2021: How will a 25 to 28% corporate tax rate affect Berkshire’s companies?

BECKY QUICK: One more question for you, Jack Robbins asks, how will a 25 to 28% corporate tax rate affect Berkshire’s companies?

CHARLIE MUNGER: Well, I don’t think it would be the end of the world. We’ve adapted to the tax rate, whatever it is.

WARREN BUFFETT: Yeah. I would say that if they raise the tax rate, the federal government’s owning a larger percentage of business. But I’m not saying what the tax rate is, but we have a class A stock and a class B stock. The US government owns what I call the class AA stock, that’s a very special stock. They get a percentage of the earnings, but they don’t own the assets and they don’t vote on who gets to run the place or anything else. But if the government wants to take… When I was first starting, they used take 52%, the federal government did of corporate profits and they’ve got, what would you pay to own the government’s class eight AA stock? If there was a public issue by the US Treasury and they said, “This vehicle…” Given a name like SPAC or something, even sexier, but… “And all it will do is it owns the future tax payments of Berkshire Hathaway forever?”

And how much is that stock now worth? And it gets, and it’ll pay a big cash dividend and they’ll go up as we retain earnings and build the company and everything else. It’s worth more, if it’s, if the tax rate is 25% or 28% or 52%, then at 21%. They own a special stock, and when people talk about how it all gets passed through to customer and everything in the utility business, that actually does it that’s a special case, but it doesn’t, it doesn’t in most of our businesses. I mean, it’s just, it’s a, it’s a corporate fiction. When they put out statements about the fact that this will be terrible for all of you people, we pay more taxes and it hurts the Berkshire shareholders if rates are higher and that may be quite appropriate.

But to say otherwise, is just that it doesn’t make any sense. I would love to see the government actually issue, they could set up a company, just call it the Berkshire Hathaway tax company. And it would take all the taxes we paid every year. How much would they be able to sell that asset for? They talk about unfunded obligations of the government. That’s an unreported asset of the federal government, but they own part of Berkshire and they get to determine how much, I mean, it’s an interesting question.