Death, Taxes, Warren Buffett, and Donald Trump

Berkshire Hathaway The Essays of Warren BuffettWIth permission from copyright holder

Warren Buffett once said: “It takes 20 years to build a reputation and five minutes to ruin it.”

Well, Buffett’s been building a stellar reputation for 86 years, and in Monday’s second presidential debate Donald Trump attempted to ruin it in five seconds.

During the debate, Donald Trump tried to defend his personal income tax strategies by saying:

Now, the taxes are a very simple thing. As soon as I have — first of all, I pay hundreds of millions of dollars in taxes. Many of her [Clinton’s] friends took bigger deductions. Warren Buffett took a massive deduction.

Buffett had already previously spoken out against Trump and offered to release his tax returns if Trump released his. But clearly Buffett couldn’t let this personal attack by Trump (on a national stage watched by nearly 67 million Americans no less) stand.

[drizzle]

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Some Tax Facts for Donald Trump

So on Monday, Warren Buffett issued this press release, titled “Some Tax Facts for Donald Trump“:

Answering a question last night about his $916 million income tax loss carryforward in 1995, Donald Trump stated that “Warren Buffett took a massive deduction.” Mr. Trump says he knows more about taxes than any other human. He has not seen my income tax returns. But I am happy to give him the facts.

My 2015 return shows adjusted gross income of $11,563,931. My deductions totaled $5,477,694, of which allowable charitable contributions were $3,469,179. All but $36,037 of the remainder was for state income taxes.

The total charitable contributions I made during the year were $2,858,057,970, of which more than $2.85 billion were not taken as deductions and never will be. Tax law properly limits charitable deductions.

My federal income tax for the year was $1,845,557. Returns for previous years are of a similar nature in respect to contributions, deductions and tax rates.

I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.

Finally, I have been audited by the IRS multiple times and am currently being audited. I have no problem in releasing my tax information while under audit. Neither would Mr. Trump – at least he would have no legal problem.

This is Warren Buffett, in his typical concise and straightforward manner, simply calling B.S. on Trump.

And that $2,858,057,970 number is NOT a typo! As Forbes points out, Buffett’s charitable donations in 2015 amounted to 75% more than Donald Trump’s total net worth.

Trump-v-Buffett_Post

The Buffett Rule

Taxes have always been a big issue for Warren. As Janet Novack from Forbes notes, Buffett has long campaigned for higher taxes on the ultra-rich, pointing out that he pays a lower effective tax rate than his secretary.

In October 2011, in response to a challenge from the WSJ, Buffett disclosed that his effective tax rate was just 11.06%, as it was reduced by his heavy reliance on lower taxed long term capital gains and large deductions for his charitable giving. Back then, he also offered to release his full tax return if billionaire Rupert Murdoch, the chairman and CEO of News Corp., whose holdings include the WSJ and Fox News, would do so.

President Obama even created the “Buffett rule” – a 30% minimum tax on those with adjusted gross income above $2 million – which was part of his 2011 tax plan – but was blocked after a Rebuplican filibuster in the Senate. Clinton has also embraced the Buffett Rule in her tax plan; according to an analysis by the Tax Policy Center, Clinton’s proposed tax rate for the richest 0.1% is nearly double the rate Trump has proposed.

There Are Only Two Certain Things in Life…

In the end, there are only two certain things in life: death and taxes.

But when it comes to Warren Buffett, only one thing is certain: if you try to attack Buffett’s reputation (the thing he holds most dear, second only to Berkshire Hathaway), then you’re going to be in for trouble.

Be sure to take a look at The Essays of Warren Buffett.

The Essays of Warren Buffett: Lessons for Corporate America

by Warren E. Buffett, edited by Lawrence A. Cunningham

Buffett, the Bard of Omaha, is a genuine American folk hero, if folk heroes are allowed to build fortunes worth upward of $15 billion. He’s great at homespun metaphor, but behind those catchy phrases is a reservoir of financial acumen that’s generally considered the best of his generation.

And want to learn more about Trump? Try Trump: The Art of the Deal.

Trump: The Art of the Deal

by Donald J. Trump and Tony Schwartz

Republican presidential nominee Donald J. Trump lays out his professional and personal worldview in this classic work—a firsthand account of the rise of America’s foremost deal-maker.

Did you like this article? Chances are someone you know would like it too! It would make my day if you shared this with a friend, and it might just make their day too!

[/drizzle]

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)



About the Author

VintageValueinvesting
Ben Graham, the father of value investing, wasn’t born in this century. Nor was he born in the last century. Benjamin Graham – born Benjamin Grossbaum – was born in London, England in 1894. He published the value investing bible Security Analysis in 1934, which was followed by the value investing New Testament The Intelligent Investor in 1949. Warren Buffett, the value investing messiah and Graham’s most famous and successful disciple, was born in 1930 and attended Graham’s classes at Columbia in 1950-51. And the not-so-prodigal son Charlie Munger even has Warren beat by six years – he was born in 1924. I’m not trying to give a history lesson here, but I find these dates very interesting. Value investing is an old strategy. It’s been around for a long time, long before the Capital Asset Pricing Model, long before the Black-Scholes Model, long before CLO’s, long before the founders of today’s hottest high-tech IPOs were even born. And yet people have very short term memories. Once a bull market gets some legs in it, the quest to get “the most money as quickly as possible” causes prices to get bid up. Human nature kicks in and dollar signs start appearing in people’s eyes. New methodologies are touted and fundamental principles are left in the rear view mirror. “Today is always the dawning of a new age. Things are different than they were yesterday. The world is changing and we must adapt.” Yes, all very true statements but the new and “fool-proof” methods and strategies and overleveraging and excess risk-taking only work when the economic environmental conditions allow them to work. Using the latest “fool-proof” investment strategy is like running around a thunderstorm with a lightning rod in your hand: if you’re unharmed after a while then it might seem like you’ve developed a method to avoid getting struck by lightning – but sooner or later you will get hit. And yet value investors are for the most part immune to the thunder and lightning. This isn’t at all to say that value investors never lose money, go bust, or suffer during recessions. However, by sticking to fundamentals and avoiding excessive risk-taking (i.e. dumb decisions), the collective value investor class seems to have much fewer examples of the spectacular crash-and-burn cases that often are found with investors’ who employ different strategies. As a result, value investors have historically outperformed other types of investors over the long term. And there is plenty of empirical evidence to back this up. Check this and this and this and this out. In fact, since 1926 value stocks have outperformed growth stocks by an average of four percentage points annually, according to the authoritative index compiled by finance professors Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College. So, the value investing philosophy has endured for over 80 years and is the most consistently successful strategy that can be applied. And while hot stocks, over-leveraged portfolios, and the newest complicated financial strategies will come and go, making many wishful investors rich very quick and poor even quicker, value investing will quietly continue to help its adherents fatten their wallets. It will always endure and will always remain classically in fashion. In other words, value investing is vintage. Which explains half of this website’s name. As for the value part? The intention of this site is to explain, discuss, ask, learn, teach, and debate those topics and questions that I’ve always been most interested in, and hopefully that you’re most curious about, too. This includes: What is value investing? Value investing strategies Stock picks Company reviews Basic financial concepts Investor profiles Investment ideas Current events Economics Behavioral finance And, ultimately, ways to become a better investor I want to note the importance of the way I use value here. It’s not the simplistic definition of “low P/E” stocks that some financial services lazily use to classify investors, which the word “value” has recently morphed into meaning. To me, value investing equates to the term “Intelligent Investing,” as described by Ben Graham. Intelligent investing involves analyzing a company’s fundamentals and can be characterized by an intense focus on a stock’s price, it’s intrinsic value, and the very important ratio between the two. This is value investing as the term was originally meant to be used decades ago, and is the only way it should be used today. So without much further ado, it’s my very good honor to meet you and you may call me…

Be the first to comment on "Death, Taxes, Warren Buffett, and Donald Trump"

Leave a comment

Your email address will not be published.