Why Does Warren Buffett Like Taxes?

Why does Warren Buffett like taxes? John Onesti explains:

Mr. Buffett has stated that he is against lowering the tax on dividends and is against eliminating the estate tax. Why would an individual who has made so much money in the markets say these things? Let’s examine some of the possible reasons. First let’s talk about dividends. Berkshire Hathaway is a holding company that owns subsidiaries. Berkshire Hathaway itself does not pay a dividend but some of the companies it owns do indeed pay dividends. Because Berkshire Hathaway is a corporation, over the years it has not had to pay the same taxes on dividends as an individual. That is because 70-80% of the corporate dividend is tax free and the other 20-30% is taxed at the corporate rate when one corporation own shares of another corporation. Therefore the dividends Berkshire Hathaway receives from its subsidiaries can grow more than if an individual owned the same exact stocks in a taxable account. Berkshire Hathaway itself does not pay a dividend so its owners do not pay taxes on the dividends within Berkshire Hathaway. Warren Buffett could have managed a mutual fund but then the mutual fund would have to pay dividends to shareholders and the dividends would be taxed at a much higher rate. Instead, he elected to setup Berkshire Hathaway as a holding company and own other companies much the same way a mutual fund would operate. This is perfectly legal but inconsistent. If Mr. Buffett wants the rest of us to pay taxes on our dividends for the good of society and the state why should Berkshire Hathaway be setup so it can get a reduced tax rate? In the spirit of free markets and smaller government Mr. Buffett should be against the dividend tax altogether. Instead, he has spent a lot of time and energy setting up and managing Berkshire Hathaway so it can avoid the large bite of the dividend tax. If the dividend tax were reduced or eliminated completely Berkshire Hathaway would lose one of its competitive advantages over mutual funds and other company stock. The demand for Berkshire Hathaway’s shares would be reduced significantly if there was no dividend taxation. Could this be the reason Mr. Buffett didn’t want a reduction in the dividend tax that President Bush suggested a few years back?

You might want to read the whole piece it's one of the best things written on "Saint Warren".John Onesti isn't part of the Buffett empire.