Berkshire Hathaway 1994 Annual Meeting Audience Question # 40

Warren explains his personal preference on tax rates

Warren Buffett:

Zone 6.

Audience Member:

Good morning, I’m Paul Miller from Kansas City, Missouri. I’ve got two questions.

First, not too long ago, I believe it was Fortune Magazine that ran an article regarding personal tax rates.

And at the risk of misquoting you, my recollection is that you favored higher personal rates, rates even higher than those proposed by those in Washington.

The second question is, I’ve heard Berkshire Hathaway referred to as nothing more than a high priced rich man’s mutual fund.

Would you care to comment on that also?

Warren Buffett:

Well, on tax rates, if you ask me what I personally favor, I personally favor a steeply progressive consumption tax.

That has a little more attention being paid to it now, although the “steeply progressive” might be modified by most of the advocates of the consumption tax, maybe to “mildly progressive” or something of the sort.

There’s a Nunn-Domenici proposal along that line, and there are other people that are talking about it more. It may be examined by the new Kerrey-Danforth Commission, of which we’ve got a member in the audience.

But I believe, in one way or another, I believe in progressive taxes. So I am not shocked in terms of my own situation, and I don’t think Charlie is particularly, about having a progressive income tax.

Although, like I say, I think society would run better over time if it were a progressive consumption tax instead.

Do you want the comment on the tax situation, Charlie?

Charlie Munger:

Well, I think there is a point at which income taxes become quite counterproductive if their progression is too high. But I don’t think we’re there yet.

Warren Buffett:

We think… at least I think… I’m extraordinarily well treated by this society, and I think most people with high incomes are. I think if you transported most of them to Bangladesh or Peru or something, they would find out how much of it is them and how much
is the society.

And I think there’s nothing better than a market system, in terms of motivating people and in terms of producing the goods and services that the society wants.

But I do think it gets a little out of whack, in terms of what the productivity may be of an outstanding teacher compared to somebody who is good at figuring out the intrinsic value of businesses.

I don’t have a better system on the income side, but I think society should figure out some way to make those who are particularly blessed, in a sense, that have talents that get paid off enormously in a market system, to give back a fair amount of that to the society that produces that.

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