Buffett: Dividend Voodoo

May 21, 2003 00:24 · 158 words · 1 minute read

Warren Buffett writes, in Dividend Voodoo:

Now the Senate says that dividends should be tax-free to recipients. Suppose this measure goes through and the directors of Berkshire Hathaway (which does not now pay a dividend) therefore decide to pay $1 billion in dividends next year. Owning 31 percent of Berkshire, I would receive $310 million in additional income, owe not another dime in federal tax, and see my tax rate plunge to 3 percent.

All right, I admit that Warren Buffett is probably in a better position to talk about this than just about anyone. However, he doesn’t say anything about the argument that the money paid out as dividends has already been taxed at the corporate level. I agree that this tax certainly benefits the well-to-do more than the have-nots, though. And, I also think that doing a tax cut when we’re already running deficits is not likely to bring about the growth that the administration wants.