Buffett as Mr. Secretary
WARREN Buffett made has plenty of headlines this election cycle — many coming out of Washington.
Buffett’s political push has become so strenuous that the president has named a proposed tax for him, called the “Buffett Rule,” for his talking up the point that taxes should be raised on those who make “over $1 million” a year.
Given Buffett’s vocal support of the White House tax policy, and the fact that Treasury Secretary Tim Geith
ner has said he is looking to step down after the election, could Buffett be looking to have an office overlooking the National Mall?
A billionaire Treasury secretary is not so strange. Andrew Mellon was the third-longest-serving secretary — almost 11 years — under Presidents Warren G. Harding, Calvin Coolidge and Herbert Hoover. At the time, he was the third-richest man in America, behind John D. Rockefeller and Henry Ford.
The Buffett Rule is really an oxymoron when it comes to Warren. He has structured Berkshire as part mutual fund, part investment partnership, part derivative operation — all wrapped in a large insurance business.
Buffett clearly has chosen to be extremely, almost painfully, tax-efficient and avoid many taxes in a perfectly legal way to maximize his own fortune.
Interestingly, the Buffett Rule wouldn’t really affect Warren very much at all. You see, Berkshire Hathaway pays him very little in the form of salary — roughly $100,000 a year, plus $350,000 that Berkshire picks up for his personal and home security — so by this measure, Buffett wouldn’t even qualify under his own rule.
On his $100K salary, Buffett would pay approximately 22 percent, or $22,000, on today’s sliding scale. His $44 billion in Berkshire stock pays no dividend — which would be a taxable event for him, but it would also help all the pension plans and IRAS that own the stock and are looking for income.
Furthermore, since he doesn’t need the money, Buffett hasn’t sold shares and hence has triggered no capital gains and resulting taxes.
So the guy is worth $44 billion and is as tax-shrewd as they come.
And besides, it isn’t as though Geithner hasn’t had his own tax issues in the past.