Buffett's buffet ain't generous

It isn't what Warren said that's bothersome. After all what else can you expect from a liberal? Its the hypocrisy that's irksome.

Note the WSJ editorial: For a guy who spends a lot of time advocating for higher taxes, Warren Buffett does a remarkably good job of minimizing his own corporate tax bill. This is all to the good for Mr. Buffett and his fellow Berkshire Hathaway shareholders, who no doubt can invest the money more wisely than the federal government is likely to do.

Mr. Buffett's recent decision to invest in Bank of America represents another tax-avoidance triumph for the Berkshire chief executive. U.S. corporations are subject to a top federal income tax rate of 35%, the second highest in the world. But the Journal's Erik Holm notes that Mr. Buffett and the Berkshire bunch won't pay anything close to that on their investment in BofA preferred shares.

That's because corporations can exclude from taxation 70% of the dividends they receive from an investment in another corporation. This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn't 100%.

With the 70% exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.

We're tempted to suggest that Mr. Buffett should do what he might call the patriotic thing and volunteer Berkshire to pay the full 35% rate as a good corporate citizen. But even if Mr. Buffett won't say it, most Americans know that more jobs will be created if the money is deployed by the Berkshire bunch than by the Beltway boys.

Warren's doing what no marketer must do. Build perceptions and then do a lousy job when the experience turns real. Warren's hypocrisy is aimed at building perceptions about his grandiose generosity. Surely that hits home with the liberals. But to others (like me, for instance) its a whole lot of hot air. Sure, Warren's contributed big time to charity. But me thinks even that's to keep the benefactor image rolling. What's real about Warren is what exposes him as a hypocrite.

For brands, perceptions matter only that much, in engineering the first buy. Then on, its the experience that will dictate whether there'll be a comeback by the customer. As for Warren, the image's done and over with.

At least for some of us.

Psst...Buffet's Berkshire Owes $1 Billion In Back Taxes!


Mike said…

Another excellent post.


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