Taxmaster

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. 

Where is Bill Gates?

Where is Bill Gates?

Although I enjoy a TED Talk just as much as the next guy, it really makes you wonder if it is the best use of your time if you're the head of a multi-billion dollar charitable health foundation in the midst of a global pandemic. Rather than fielding questions as to what you'd do if you were President of the United States, perhaps it would be better to go through an action plan of what the Gates Foundation is proactively doing to help fight the coronavirus. Where is Bill Gates?

As the beneficiary of hundreds of millions of dollars in both Federal and State tax exemptions, the Gates Foundation holds a special place in global philanthropy. For the liberal elite, it is an invitation-only pass into the highest echelons of philanthropy. But the hairs on the back of your neck should tingle when you hear the words "philanthropy," especially when it coincides with massive tax breaks that would otherwise be funneling much needed funds into a government that is actually fighting the coronavirus with surges in public/private manufacturing of N95 masks and ventilators, an unrelenting pursuit of vaccines amongst big pharma, and most importantly, the frontline heroes (nurses, caregivers, EMTs, firefighter, doctors, etc.) who are completely overwhelmed. Where is Bill Gates?

Philanthropy, and foundations in particular, are touchy subjects. At face value, they are supposed to be the engines of direct, unbureaucratic good. And many, many are just that...they have minuscule operating budgets, shoestring infrastructure, and provide a world of good for many. To those, God bless you! My concerns, however, arise when an institution by its very mandate, say helping to alleviate global pandemics, does nothing when its very reason for relevance appears on the global stage. Then it is only morally right to ask questions. Where is Bill Gates?

A higher power lens needs to focus on the billions of dollars pledged and committed to private foundations when operating expenses run into the hundreds of millions, corporate infrastructure is grandiose, and financial control of donated assets remains intact to the donor(s). As taxpayers on the hook for capital gains and income taxes, we all should wonder why the U.S. Treasury isn't the first choice for billionaire philanthropists...especially when foundation mandates are ignored in the face of calamity. Something is seriously wrong when citizens of this great country are deprived of the economic and social benefits of hundreds of billions in sheltered assets. Where is Bill Gates?

When the last vestiges of the coronavirus are ultimately mopped up throughout the world, including the inevitable secondary and tertiary waves, we're going to need a "Marshall Plan" of restoration. Similar to post-9/11, there will be societal changes. The economy itself will shift, and survive. A reckoning needs to occur right quick, however, answering the question of why those with so much did so little. COVID-19 is going to leave generational scars on this country, especially in terms of income and wealth inequality. The salve, echoed by Truman and Reagan alike, was the philosophy Gen George C. Marshall coined with the comment: "There is no limit to the good you can do when you don't care who gets the credit." It's time to strip mega foundations of their tax-exempt status and restore accountability to the taxpayer. Where is Bill Gates? Who cares.