Berkshire Hathaway’s chairman and CEO, Warren Buffett, released his annual letter this past Saturday. In it, he highlighted the company’s unprecedented tax contributions in the previous year and called on the federal government to utilize this revenue responsibly.
Reflecting on his initial acquisition of Berkshire Hathaway 60 years ago, Buffett recounted how his long-standing business partner, Charlie Munger, warned of the company’s bleak future. At the time, Berkshire Hathaway was primarily a textile business struggling to generate profits and pay taxes. In 1965, the company did not pay any income tax, a situation that had persisted for roughly a decade, which Buffett described as a warning sign for such an established industry player.
Buffett noted the remarkable transformation of Berkshire Hathaway over the past six decades. From a company struggling to pay taxes, it has become one of the largest contributors to corporate income tax, exceeding even major American tech companies in total payments to the U.S. Treasury. In the last year alone, Berkshire made four payments to the IRS, totaling $26.8 billion, representing about 5% of the total corporate tax paid by all U.S. companies. Over time, Berkshire’s cumulative tax contributions to the U.S. Treasury have reached $101 billion.
Buffett attributed the company’s capacity for growth in taxable income to its practice of rarely paying dividends, allowing it to reinvest earnings. He praised investments in major companies like Apple, American Express, Coca-Cola, and Moody’s, highlighting their high returns on net tangible equity required for operations.
The letter also touched on Buffett’s views regarding capitalism. He acknowledged the existing shortcomings and abuses within the system while emphasizing its unparalleled potential to create wealth and value. He argued the importance of saving and wisely deploying capital, asserting that without it, American economic progress would have stalled.
Buffett reflected on America’s growth from a small population to a global powerhouse, attributing part of this success to prudent capital management. He credited the country’s economic system for this transformation, also acknowledging Berkshire’s own role in this economic landscape. He thanked the federal government and expressed hope for continued responsible use of tax payments, urging the government to ensure a stable currency through wisdom and vigilance.
Overall, Buffett’s letter underscored his appreciation for the opportunities presented by the American economic system, Berkshire’s growth, and his expectations for continued prudent fiscal governance.
