Why Billionaire Warren Buffett Doesn’t Mind Paying the Highest Tax Bill in History
Written by
Marc Guberti
Edited by
Zuri Anderson
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Warren Buffett hasn’t been shy about sharing how proud he is to pay taxes. The billionaire has talked several times about how corporations should be paying higher taxes. He has also argued that Americans can end up with no federal income taxes if 800 companies pay their fair share of taxes.
The famed investor shared in Berkshire’s 2024 Annual Letter that the company paid $26.8 billion to the IRS last year. That comes to roughly 5% of what all of corporate America paid to the government. Buffett lamented that this wasn’t always the case for Berkshire, especially before he acquired it.
“In 1965, the company did not pay a dime of income tax, an embarrassment that had generally prevailed at the company for a decade,” he said while describing how the company was on the brink of extinction back when it was in the textile industry. He also singled out American tech giants as not paying their fair share in taxes.
Buffett views taxes as the opportunity to transfer money from the rich to people who got the short end of the stick in life. He says as much in the annual letter to his shareholders.
“Spend it wisely,” Buffett told Uncle Sam. “Take care of the many who, for no fault of their own, get the short straws in life. They deserve better.”
GOBankingRates further breaks down the Oracle of Omaha’s philosophy behind paying high taxes.
Buffett Warns of Runaway Currency
Buffett led Berkshire to its success by making good investments more often than he made bad ones. It’s a simple mentality like this that is easy to understand but difficult to implement in practice.
However, he said that he will continue to invest mostly in U.S. equities. He cited concerns about a runaway currency and explained that zero-coupon bonds aren’t enough to keep up with the changes.
“Paper money can see its value evaporate if fiscal folly prevails,” he said in the annual letter. “In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency.”
Reinvesting vs. Consuming
Making regular reinvestments has helped Berkshire pay higher taxes than other corporations. Buffett explains that shareholders contributed to the high tax bill through foregoing dividends. Since Berkshire didn’t have to pay dividends, the company could reinvest money into various initiatives. It was essentially short-term pain for long-term gain, and it certainly worked out well for long-term investors.
“Originally, this reinvestment was tiny, almost meaningless, but over time, it mushroomed, reflecting the mixture of a sustained culture of savings, combined with the magic of long-term compounding.”
Saving money makes it easier to grow a business, and that results in more taxable revenue. He mentioned that the U.S. “would have been spinning its wheels” if it had consumed all that it had produced.
Reinvesting instead of consuming strengthens companies and countries in the long run. It allows the magic of compounding to work favorably, create jobs and generate more revenue for the government.
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