Reuters reported late Friday, citing two anonymous sources, that President Obama will call for reducing the U.S. corporate income tax rate to "the high 20 percent range" from 35%.
Say it goes to 28%, a 20% reduction in the corporate tax rate. And say that Warren Buffett's Berkshire Hathaway Corp. is affected about the same as other American companies, and has its corporate tax bill — about $5.6 billion — reduced 20%. (Even that probably understates the way such a move would help Berkshire more than others, since Berkshire throws off more taxable cash in America than do a lot of other American-based companies). That's a savings for Berkshire Hathaway of about $1.1 billion. Mr. Buffett, according to Berkshire's most recent proxy statement, has a 23% economic interest in Berkshire Hathaway, meaning the tax savings to him of Mr. Obama's proposed cut in the corporate income tax would be about $253 million a year.
Compare that gain for Mr. Buffett to his loss under the president's proposed "Buffett rule" that has been getting all the headline press attention and that would apply to Mr. Buffett's personal taxes. Mr. Buffett's adjusted gross income for 2010 was a reported $62,855,038, on which he paid $6,923,494 in tax. Raise his tax rate under President Obama's "Buffett Rule" to the minimum of 30%, and he'd have to pay roughly $18.9 million a year in taxes, or additional $12 million a year more than he already pays.
So the emerging details of the Obama tax reform mean that Mr. Buffett would end up about $241 million a year better off than he would under the current rules. Mr. Buffett would pay $12 million a year more in personal income taxes, but those additional taxes would be far, far outweighed by the tax savings Mr. Buffett would see in the reduction of the corporate income tax.
That's not a reason to oppose cutting the corporate tax rate. But it is a reason to be skeptical of public portrayals of Mr. Buffett's support for the Buffett Rule as a demonstration that he's somehow putting the nation's budget difficulties ahead of his own personal bottom line.
It would be interesting to know if Mr. Buffett has discussed the corporate tax rate with President Obama or anyone else in the administration, and, if so, whether he's taken them through the math outlined above.
