[triangleman]

There is definitely some tax evasion in there somewhere, plus insurance practices and all the free money seems pretty messed up but maybe not a crime. Also lots of lobbying state governments for favorable regulations.

The quote is sort of non falsifiable... It's a hidden crime we're talking about after all.

[valuearb]

LOL. There isn't a sniff of any tax evasion or crime to Buffett's wealth. I'm also pretty doubtful he's ever lobbied anyone for any personal advantage, remember this is a guy who has publicly lobbied for higher taxes on the wealthy, including himself.

"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further. But I think that people at the high end - people like myself - should be paying a lot more in taxes. We have it better than we've ever had it." - Warren Buffett

Warren Buffett is just a guy who believed in the power of compounding from an early age, lived below his means so he could invest every dime possible, and became the world's best at investing in businesses.

The amazing thing about Warren is that if he had wanted to be worth far more than he is, he easily could have been. He ran an investment partnership for 13 years where he earned 25% of the profits, and averaged 40% per year just investing in the stock market. Then he switched to running Berkshire Hathaway, where anyone can call up their broker and buy shares in to have Warren manage your money nearly for free (his salary is $100,000 per year. No. Really). If he had kept his profit share arrangement (and easily could have) he'd easily be worth over $200B today.

[triangleman]

No, I would not assume buying Berkshire and going in that direction was anything but a purely profit seeking decision unless you have evidence to the contrary.

By tax evasion I mean buying companies and taking their profits as dividends, which means 15% tax or no tax at all in many cases. Yes it's reinvested but it's clearly an effort to avoid capital gains/income taxes. Buffets recent comments on tax policy have no effect on his tax position, for he does not play by the same rules as your average fund manager.

Same with insurance float, that's an interest free loan from policy holders to play with.

As I said, we are talking about hidden crimes here so that would almost by definition comprise 1) things that are unethical but not illegal, 2) things that would normally be illegal but can be reclassified as legal, or 3) illegal things that we don't know about.

[valuearb]

Buying Berkshire and running it as an investment vehicle clearly was a “profit seeking” decision, it also clearly wasn’t a profit maximization decision. The most mediocre hedge fund manager alive gets 2% of the fund a year for “expenses”, and 20% of the profits. Buffett obviously could have gotten the same, which would have doubled or tripled his current net worth.

If he had that perfectly standard money management arrangement, Buffett would have made $10B last year, and been able to shield it from taxes as long term capital gains. Instead he made $100,000 in salary, and paid regular taxes on it. The last 4 years alone a 2/20 profit share would have been worth close to $40B, nearly doubling his net worth just from those years, ignoring the profit share from the 40 years before that.

The reason Buffett chose Berkshire as a vehicle and doesn’t take his rightful fees from it, is he was already wealthy when he started with it. He had shutdown the Buffett Partnerships and briefly retired after making himself and his investors (a collection of mostly Omaha doctors and dentists) all multi-millionaires in only 13 years. When he decided to restart his friends and investors jumped in with him and he didn’t need or want to charge them fees. So every BRK shareholder since has gotten that glorious free ride.

The dividend tax rate is another spurious issue. Coke pays federal and state taxes on its profits, the pays most all of what’s left as dividends to its investors. Berkshire only pays around a 10% tax rate on those dividends, less than the 15-20% individual investors pay, but for good reason, because the corporate dividend tax is the first level of a DOUBLE taxation. If Buffett ever wants to pocket those Coke dividends, Berkshire has to pay them as dividends and shareholders would owe another 15% dividend tax rate on top and Buffett himself would have to pay 20% because he’s top bracket. That 10% is an extra tax Berkshire shareholders have to pay to own Coke thru Berkshire instead of directly.

This also shows how Berkshire’s tax structure is so inefficient. Even with the “discount” on dividend earnings, Berkshire paid over $7B in taxes last year on $33B in eanings. If he was still running an investment partnership, not only could he pay himself massive fees, but those fees would be considered “carried interest” and treated like long term capital gains, and only taxed when he sold shares, at low long term capital gains rates.

If insurance float is an interest free loan, in what world is it tax evasion? Taxes are owed on profits, not loans. And float is only interest free if you run your insurance companies exceptionally well. Ordinary insurers take a loss on float as a cost of doing business. But Buffett refuses to own insurers that are that crappy, and it’s the discipline of his insurance companies that makes Berkshire one of the rare insurers to have free float.

Lastly “crime” has a meaning, and you don’t get to redefine it as things you regard as “unethical”. Buffett has been investing very publicly for over 60 years with a total tally of zero crimes, and zero unethical acts. You may wish for some to maintain your silly desire that people can only be more successful than you by cheating and committing crimes, but they ain’t coming.