Taxmaster
As Liberal-Progressive Warren Buffett is poised to retire at 95 as the CEO of Berkshire Hathaway, it is interesting to see his final tax avoidance move on the investing chess board. Considered by many to be the greatest investor of all time, Buffett's annual letters to shareholders of Berkshire Hathaway could constitute an MBA in their own right. For over 60 years Buffett has been steadfast in his position on "tax fairness," ie that the extremely wealthy do not pay their fair share.
Recently Buffett released a Thanksgiving missive, this letter is what he intends to produce yearly in lieu of his previous Berkshire Hathaway shareholder letter. Along with several nostalgic stories and anecdotes regarding growing up in Omaha, Nebraska along with several of Berkshire's most luminous figures, including his best friend Charlie Munger it details his future plans.
Via this letter, the reader learns of Buffet's intentions to dispose of his vast fortune...a fortune originating from old textiles mills in New England where oddly there is no bronze statue of Warren Buffett. Why is that? No "Warren Buffett Day" in Cumberland, RI? No "Buffett, Massachusetts?"
Sensitive readers cover your eyes. Berkshire's fortune primarily derived from cheap labor and monopolistic corporate moats, in many cases with unfathomably beneficial terms to Berkshire struck in moments of financial crisis. Many of these businesses had seen better days, indeed Buffett's investment thesis had been for decades "to get the last puff of a cigar for free."
Those old textile mills, namely Berkshire Fine Spinning and Hathaway Mills are now empty lots, industrial skeletons, and piles of red brick. The local economies never recovered from the decline of the textile mills in the 1950s. Yet, Berkshire Hathaway today is a $1.2 TRILLION dollar company, with Buffett owning approximately 15% or about $180,000,000,000 of that value.
Here at ILAF we begrudge no man his fortune. Yet, the concern arises when a fortune is created in the United States utilizing the benefits of our legal system, banking system, infrastructure, labor force, educational system, defense, etc. etc. and after 75+ years of compounding and accumulating vast wealth it strategically avoids the valid claims of taxation from society (taxation is what Oscar Wilde referred to as the "price of a civil society.")
Buffett is by no means alone in this legally-sanctioned, yet morally dubious subterfuge. Show me a billionaire and I will show you a private foundation. What is particularly vexing in the Buffett situation, however, are the literally decades of pontification about him not being taxed enough, about the struggle of the working person, of not passing down generational wealth, of luck, of fairness, of hard work and discipline. Yet the very first paragraph of Buffett's Thanksgiving letter clearly outlines his true intention: to pass on his vast fortune virtually tax-free to his children via foundation structures.
The "foundation loophole" needs to be closed, it is costing American citizens hundreds of billions, if not trillions, in benefits they (American citizens) helped create and on which they (American citizens) have a valid claim. A better legacy to leave the United States and the American people is being known as both the greatest investor of all time and the greatest philanthropist who eschewed foundation tax avoidance and paid the claim due to citizens.
