danivon wrote:

Archduke Russell John wrote:So is Buffet a hypocrite for backing the Burger King/Horton deal given the inversion plans?

Not really. He is quite honest in pointing out how his class uses the rules to macimise profit. His job as an investor (especially of other people's money) is to do just that. But the issue is the rules, which he does not control. There is a small amount of hypocrisy, but it's not like he ever said people should not do what he does - he says that the govermment should change the rules

The right are desperate to attack the man because he is seen as a class traitor.

Some are; but most are using it as evidence that the tax rules are poorly constructed in this country. Namely the high U.S. corporate income tax rate is what is driving these inversions. When big companies are migrating to Canada and the U.K. for lower taxes, you know something is wrong.

These high tax rates are defended by Democrats. Instead of fixing the underlying issue, Obama has called lawyers and accountant and business people unpatriotic. Is Buffett unpatriotic too? No. Obama and congress should fix the law.

ray

Some are; but most are using it as evidence that the tax rules are poorly constructed in this country. Namely the high U.S. corporate income tax rate is what is driving these inversions. When big companies are migrating to Canada and the U.K. for lower taxes, you know something is wrong

If the tax bill for BK/Tims was all that much lower it might be true. However, Canada's corporate tax is paid after moneys earned in foreign countries are taxed in the country of origin first...
So the lower Canadian corporate tax for BK only affects monies earned in Canada and other markets outside of the US. The analyst on Business News Network, had it around 2 percentage points total after all the considerations. (BK makes most of its profits in the US)
In Canada the move is considered a way for the combined company to more quickly expand Tims in the US and around the world. The breakfast segment, is the one area where Fast food is still growing and competing in the US. And Tims has never had the critical mass to take on Dunkin in the US.

By the way, BK may be an American company but its controlled by 4 Braziilans. Calling 4 Brazilian billionares unpatriotic for moving a corporate headquarters from the US probably doesn't sting them too much.

Archduke Russell John wrote:So is Buffet a hypocrite for backing the Burger King/Horton deal given the inversion plans?

Absolutely not. Everyone should be following the rules. It's completely fine to point out where the rules are not fair, but you still follow them, sometimes to your advantage. Dr Fate also made a similar point earlier: to the effect of if Buffet wants to pay more taxes, he should!

Tax policy is not religion. There is no dogma, just rules made by men. Follow the rules, and if they suck, work to change them, but follow the rules and use them to your advantage when you can. Is there a better example of how utterly ineffective our policy makers are than the current inversion mess?

This example is probably a poor one to condemn inversions--I understand BK would have pursued this deal regardless of tax advantages, which aren't that large. This isn't Medtronic going to Ireland, but still I'm pleased that this deal is bringing a lot of attention to the practice, which has got to change. I think I agree with RJ, the problem is not inversions per se, but the tax rate that some corps pay (while others pay almost nothing, or literally nothing). Fix the tax rate and these sorts of deals will likely become a non-issue.

geojanes wrote: I think I agree with RJ, the problem is not inversions per se, but the tax rate that some corps pay (while others pay almost nothing, or literally nothing). Fix the tax rate and these sorts of deals will likely become a non-issue.

It depends what the solution is. If corporation tax rates are too divergent from other income taxes, it creates incentives to avoid or evade tax by redesignating income. And if rates are cut too much, it just exacerbates the current fiscal position (Ireland has seen this happen, despite winning new company HQs)

Some corporations do indeed pay zero corporation tax - because they are making a loss, and taxes are levied on net income: ie profit, in the most part.

danivon wrote:

geojanes wrote: Some corporations do indeed pay zero corporation tax - because they are making a loss, and taxes are levied on net income: ie profit, in the most part.

Yes, of course, if you make no money, you pay no taxes, but there are lots of corps that pay little to no taxes based and are profitable, including not-for-profit corporations, which pay zero taxes, yet can be extremely profitable.

danivon wrote:Not really. He is quite honest in pointing out how his class uses the rules to macimise profit. His job as an investor (especially of other people's money) is to do just that. But the issue is the rules, which he does not control. There is a small amount of hypocrisy, but it's not like he ever said people should not do what he does - he says that the govermment should change the rules.

geoganes wrote:Absolutely not. Everyone should be following the rules. It's completely fine to point out where the rules are not fair, but you still follow them, sometimes to your advantage.

Does a person who complains that something should be changed have something of a moral obligation to not take advantage of what he is says is wrong?

Archduke Russell John wrote:

danivon wrote:Not really. He is quite honest in pointing out how his class uses the rules to macimise profit. His job as an investor (especially of other people's money) is to do just that. But the issue is the rules, which he does not control. There is a small amount of hypocrisy, but it's not like he ever said people should not do what he does - he says that the govermment should change the rules.

geoganes wrote:Absolutely not. Everyone should be following the rules. It's completely fine to point out where the rules are not fair, but you still follow them, sometimes to your advantage.

Does a person who complains that something should be changed have something of a moral obligation to not take advantage of what he is says is wrong?

To avoid being hypocritical, yes.

Buffett does not claim that capitalism is wrong. Capitalism is about maximising return on investment, and doing so in a competitive environment, often with other people's money. He has a moral obligation to do so legally and in the best interests of shareholders.

So that creates a conflict, and means it is not so simple. I know you guys (who are not even of the class being betrayed by Buffett) are looking for ways to discredit him. As I said, there is a small element of hypocrisy there. But that does not actually invalidate his point that the rules are not set up equitably.

There is a saying that springs to mind: "Don't hate the player, hate the game"

Archduke Russell John wrote:Does a person who complains that something should be changed have something of a moral obligation to not take advantage of what he is says is wrong?

Morality has nothing to do with taxes. Taxes are rules that we've imposed on ourselves. We are merely obliged to follow the rules. If the rules are dumb, then as a citizen, work to change them, but until they are changed, follow the rules! I'm sorry, but in my mind, the question is absurd, and Brad's answer is ridiculous.

I would go further than Dan and say there is no element of hypocrisy, at all. We're all playing a game and following the rules. He's enough of a citizen to say, hey, these rules suck, we should change them. There are other amoral SOBs out there who game the system and the expense of other Americans who know the rules are broken, but they not only keep silent about how broken they are, they funnel huge amounts of money into Congress to keep them broken. While Buffet's just doing what any moral citizen should do, compared to most hedge fund a**holes he's an American hero.

I don't know, I think the Archduke has a valid point. I did not think it was a valid criticism when the Republicans responded to Buffet's suggestion that the rich should pay more taxes by saying why doesn't he do voluntarily pay more taxes, because it would not have had an impact if he did it alone-- it required all of the rich to pay more taxes. Basically, he was willing to pay more taxes if all of the rich did so as well . And there was nothing wrong with that statement or hypocritical about it. But if Buffet thought inversions were wrong , I don't think he has the defense here that everyone has to stop inversions before he stops doing them. If you think vulture capitalism is wrong, do we have to pass a law stopping it or you will think it perfectly ok to do it? Are we moral beings or are we only constrained by laws? I think Buffet lost some credibility by doing this.

Did Buffett attack inversions as immoral? The only quote I have seen suggests he would change the law, but until then companies can do them if they want.

Similar to his position on income taxes - the rates and rules are not fair, but he abides by them like everyone else who acts within the law.

freeman3

I did not think it was a valid criticism when the Republicans responded to Buffet's suggestion that the rich should pay more taxes by saying why doesn't he do voluntarily pay more taxes, because it would not have had an impact if he did it alone-- it required all of the rich to pay more taxes.

Essentially taxes are a shared burden. Similar to shared resource.
A shared resource made available to the whole of the community will languish and suffer abuse in a manner that would not exist if that same resource were owned and used by a single individual.

The classic example is that of a pasture. Multiple shepherds begin by grazing their sheep in the common pasture. When the shepherds grow their herds, they begin to understand that the pasture will, in time, become over grazed. However, because the pasture is communal there is no incentive to preserve the pasture; if Farmer Johnson doesn’t increase the aggregate herd size by one, surely his neighbors will. In time, the incentive is perverse, the shepherd accelerates the growing of his herd to make sure that “he gets his.”

The tragedy of the commons.
Of course, there are two solutions to this problem:
Privatize the pasture. Assign an owner of it all or simply divide the pasture into plots.
Form a government and regulate it.

You cann't privatize the shared burden of taxation. So it is regulated. For one to volunteer a larger share of the burden makes that person a sucker. Makes his business less competitive.

danivon wrote:Buffett does not claim that capitalism is wrong. Capitalism is about maximising return on investment, and doing so in a competitive environment, often with other people's money. He has a moral obligation to do so legally and in the best interests of shareholders.

So that creates a conflict, and means it is not so simple. I know you guys (who are not even of the class being betrayed by Buffett) are looking for ways to discredit him. As I said, there is a small element of hypocrisy there. But that does not actually invalidate his point that the rules are not set up equitably.

There is a saying that springs to mind: "Don't hate the player, hate the game"

First off, I am not trying to discredit him. Please show me where I have actually said that he is a hypocrite. I simply asked if other thought he was.

Stop putting words in my mouth. You don't like it when other do it to you so don't do it to other people. Otherwise you become the hypocrite yourself.

So taking advantage of a rule you find wrong is ok if you are using OPM to make them more money. I can sort of agree with that. However, I am sure there are opportunities to invest that OPM and make an equal amount of money for his shareholders with M&A's that do not include inversions.

How about if he used his own money and not OPM so that any profit goes into his pocket?

Archduke Russell John wrote:

danivon wrote:Buffett does not claim that capitalism is wrong. Capitalism is about maximising return on investment, and doing so in a competitive environment, often with other people's money. He has a moral obligation to do so legally and in the best interests of shareholders.

So that creates a conflict, and means it is not so simple. I know you guys (who are not even of the class being betrayed by Buffett) are looking for ways to discredit him. As I said, there is a small element of hypocrisy there. But that does not actually invalidate his point that the rules are not set up equitably.

There is a saying that springs to mind: "Don't hate the player, hate the game"

First off, I am not trying to discredit him. Please show me where I have actually said that he is a hypocrite. I simply asked if other thought he was.

Stop putting words in my mouth. You don't like it when other do it to you so don't do it to other people. Otherwise you become the hypocrite yourself.

My bad. I am reading bbauska and DF more - and they certainly are at the very least heavily hinting. I didn't refer to you directly in the post you are citing, so I apologise that it swept you up in ambiguous language when I said 'you guys'.

So taking advantage of a rule you find wrong is ok if you are using OPM to make them more money. I can sort of agree with that. However, I am sure there are opportunities to invest that OPM and make an equal amount of money for his shareholders with M&A's that do not include inversions.

How about if he used his own money and not OPM so that any profit goes into his pocket?

Well, how about we actually look at the deal with BK and Tim Hortons and try to work out how much of it is about return on investment for the deal itself, and how much is in tax savings. I suspect that the former is much larger than the latter - indeed I have seen some suggestions that there isn't actually an overall saving because of the way that the respective tax laws work.

Even if he did use his own money (and I'm sure some of the Berkshire Hathaway investments are owned by him so some of it definitely is his money), it's not really different.

http://blogs.wsj.com/moneybeat/2014/08/ ... king-deal/

There is also often a tax hit on shareholders when the inversion happens (because they pay CGT on shares they hold in Company A as they are transferred into shares in Company B, whereas a non-inversion deal they usually don't). It's not clear what holdings Buffett or Berkshire Hathaway will have in BK at that point, or what shareholder liabilities will be - because the process is complex and it seems that 3G are trying to reduce those liabilities.

The truth is simple: there is a broad consensus that our corporate rates are too high. However, the Democrats want to cut them and then raise other revenue and spend more. It would actually improve our economy if the Democrats would simply lower the rate.