly. The hypocrites are those who pretend that they want lower taxes for the wealthy/finance people for the greater good while in fact all they care about is themselves.

[Jurgis]

I realize that higher taxation of the wealthy might negatively affect you

 

I think he's Canadian.

 

and you have an emotional stake in this

 

That he does.

[Cardboard]

I have been critical of Buffett on taxes well before Trump was even a candidate in the primary. You can check my record. He is one of the best examples that I have seen on not in my backyard.

 

If Buffett was so convinced that giving more money to the government via higher taxes is an effective use of capital and how to resolve our societal issues, then he would not hesitate for a second to give some of his Berkshire shares to the government instead of charities of his choosing.

 

Please try to forget Trump and Hillary for a moment. Why isn't he?

 

Cardboard

[Liberty]

I have been critical of Buffett on taxes well before Trump was even a candidate in the primary. You can check my record. He is one of the best examples that I have seen on not in my backyard.

 

If Buffett was so convinced that giving more money to the government via higher taxes is an effective use of capital and how to resolve our societal issues, then he would not hesitate for a second to give some of his Berkshire shares to the government instead of charities of his choosing.

 

Please try to forget Trump and Hillary for a moment. Why isn't he?

 

Cardboard

 

This is a thread about Trump bringing Buffett into his fight and Buffett responding by being transparent about his taxes, so this was the topic.

 

Saying "If he believed X he would do Y" is a strawman. I don't think Buffett agrees with your reasoning, and I don't either. Buffett has a right to express political opinions, especially on topics that he knows well (incentives, economics, taxation, etc).

 

Buffett isn't saying that he thinks the government can better use his money than the Gates Foundation, he's saying that the current tax system is full of loopholes and exceptions and deductions and weird incentives, and that when you add it all together, it just so happens that the very wealthy are favored compared to say, the middle class, and that he doesn't think this is a good thing for the country because it breeds resentment against capitalism and the wealthy, among other issues.

[Cardboard]

"he's saying that the current tax system is full of loopholes and exceptions and deductions and weird incentives, and that when you add it all together, it just so happens that the very wealthy are favored compared to say, the middle class, and that he doesn't think this is a good thing for the country because it breeds resentment against capitalism and the wealthy, among other issues."

 

Buffett: "Change it now, I am almost dead anyway and I want to be remembered as a Saint hence why I am supporting the Democrats and pushing for this. And it won't affect me in any measurable way."

 

If Buffett was a Republican, they would likely compare him to the Koch Brothers even if he acted identical.

 

Personally, I stand with Thomas Petterfy. The guy gets it.

 

Cardboard

[Tim Eriksen]

 

As for the rest, it doesn't make him a hypocrite, it just means that he made the comparison in a different way than you would've (it's arguable that payroll taxes are paid by employers, not by employees, even if the economic effect is probably the same). Regardless of the specifics, do you disagree that the current tax code could use an overhaul and that it currently allows certain privileged groups to pay much lower % than other groups, which might not be seen as fair?

 

Personally, I get the feeling that he could've given any example to illustrate his point and you still wouldn't have accepted it, so it's not the flaw in his example that is problematic.

 

Buffett either intentionally misleads about his taxes versus his Secretary or he is appallingly ignorant of how faulty his analysis was. 

1. He used taxable income and not income to lower the denominator substantially which disproportionately impacted the calculations.

2. He included the employer portion of payroll taxes which disproportionately impacted the results.  Once coudl further argue that this not only increased taxes for his secretary but it allowed him to act as if BRK (and thius himself as a look through owner) is not paying those taxes.

3. He excluded medical benefits form income which also disproportionately impacted results since the cost impacts the secretary more than him.

4. He includes payroll taxes but excludes future social security benefits, which for most people results in all the taxes plus being returned to them, which once again disproportionately impacted results.  This accoutns for the majority of taxes the middle class pays.

5. He used himself as an example of the super-rich, which is problematic since nearly all of his wealth was not earned income but stock appreciation (Trump is also a bad example as his wealth is likely unrealized appreciation as well, except in real estate you borrow against the increase generating tax free cash flow). 

6. He ignores corporate taxes entirely.  As a business owner one could argue that you are paying whatever portion of the business you own.  Of course the income of the business would need to be included as well.  BRK has historically been a full tax payer. 

Are_We_Really_Coddling_the_Super_Rich.pdf

[DooDiligence]

I have been critical of Buffett on taxes well before Trump was even a candidate in the primary. You can check my record. He is one of the best examples that I have seen on not in my backyard.

 

If Buffett was so convinced that giving more money to the government via higher taxes is an effective use of capital and how to resolve our societal issues, then he would not hesitate for a second to give some of his Berkshire shares to the government instead of charities of his choosing.

 

Please try to forget Trump and Hillary for a moment. Why isn't he?

 

Cardboard

 

Fuzzy logical obfuscation leads to misdirection...

[DooDiligence]

I have been critical of Buffett on taxes well before Trump was even a candidate in the primary. You can check my record. He is one of the best examples that I have seen on not in my backyard.

 

If Buffett was so convinced that giving more money to the government via higher taxes is an effective use of capital and how to resolve our societal issues, then he would not hesitate for a second to give some of his Berkshire shares to the government instead of charities of his choosing.

 

Please try to forget Trump and Hillary for a moment. Why isn't he?

 

Cardboard

 

This is a thread about Trump bringing Buffett into his fight and Buffett responding by being transparent about his taxes, so this was the topic.

 

Saying "If he believed X he would do Y" is a strawman. I don't think Buffett agrees with your reasoning, and I don't either. Buffett has a right to express political opinions, especially on topics that he knows well (incentives, economics, taxation, etc).

 

Buffett isn't saying that he thinks the government can better use his money than the Gates Foundation, he's saying that the current tax system is full of loopholes and exceptions and deductions and weird incentives, and that when you add it all together, it just so happens that the very wealthy are favored compared to say, the middle class, and that he doesn't think this is a good thing for the country because it breeds resentment against capitalism and the wealthy, among other issues.

 

Clear, concise & logical (as such it's totally unusable by anyone trying to swing sheep to vote for them...)

[Liberty]

 

As for the rest, it doesn't make him a hypocrite, it just means that he made the comparison in a different way than you would've (it's arguable that payroll taxes are paid by employers, not by employees, even if the economic effect is probably the same). Regardless of the specifics, do you disagree that the current tax code could use an overhaul and that it currently allows certain privileged groups to pay much lower % than other groups, which might not be seen as fair?

 

Personally, I get the feeling that he could've given any example to illustrate his point and you still wouldn't have accepted it, so it's not the flaw in his example that is problematic.

 

Buffett either intentionally misleads about his taxes versus his Secretary or he is appallingly ignorant of how faulty his analysis was. 

1. He used taxable income and not income to lower the denominator substantially which disproportionately impacted the calculations.

2. He included the employer portion of payroll taxes which disproportionately impacted the results.  Once coudl further argue that this not only increased taxes for his secretary but it allowed him to act as if BRK (and thius himself as a look through owner) is not paying those taxes.

3. He excluded medical benefits form income which also disproportionately impacted results since the cost impacts the secretary more than him.

4. He includes payroll taxes but excludes future social security benefits, which for most people results in all the taxes plus being returned to them, which once again disproportionately impacted results.  This accoutns for the majority of taxes the middle class pays.

5. He used himself as an example of the super-rich, which is problematic since nearly all of his wealth was not earned income but stock appreciation (Trump is also a bad example as his wealth is likely unrealized appreciation as well, except in real estate you borrow against the increase generating tax free cash flow). 

6. He ignores corporate taxes entirely.  As a business owner one could argue that you are paying whatever portion of the business you own.  Of course the income of the business would need to be included as well.  BRK has historically been a full tax payer.

 

I'm not defending the particular example that he gave. You'd have to ask him to defend his choices. Maybe he would even say that he made a mistake with that example, but that his secretary isn't the reason why he thinks the way he does on this topic.

 

I'm trying to look pass the tree to the forest. Do you disagree with his overall point that the taxation system in the US favors the wealthy, and that a lot of the backlash against elites and capitalism might go away if there wasn't the perception that there's a system for regular people ("suckers"), and there's a different system if you've got money/connections/power/top-shelf accountants & lawyers?...

 

I feel like things would probably be a lot better if taxation was heavily simplified with lower overall rates but with fewer ways for sophisticated agents or influential industries to go much lower than those rates through clever structures and lobbying politicians for loopholes.

[Gregmal]

The entire system is skewed to benefit the ruling class. The few that are in live by an entirely different set of rules as the rest of the country. How long do you think a congressman waits in line at the DMV? How long do you think Buffett waits on hold if he has an issue with the IRS. How does wealthy rapper caught with a dozen assault rifles and drugs get 1-2 years and 22 year old no name minority caught with a gram gets jail plus probation for 5 years? There's people in jail for minor mishandling of classified information. Meanwhile Hilary gets off because she was simply careless but not deliberate? I probably couldn't even get out of a traffic ticket using an excuse like that.. yet this woman is running for president! Trump is 100% right in pointing out that its because of career politicians like HRC that the system is the way it is. And Buffett, being one of the few who benefit greatly, obviously is a proponent of it continuing.

 

The most ironic aspects of the election to me where millennial favorite Bernie Sanders revealing that lowly ole champion of little guy made over 200k last year and paid less taxes "than his secretary".(that's the saying right?)

 

Then you have career politicians, WJC and HRC, with 100,000,000 net worths. How exactly does one accumulate so much wealth on a civil servants wage? Harry Reid? Nancy Pelosi? Ted Cruz? Paul Ryan? Please explain this to me? And yet still, these same folks want to vilify the Romneys and the Trumps of the world who have built(and in some cases destroyed) their wealth largely taking risks, in the public eye. The level of hypocrisy is so stunning.

[Txvestor]

The level pf hypocrisy is stunning yes. Alas what's worse is the public's gullibility on this topic.

One just wonders if it hasn't just degenerated to a gimme mentality for the majority of voters, like Romney said in that leaked tape. If so we as a country are not as far removed from banana republic status as we would all like to believe.

[Txvestor]

Of course it would be better for all including the overall economy if it were simplified. Lest we remind you that Simpson Bowles came up with precisely that as a recommendation. Mr Obama quietly ignored it. He was never Ok with a revenue neutral tax plan as much as he pretends to blame the house republicans, he was the one who refused to take it forward. He demanded an increase in taxes and wanted them further tilted towards the upper income brackets. Never mind the already high nearly 44% percent marginal federal rate paid at this time. Add in state and local taxes and high income earners already are at roughly half on their marginal rates.

Contrast that with a sub 20% for the lower income crowd, tax rebates as EITC at the very lowest levels, and the now near 24 percent for the income on capital crowd, divis/LT cap gains. Whats more corporate taxes paid are averaging lower that even that.

Why is highly valued work paying such a high rate? Whereas capital and low end labour being treated so kindly? I will tell you why, one has votes and the other has lobbying clout. High income earners get taxation without representation.

Remember the total tax take is around 20 percent of GDP. Anyone paying more is the victim of this unfair system and anyone paying less is the beneficiary. Anyone can look at their returns and figure it out for themselves.

High income earners averaging 40+% are the ones getting reamed out. Buffett probably never paid anything close ever in his lifetime. Its a bit rich of him telling those paying half their income to pony up more. Don't you all agree?

[Gregmal]

Spot on TXvestor. More or less the middle class is being eaten alive. My definition of middle class is probably a little more liberal than most for simplifications sake, but unless you are uber wealthy(8 figure NW and up) or super reliant on "the system"(under 40-50k/year AI), you are pretty much at the mercy of the system. The 8 figure NW people simply dictate the rules, while the lower end of the spectrum simply doesnt care and continues to vote as instructed provided they continue to get thrown their proverbial bone.

[Liberty]

Where did Buffett ever say that those already paying high rates should pay more? In fact, I think he'd probably want to make the US more competitive with other countries on that front. I think he's been targeting people making tens and hundreds of millions paying 15% because they were favored by some exception.

 

If we forget about his secretary for a minute and look at his overall points:

 

we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

 

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places. [...]

 

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot. [...]

 

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

 

I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get. [...]

 

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

[Cardboard]

"But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate."

 

None of that would impact Buffett or most of the mega-rich (Bezos, Zuckerburg, Gates) in any meaningful way and would hurt a lot of people taking a lot of risk (smaller businesses) who create new jobs.

 

If Buffett truly find unfair the current system and that the mega-rich are raking in too much here is what he should propose instead:

 

A tax on any yearly appreciation (or break on depreciation) of wealth above $100 million.

 

Cardboard

[rmshaner]

Trump should've asked Warren why he doesn't even pay himself enough to hit the medicare/social security max.  His salary of 100K/yr is intentionally low to avoid paying income taxes, and has been that way his entire tenure at the helm of Berkshire.  How he gets away with paying himself less than any subsidiary manager is beyond me, he's even paid less than the other 2 capital allocators in the office.  He's a 73 year veteran of tax dodging to the max, now that he's at the end of his tax paying timeline he wants taxes raised.  Convenient timing to be pro taxes. 

[Liberty]

Trump should've asked Warren why he doesn't even pay himself enough to hit the medicare/social security max.  His salary of 100K/yr is intentionally low to avoid paying income taxes, and has been that way his entire tenure at the helm of Berkshire.  How he gets away with paying himself less than any subsidiary manager is beyond me, he's even paid less than the other 2 capital allocators in the office.  He's a 73 year veteran of tax dodging to the max, now that he's at the end of his tax paying timeline he wants taxes raised.  Convenient timing to be pro taxes.

 

Yeah, how dare he pay himself such a low salary when most other CEOs of his stature pay themselves tens and tens of millions plus large stock awards and low-price options with easy vesting targets, not to mention non-monetary perks like fancy offices, large staffs, private planes, etc...  ::)