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Friday, August 26, 2011

BANK OF AMERICA: Media release on Berkshire Investment in BOA

CHARLOTTE, N.C., Aug 25, 2011 (BUSINESS WIRE) --

Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway, Inc. in a private offering. The preferred stock has a dividend of 6 percent per annum, payable in equal quarterly installments, and is redeemable by the company at any time at a 5 percent premium.

In conjunction with this agreement, Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share. The warrants may be exercised in whole or in part at any time, and from time to time, during the 10-year period following the closing date of the transaction. The aggregate purchase price to be received by Bank of America for the preferred stock and warrants is $5 billion in cash.

"We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value," said Bank of America Chief Executive Officer Brian Moynihan. "I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."

"Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it," said Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett. "I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That's what customers want, and that's the company's strategy."

Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 58 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,800 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

Forward-Looking Statements

Certain statements in this press release represent the current expectations, plans or forecasts of Bank of America and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements often use words like "expects," "anticipates," "believes," "estimates," "targets," "intends," "plans," "predict," "goal" and other similar expressions or future or conditional verbs such as "will," "may," "might," "should," "would" and "could." The forward-looking statements made in this press release include, without limitation, statements concerning:the closing of the agreement with Berkshire Hathaway Inc. to sell preferred stock and warrants (the "sale agreement") and the receipt of the aggregate purchase price in the transaction.Forward-looking statements speak only as of the date they are made, and Bank of America undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under Item 1A. "Risk Factors" of Bank of America's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, Item 1A. "Risk Factors" of Bank of America's Annual Report on Form 10-K for the year ended December 31, 2010 and in any of Bank of America's other subsequent Securities and Exchange Commission filings: the satisfaction of the closing conditions for the sale agreement, including obtaining any necessary regulatory or other approvals.

www.bankofamerica.com

SOURCE: Bank of America

Investors May Contact:

Kevin Stitt, Bank of America, 1.980.386.5667
Lee McEntire, Bank of America, 1.980.388.6780
Reporters May Contact:
Jerry Dubrowski, Bank of America, 1.980.388.2840
jerome.f.dubrowski@bankofamerica.com


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CNBC VIDEO: Buffett Tells CNBC 'This Isn't 2008' As Bank of America Gets $5B Loan at Just 6%

Published: Thursday, 25 Aug 2011 | 9:42 AM ET
By: Alex Crippen
Executive Producer

Warren Buffett
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Warren Buffett

Warren Buffett tells CNBC's Becky Quick "this isn't 2008" and that's why Bank of America is getting better terms for its $5 billion loan today from Berkshire Hathaway, compared to what General Electric and Goldman Sachs paid for similar loans almost three years ago at the height of the credit crisis.

Buffett is also stressing the investment was his idea, perhaps to downplay any fears that Bank of America is desperate for a cash infusion.

This morning, Bank of America announced that Berkshire will use cash to buy 50,000 shares of preferred stock with a liquidation value of $100,000 per share in a private offering.

That is, in effect, a loan to the bank, in which it will pay around $300 million in dividends each year to Berkshire. BofA can pay back that loan at any time, but it will have to make an additional 5 percent dividend payment to do so.

The interest rate on the loan is 6 percent, well below the 10 percent that Buffett got from GE and Goldman almost three years ago, but not at all bad with 10-year Treasuries just above 2.2 percent.

Goldman paid back its $5 billion loan in April of this year, sending Berkshire roughly $1.6 billion in dividends over the 2-1/2 year life of the deal. That's an annualized return on investment of 12.6 percent. Warrants that came with that deal are out of the money, with Goldman trading a few dollars below the $115 strike price. Current price: [GS 109.84 -0.47 (-0.43%) ]


Buffett had said he didn't want Goldman to buy back its preferred shares, because it cut off the stream of $500 million a year going from Goldman to Berkshire. He's also indicated he doesn't plan to exercise the Goldman warrants until just before they expire in 2013.

General Electric has said it will pay off its $3 billion loan this October. Berkshire will pocket a total of $1.2 billion in dividends over that deal's three years for an annual return on investment of 11.1 percent. Like Goldman, warrants in that deal are also out of the money, with GE trading almost seven dollars below the $22.25 strike price. Current price: [GE 15.45 -0.27 (-1.72%) ]

In today's deal, Berkshire gets warrants to buy up to $5 billion of BofA's common stock, 700 million shares at an exercise price of just over $7.14 a share. It can make those purchases at its discretion anytime in the next 10 years.

That gives Berkshire the potential to become BofA's largest shareholder. State Street is currently at the top of that list with 460.5 million shares, about 4.5 percent of the bank's outstanding shares. (Berkshire sold a 5 million share stake in BofA during 2010's fourth quarter. It had been purchased by the now-retired GEICO stock picker Lou Simpson.)

Buffett's deal with Bank of America sent its shares as high as $8.80 this morning, for a gain of almost 26 percent. That put the stock well above the strike price of the warrants. At that high, Berkshire's warrants had an instant "paper profit" of $1.16 billion.

BofA shares have been giving back some of those gains. As of 10:50a ET, they're around $7.85, reducing the warrants' paper profits to 'just' $500 million.

BofA closed yesterday at $6.99.

Current price: [BAC 7.65 0.66 (+9.44%) ]

As was the case with GE and Goldman, Bank of America also gets a strong endorsement from Buffett. He calls the investment a vote of confidence in both BofA and the United States.

In the release, Buffett says, "Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it. I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That's what customers want, and that's the company's strategy."

Buffett tells us he came up with the idea of an investment while taking a bath earlier this week, and he asked BofA CEO Brian Moynihan yesterday if Berkshire could do the deal.

Why now? Buffett tells Becky that BofA's shares "have gone down a lot" and the bank is "certain to be around" for a long time.

He says Wells Fargo [WFC 24.76 0.33 (+1.35%) ], a large Berkshire holding, and BofA have the best deposit franchises in the country, and compares today's investment to Berkshire's past deals for GEICO and American Express [AXP 48.09 0.01 (+0.02%) ].

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Tuesday, August 23, 2011

WALL STREET JOURNAL: BYD's Profit Plunges 89%

HONG KONG—Chinese battery and car maker BYD Co. said its first-half profit plunged 89%, hurt by intensified competition and the end of government subsidies for car buyers.

BYD said Monday that its net profit fell to 275.4 million yuan ($43.1 million) from 2.42 billion yuan a year earlier.

Revenue fell 11% to 22.54 billion yuan.

BYD, 10% of which is owned by a unit of Warren Buffett's Berkshire Hathaway Inc., reports results under Chinese accounting standards.

The sharp decline in earnings came as no surprise. The company has been facing rising competition from domestic rivals and from Sino-foreign joint ventures that have rolled out brands in China, a low-end market that for years was dominated by small, closely held auto makers such as BYD.

BYD sold 220,131 cars in the first half, down 23% from a year earlier. In addition to facing heightened competition, the company has suffered since Beijing canceled stimulus measures for car buyers.

BYD Chairman Wang Chuanfu said in a written statement that he expects growth in Chinese car sales will remain slow in the second half. He cited weak consumer confidence amid rising inflation rates in China and lingering concerns about the European debt crisis and the financial health of the U.S.

The company recorded lower revenue for its handset division as BYD's single largest customer delayed orders, he said.

The Shenzhen-based company forecast net profit for January through September of 121.63 million yuan to 364.88 million yuan because of slower car sales. That would represent a drop of 95% to 85% from 2.43 billion yuan a year earlier.

Established in 1995, BYD began as a manufacturer of rechargeable lithium-ion and nickel batteries and expanded into cellphone parts and alternative-fuel cars. The company's background in battery production caught the attention of Mr. Buffett as interest in electric vehicles grew amid surging oil prices and international efforts to reduce emissions from fossil fuels.

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Sunday, August 21, 2011

WASHINGTON TIMES: Warren Buffett and Ben Stein speaking in tongues

Friday, August 19, 2011 - Truth Be Told by Carla Garrison

WASHINGTON, August 19, 2011 - Warren Buffett and Ben Stein, two rich Americans, have recently said "the rich" are not taxed enough. Does this mean they agree with the New York Times statement that "There is no economically sensible or politically honest way to address the deficit without also increasing revenues and reforming the tax code."

Barak Obama has said, "We are told that the market will correct all of our problems. And that there is no problem that cannot be solved by another tax break that the wealthy didn't need, and half the time didn't ask for. We have tried that way for the last six years -- we are ready to try something new."

Buffett, Stein and Obama may as well be speaking in tongues because to most Americans, taxes (that's what revenue means in political speak) are plenty high on every thing from consumer goods to income. The issue is whether or not tax increases are the solution to reducing the national debt and a return to prosperity.

Underlying the debate around taxes is the question: Is everyone paying their fair share toward the fine government benefits we all receive?

The Tax Foundation says that roughly 50 percent of American households pay no incom tax at all, but the IRS will give out roughly $110 billion in "refundable" tax credits this year to households that pay no income taxes.

IRS data compiled by the Tax Foundation for 2009 shows that taxpayers earning over $200,000 paid 50 percent of the $866 billion in total income taxes paid that year, or $434 billion. These taxpayers earned 25 percent of the $7.6 trillion in total adjusted gross income in the country that year.

In 2009 a great deal of "revenue" was distributed: 21 million households who paid zero taxes received $27.5 billion in refundable credits from the child credit; Obama's Making Work Pay program gave out $12.8 billion in refundable credits to 32 million filers; The Earned Income Tax Credit program doled out $54 billion in refundable credits to 24.9 million filers; and, nearly 5 million filers received $3.9 billion in refundable Education Credits and roughly 1 million filers got $4.65 billion in refundable credits under the First Time Homebuyers credit program.

Buffett feels he and his friends are not paying enough in taxes and in his August 14 Opinion Editorial in the New York Times, Stop Coddling the Super-Rich, Buffett said, "Last year my federal tax bill - the income tax I paid, as well as payroll taxes paid by me and on my behalf - was $6,938,744... But what I paid was only 17.4 percent of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."

Buffett believes that taxes should be raised immediately for those making more than $1 million (236,883 households), including dividends and capital gains as well as those making in excess of $10 million (8,274 households) all for 2009.

That sounds reasonable, but how to write such precision tax laws?

Mr. Buffett didn't mention the fact that capital gains and dividends taxes are a double tax on corporate income. Before dividends are distributed, U.S. corporations must first pay a 35 percent federal corporate income tax.

Then, shareholders pay the individual tax rate of 15 percent on their dividend income or the gains from appreciated stock. As a result, the combined tax rate of 50 percent is the 4th highest combined dividend rate in the industrialized world, argues the Tax Foundation.

Additionally, in 2008, the roughly 1,900 largest corporations paid $152 billion in income taxes. This amounted to 67 percent of the $227 billion in total corporate income taxes paid that year.

Reagan tax cuts helped the economy through George H. Bush and Clinton years. When Reagan took office in 1981, the top marginal income tax rate was 70 percent and the rich paid 20 percent of all income taxes. He got it cut in half to a 35 percent marginal rate and now the rich pay twice that.

In 1980 the economy was described in terms of the "misery index" and the
mantra was "anybody but Carter."

According to Russ Paielli: "Reagan eliminated many tax shelters that the rich routinely relied on to avoid paying taxes altogether, forcing them to invest in the free market and actually pay taxes. Shortly after the tax cuts were enacted, the economy took off for an unprecedented period of peacetime growth. The misery index plummeted as unemployment fell, inflation slowed, and interest rates dropped, leading to a seven-year boom that the liberal media cynically dubbed "the decade of greed."

Will more taxes help the deficit?

According to a Congressional Budget Office memo, "if all of the President's budgetary proposals were enacted, they would add $26 billion to the baseline deficit for 2011. As a result, the 2011 deficit would total $1.43 trillion, or 9.5 percent of gross domestic product (GDP)."

In August of 2010, The New York times said that extending for another ten years the tax cuts passed during 2001 and 2003 and renewed by the Obama administration "would add about $3.8 trillion to a growing national debt that is already the largest since World War II. About $700 billion of that reflects the projected costs of tax cuts for those in the top 2 percent of income-earners."

Assuming you agree that the money other people are expected to earn, even rich people, belongs to the government, the $700 billion lost is only about 0.3 percent of GDP or one out of fifteen dollars in deficit spending.

Remembering who we are

While we all should in fact pay our fair share of what it takes to reasonably run the country that has been a blessing to not only her citizens but to the world, this argument about more taxes on the proverbial rich always prompts a reminder of a Margaret Thatcher quote:

"The problem with socialism is that you eventually run out of other people's money."

The New York Times writers, Barak Obama and others may be well-meaning in their attempts to redistribute wealth, but it still looks, smells and tastes a lot like socialism. That is not who we are.

Most Americans would rather let Buffett give his billions to the Bill and Melinda Gates Foundation than to the U.S. Treasury, if that's what he wants to do with it.

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BARRONS: Buffett's Blunder on Taxes

SATURDAY, AUGUST 20, 2011

When billionaire investor Warren Buffett speaks, people tend to listen. So when the Oracle of Omaha called last week for drastic tax hikes on earners like him, President Obama cheered, and the rest of us at least took notice.

Based on the op-ed article Buffett published in last Monday's New York Times, his main thinking is consistent with two recent Barron's cover stories on how to fix the federal government's looming debt bomb. (The first ran on May 2; the second, shown here, on Aug. 8.)

Unfortunately, Buffett didn't bother to estimate either how much his tax proposal could generate in revenues, or the real multi-trillion-dollar dimensions of the federal debt problem. By remaining vague on both counts, he leaves the impression that a bigger tax contribution from the superrich can make a significant difference, when in fact, we might be lucky if it added five cents on the dollar.

As we have explained, the debt problem presents Washington with two painful choices: Either cut spending, with virtually nothing regarded as sacrosanct, or hike taxes, with virtually no income brackets spared. The "millionaires and billionaires" often cited by the president can certainly pay more—a possibility Barron's has put on the table—but there simply aren't enough of them to make a huge difference by themselves.

The Barron's tax proposal echoed Obama's: Raise rates on the two top income brackets and boost estate taxes. It was therefore more ambitious than Buffett's, which would hike taxes only on those earning a million dollars a year or more.

But while never saying so explicitly, Buffett did appear to recognize that most of the heavy lifting must therefore come from spending cuts. Speaking about the 12 members of Congress who are supposed to reduce the debt over 10 years by $1.5 trillion, he declared it "vital…that they achieve far more than that," and called it "job one for the 12…to pare down some future promises," from which "big money must be saved."

But where were the dollar signs for his spending cuts and tax hikes? Buffett offered none.

Here are some figures. Based on its most plausible scenario, the nonpartisan Congressional Budget Office projects that the federal debt held by the public will rise from 69% of nominal GDP to 101% in 10 years. Barron's set as a modest 10-year goal simply keeping the share at 69%. That still means the debt would continue to grow, but no faster than nominal GDP. (The euro-zone nations have a goal of 60%). It turns out that, in order to achieve the 69% goal, spending would have to be cut, or revenue raised, by nearly $7.6 trillion over the next 10 years.

In a follow-up article to Buffett's, the New York Times estimated that Buffett's proposal would raise about $500 billion in extra revenue over 10 years. That means the proposal would roughly make a mere 6.6% contribution to that $7.6 trillion goal.

What's more, even that $500 billion revenue estimate could be way too high. Anyone reading Buffett's article would get the impression that an altered tax structure does not alter behavior. ("People invest to make money," he declares, "and potential taxes have never scared them off.") But just consider the $340 billion that is supposed to come from high taxes on capital gains and on dividends.

Research has shown that the 2003 tax cut on dividends induced corporations to make more dividends available to shareholders. Might a tax hike—to 50% on dividends taken by Buffett's million-dollar-plus earners—cause that policy to go in reverse? And at that 50% rate, might many of the very rich forgo stock purchases and start channeling funds into tax-free municipal bonds and other tax-sheltered vehicles?

The super-rich can contribute their pennies. The real dollars will come from spending cuts.

—Gene Epstein

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Wednesday, August 17, 2011

CHARLIEROSE.COM: Warren Buffet Interview in full - 15 Aug 2011



Warren Buffett discusses his New York Times Op-Ed piece 'Stop Coddling the Super-Rich' which calls on Congress to increase taxes on the Super-Rich like himself.


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Tuesday, August 16, 2011

WALL STREET JOURNAL: Buffett: U.S. May Pick Up Sooner Than Fed Thinks

Warren Buffett said the U.S. economy may pick up faster than the Federal Reserve expects and that the U.S. and Asia can probably weather the euro-zone debt crisis.

The Fed’s announcement last week that it will keep interest rates near zero for two more years was “a very, very stark statement,” the multibillionaire investor said in an interview on the Charlie Rose show aired Monday in the U.S. “I think there’s a chance they’re wrong, yeah. I think it may pick up before then.”

The Sage of Omaha said the U.S. is “making progress” in working off the excess inventory from the country’s housing “binge,” according to a transcript of the interview. Other parts of the economy are improving steadily, he said.

U.S. fiscal and monetary policy have been pushed “to the limit,” Buffett said, “but fortunately the most important thing in terms of this country ever coming out of recessions has been the natural workings of capitalism.”

The biggest risks to the recovery would be if the public completely lost faith in the government or “if somehow the troubles of Europe spilled over here,” he said, but added he thought these were unlikely.

Buffett said he disagreed “100%” with Standard & Poor’s unprecedented downgrade of U.S. debt because the country can and always will repay its obligations. But he expressed understanding for China’s concerns over its massive holdings of U.S. Treasurys as the value of the investment may fall.

“Our government gives you the impression at times that they will resort to a printing press if necessary,” Buffett said. “If they do enough of that, the value of the dollar goes down and it goes down significantly. So if you hold a lot of dollars, which the Chinese do, I can see (them) getting very unhappy about that.”

Buffett, who made waves Monday with an opinion piece in The New York Times saying the government should raise taxes on the “mega-rich” like himself, excoriated Republican presidential candidates for refusing to consider tax hikes to help balance the budget.

It was “pathetic” that none of the Republican presidential contenders in last week’s debate was willing to accept even a 10-to-one ratio of spending cuts to tax increases, he said. “When they take that attitude, they are really saying…’The country be damned, I want to win this primary.’”

Buffett said Berkshire Hathaway Inc.’s board has agreed on his successor to run the conglomerate, whom he didn’t name. “If I die tonight, tomorrow morning, it won’t take the board an hour to have announced my successor.”

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CNBC: Buffett's Berkshire Adds Dollar General Stake, But Warren Probably Didn't Do the Buying

Published: Monday, 15 Aug 2011 | 5:16 PM ET
By: Alex Crippen
Executive Producer

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Warren Buffett

Warren Buffett's Berkshire Hathaway added a new stake in Dollar General [DG 32.19 0.53 (+1.67%) ] during the second quarter.

At just $48 million, however, the relatively small size of the 1.5 million share stake (as of June 30) indicates Buffett himself did not pull the 'buy' trigger.

He has said his stock moves are usually a billion dollars or more.

Berkshire's new portfolio manager Todd Combs may have made the decision.

Berkshire's just-released snapshot of its U.S. common stock portfolio also lists 2.1 million shares of Verisk Analytics [VRSK 32.21 -0.01 (-0.03%) ] that weren't included in Berkshire's Q1 filing. That's 1.3 percent of Verisk's outstanding shares.

But what looks like a new stake in the New Jersey-based risk assessment company isn't new at all.

When Verisk went public in October of 2009, Berkshire already had an ownership stake that was not sold in the IPO. (Several other insurance company co-owners did sell their shares at that time.)

That stake has been in the form of Class B shares that don't trade publicly. As a result, they have not been included in previous 13-F filings, because only positions in publicly-traded stocks have to be disclosed.

According to the Verisk's web site, however, a chunk of Class B shares were converted in April to Class A shares. The A shares do trade publicly on the Nasdaq, and so we're only now seeing the $68 million position included in Berkshire's filing. (Thanks to the Rational Walk's tweeter for pointing this out.)

Other changes listed in Berkshire's latest 13-F filed with the SEC:

  • Berkshire's MasterCard [MA 335.00 6.93 (+2.11%) ] stake increased between March 31 and June 30 by 189,000 shares to 405,000 shares. That's an increase of 88 percent. The increased stake is worth $136 million at today's close, also an indication that it wasn't a Buffett decision. (Again, Todd Combs is my best guess.)

  • Berkshire's massive Wells Fargo [WFC 25.02 0.89 (+3.69%) ] stake edged 3 percent higher with the addition of 9.7 million shares. Its 352.3 million share stake is valued at $8.8 billion at today's close.

  • Tonight's 13-F also reveals a 5 percent decrease in Berkshire's holdings of Kraft Foods [KFT 34.68 0.28 (+0.81%) ], bringing that stake down by 5.7 million shares to 99.5 million. It's worth $3.4 billion tonight.

Finally, for the second consecutive quarter, Berkshire's filing says that "confidential information has been omitted" and provided separately to the SEC. That could be a sign of a major move in the works that Buffett doesn't want revealed until he's done, to ward off copycat buyers or sellers.

Current Berkshire stock prices:

Class B: [BRK.B 72.54 1.02 (+1.43%) ]

Class A: [BRK.A 108600.00 1000.00 (+0.93%) ]

An earlier version of this post said that Berkshire Hathaway's position in Verisk was new and had been added during the second quarter of this year. In fact, it was an existing non-trading stake that now has to be disclosed due to its conversion into publicly trading shares.


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CNBC: If Warren Buffett Wants a Bigger Tax Bill, Why Doesn't He Just Send His Money to Washington?

Published: Monday, 15 Aug 2011 | 1:49 PM ET
By: Alex Crippen
Executive Producer

Warren Buffett
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Warren Buffett

When Warren Buffett says he and his "super-rich" friends should be paying more in taxes, a call he's made many times over the years, there's often this response from opponents of any tax increases: If you think you should be paying more in taxes, why don't you send a billion or two (or more) to Washington on your own?

Today, Buffett had an op-ed in the New York Times urging a "billionaire-friendly Congress" to stop "coddling" the super-rich and "get serious about shared sacrifice."

He points out, as he has before, that last year his tax bill came to 17.4 percent of his taxable income, "a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."

Why the disparity? Buffett writes:

"The mega-rich pay income taxes at a rate of 15 percent on most of their earnings (capital gains and dividends) but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot."

On MSNBC's Morning Joe today, a "fed up" Pat Buchanan delivered this challenge:

"Why doesn’t he set an example and send a check for $5 billion to the federal government? He’s got about $40 billion... You get all this noise from these big rich folks. Let them send checks and set an example instead of writing op-eds."

It's a question often asked accusingly by Buffett Watch readers when they write a comment about one of the many posts over the years on Buffett's "tax the super-rich" stance. They often note that Buffett is giving billions to the Gates Foundation. Why doesn't he send the money to the U.S. Treasury instead.

Here's a typical Buffett response to that question, from a 2007 interview with CNBC's Becky Quick. Buffett had stirred debate on the issue by arguing at a Hillary Clinton fund-raiser (she was running for president at the time) that he shouldn't have a lower tax rate than his secretary.

Becky: OK, there were a couple of emails that came in that people that said if you think the government should be able to tax more money, why don't you just give your money away to the government instead of charity.

Buffett: Well, that's a choice and it's an option that... If I had to give it to a single individual, or make some young Buffett a multi-billionaire, or give it to the government, I'd absolutely give it to the government. I think that on balance the Gates Foundation, my daughter's foundation, my two sons' foundations, will do a better job with lower administrative costs and better selection of beneficiaries than the government.

All this will probably be one topic of conversation when Buffett appears on Charlie Rose this evening (Monday.)

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NEW YORK TIMES: Warren Buffett - Stop Coddling the Super-Rich

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

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Read the full transcript of the March 2 Squawk Box Interview with Warren Buffett
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Warren Buffett @ Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second EditionThe Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
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