So Warren Buffett released information today about his most recent tax returns as something of a "touche" to Donald Trump. In the primordial visual signaling echo chamber that is my facebook feed, it was gobbled up like the gospel and proof positive of...well, I'm not really sure. I don't have any dog in this hunt, and have known for years that Trump is a lowlife. Yet what Buffett described only makes me think that Mr. Trump was right -- the richest of the rich have plenty of opportunities to pay "way less than their fair share." More generally, though, it still bothers me that Uncle Warren continues to get the royal treatment amongst the uneducated masses. But we know better.
Let's start with the basic overview. The guy is worth $70Bn and his AGI was $11.6M? And his effective tax rate was 16%? So, essentially, he paid less than .001% of his net worth in taxes -- that's not a terribly impressive ROE. So, right away we know that he did something creative. And that's kind of the point, everyone at that level of wealth does it. And without seeing the actual return, there is no way to know what Buffett actually did from an accounting standpoint.
Regardless of that, the history is there to prove out that Mr. Buffett is a "tax evader". For the first 70 some-odd years of his life, he paid de minimis taxes by taking advantage of the rules. Never paying dividends, rolling all the free cash flow that Berkshire made back on to the balance sheet, never selling any shares and paying capital gains. All acts that fall within his rights.
And then, of course, he made the decision to give all his money to a non-profit run by his buddy. How charitable. But, play it out. He is a big proponent of everyone paying their full share and 50% inheritance taxes -- yet the guy with the biggest tax bill around won't be paying a dime. And could we also say that the subtext here is that he, and all the other billionaires who made the same pledge, don't have the most faith that their money will go the furthest if it's handed off to Uncle Sam?
Anyway, none of that makes him a bad guy. But he definitely is not a saint either.
