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Warren Buffett and his American dollars for Canadian doughnuts

August 27th, 2014 | No Comments

by Fausta Rodriguez Wertz

Ah, Warren Buffett. The Oracle of Omaha, loved by American liberals every time he claims to be paying a lower rate than his secretary (which was debunked, by the way), the guy after whom the Buffett rule is named. Buffett orchestrated Burger King Worldwide Inc.’s acquisition of Tim Hortons Inc. (a coffee-and-doughnut chain), and Burger King will move its Miami, FL, headquarters to lower-tax Canada. BK’s operational headquarters will remain in Miami (emphasis added):

If the deal goes through, Berkshire will end up paying taxes on its income from the preferred securities at the 35% U.S. corporate tax rate, rather than the 14%, after deductions, that an insurance company such as Berkshire would be liable for under the originally envisioned structure.

Mr. Buffett, who helped finance 3G Capital’s buyout of H.J. Heinz Co. last year and has said publicly he would like to team up again, negotiated a deal that would cover the cost of Berkshire’s higher tax bill, the person familiar with his thinking said. He wanted Berkshire to be compensated for the more than $50 million in additional taxes it would pay because of the planned move to Canada.

Buffett managed a deal that not only minimizes the corporate tax rate, it actually compensates Berkshire for the taxes it would pay because of the move.

Sweet.

Of course, his fans still assert that No, Warren Buffett Is Not a Tax Hypocrite on Burger King, since

suggestions of hypocrisy ring false because Buffett has never, ever held himself out as person who pays more taxes than he has to. The whole point of his story about his tax rate vs. his secretary’s is that he was allowed to pay less than he thought he should. He never said he was writing a check to the Treasury to make up the difference.

Back in 2012 I was pointing out that

Until Warren coughs up his personal tax returns, we should dismiss anything he says as hypocritical propaganda.

What I left out is, hypocritical propaganda coming from a firm believer in crony capitalism.

The issue is that of competitiveness. Canada is attracting investors because of its lower corporate tax rates. In the U.S. we have the highest corporate tax rate in the world; the convoluted, Byzantine tax code forces businesses to spend millions of dollars that could otherwise be used for research and development, salaries and manpower, equipment, and investment. Businesses have the obligation to legally maximize their investment. If that means moving overseas, they do.

As one of the commenters in the Wall Street Journal said, “Money goes where it is well treated.”

In the meantime, did anyone find out if Berkshire Hathaway paid up the taxes it owed since 2002?

Fausta Rodriguez Wertz writes on U.S. and Latin American politics and culture at Fausta’s Blog.

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