The big benefits of exempting taxes from dividends would go to the rich and not the poor
The tax on dividends… you know, I’ve used this illustration before, but I’m paying about the same percentage of my income to the federal government as my secretary does.
Now, I pay more in income tax rates than she does. I pay a higher marginal tax rate, by some margin, than she does.
But she pays way more in Social Security taxes than I do, because I only pay on the first whatever it is, 70,000 or 80,000 of income. And so, she is paying, between what we pay at the company for her and what she pays, we’re paying 12 percent or 13 percent or whatever it is of that.
So, we both end up paying fairly similar percentages of our income to the federal government every year.
If Berkshire were to declare a billion-dollar dividend, and my share of it was 330 million, and it were tax-free as the Bush people originally suggested… and it would be tax-free. I mean, we have lots of taxable earnings at Berkshire.
You know, I might be paying 1/10th of the rate to the federal government of my income that she would be.
Now, I can make the argument about the fact that structure shouldn’t govern tax rates. That Subchapter S, and Subchapter C, and partnerships, and all of these things, that the tax codes should be neutral between them. And I’ve made those kind of arguments in the past.
But I can make no argument in my mind that says that I, with everything that… you know, all the luck I’ve had in life, you know, I was wired a certain way at birth that enabled me to make a lot of money.
And, frankly, it was better to be born a boy than a girl, in terms of money-making possibilities, in 1930. And probably still is, but not to the same degree.
I mean the fact that I would send 1/10th the portion of my income in a year to the federal government that my secretary would, I… it just… it screams at injustice to me, in terms of what the society gives back to me.
So I am not for the Bush plan. Charlie?
Well, I agree with you. Even if you assume that the whole economy would work better if we’d never gotten into this double-taxation system on corporate earnings, which I don’t think is a clear thing anyway.
But even if you assume that, I think when you live in a democracy where there’s lots of envy and resentment and what have you, to have the absolutely most fortunate people paying practically no income taxes, I just think it’s unacceptable.
I think there has to be some fairness in some of these arrangements, even if there’s some theoretical argument that the economy might work a little better some other way.
Yeah, there are IRAs now, obviously, that work very well for people with modest amounts of dividends. That they… they’re getting tax deferred for a very long period of time, which has huge benefits.
The big benefits of exempting dividends would go to fellows like me and Charlie, you know. And that’s not going to stimulate the economy. It’s going to stimulate us, but…
And it’s going to result in us sending a very small percentage of the income… of our income… to Washington compared to what the people, you know, working in our shoe factories send.
And that… you know, when somebody says, you know, “What did you do during the war, Grandpa?” I’m not sure that’s what I want to explain to them.
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