Berkshire Hathaway Inc.'s purchase of $1.2 billion of its own stock was announced last week in the midst of the continuing debate over whether to raise federal tax rates for wealthy people.
Some critics said the Berkshire stock purchase — coming just ahead of possible tax increases — contradicts CEO Warren Buffett's position that tax rates should be raised for wealthy people who pay too little under current tax rules.
Last week Buffett and others called for higher federal taxes on estates above $4 million. He also favors a minimum federal income tax rate for incomes over $1 million, even if part of the income comes from capital gains or dividends that today are taxed at 15 percent.
Although complete details of the recent stock repurchase aren't known, it's hard to see how Berkshire had a significant impact on taxes owed by the seller — the estate of a longtime, unidentified shareholder who had died.
Buffett and Berkshire's other directors last year decided that because Berkshire stock has been undervalued on the stock market, the company would buy up some of its shares within a certain price range. The estate's shares were available at the right price, so Berkshire bought them.
But the estate's coming estate tax bill is triggered by the shareholder's death, not by the sale of the stock, according to tax rules. The estate tax would be the same whether it owns shares or the same amount of cash.
Gains taxes would apply only to the increase, if any, in the value of the shares since the shares passed into the estate, not since the shareholder's original purchase. Buffett made the same point in an email responding to criticism by CNBC commentator Gary Kaminsky, saying, “The estate did not have a gain regardless of when the stock was sold.” CNBC issued a correction.
Allentown looks good
Newspaper watchers are wondering whether Berkshire will buy the Allentown (Pa.) Morning Call from the Tribune Co. Buffett didn't deny the rumor in emails to Call reporters Sam Kennedy and Scott Kraus.
“Allentown is our kind of place,” Buffett responded to their inquiry, according to the Call story. “We haven't heard anything from the Tribune Co., but if the phone rings, I'll answer,” he wrote, adding later, “Let's just wait until I get a call.”
Berkshire bought The World-Herald last December, added more newspapers this year and formed a community newspaper division. Buffett has said he may buy more.
The Tribune, which also owns the Chicago Tribune, the Los Angeles Times and the Baltimore Sun, is undergoing bankruptcy reorganization. The investment companies that own the Tribune have taken steps toward selling some newspapers, but an executive with one of the investment firms, Thomas Fuller of Angelo Gordon & Co., told the Call, “As far as I know, there is no plan to sell off the newspapers.” A Tribune Co. spokesman had no comment.
Trounced by Bulgaria
It seems Omaha has missed out again on a foreign auto production plant.
BYD, the Chinese motor vehicle and battery company that is 10 percent owned by Berkshire Hathaway, agreed to build an electric bus and car factory in Breznik, Bulgaria, about 30 miles west of the capital of Sofia, according to Agence France Presse and China's Xinhua news agency.
Also taking part in the European market project will be the Bulgarian energy company Bulmineral, said its CEO, Alexander Usachev. Another Chinese auto company, Great Wall Motor, is building an assembly plant in Bahovitsa, Bulgaria, to produce 50,000 vehicles a year.
No word on whether Omaha was ever considered for either factory. In the early 1990s the city was in competition for a Mercedes-Benz plant in the suburbs and a BMW factory, complete with a test track, along the downtown riverfront. Both ended up in the South.
A Swedish financial firm, Spiltan Investment A.B., plans to honor Buffett by carving one of his quotations into stone, according to Reuters.
Spiltan CEO Per Borjesson, a Buffett admirer, said he thinks the Omahan should receive the Nobel Prize for economics. Instead, the company plans to inscribe these words in rocks along Sweden's southwest coast:
“Price is what you pay. Value is what you get.”
We were hoping for a different Buffett quote: “You only find out who is swimming naked when the tide goes out.”
A 'cool' aura
New Yorker magazine's James Surowiecki was one of several journalists who interviewed Buffett during his recent New York visit. He wrote that Buffett's public appeal is partly because of his “unnervingly even persona,” which projects “an aura of profound cool. During the financial crisis, he was the human equivalent of one of those 'Keep Calm and Carry On' signs.”
Buffett also has “a fundamental optimism about the future. ... You can dismiss this as Pollyanna-ish or, alternatively, as what you would say if you were worth forty-five billion dollars. But it's part of what makes Buffett likable: his quintessentially American conviction that there's no problem we can't solve.”
Son helps out Congo
Buffett's son, Howard, announced in Goma, a regional capital in the Democratic Republic of the Congo, that his foundation would donate $1 million to the United Nations' World Food Program to help refugees there, Agence France Presse reported.
The money will help refugees return to their home villages, the U.N. agency said, providing food for 41,000 refugees for three months and caring for 8,500 malnourished children.
“We have been interested in the DRC and the Great Lakes region since 1998,” Howard Buffett said. Battles between the country's army and a rebel militia group known as the M23 movement have displaced an estimated 1 million people.
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
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