2010: How would Buffett change the tax system?

ANDREW ROSS SORKIN: So we received about a dozen questions, at least I did, on the subject of your taxes, Mr. Buffett, from shareholders no less. And I chose what I hope is the most polite version of the question.

WARREN BUFFETT: I hope so, too. (Laughter)

ANDREW ROSS SORKIN: This one came from Tom Cornfeld (PH).

And he says, “Mr. Buffett is often quoted as saying that his assistant pays at a higher tax rate than he does, because of the disparity between the long-term capital gain and ordinary income tax rates.

“The implication is that taxes should be much higher on people like himself.

“However, I note that Mr. Buffett has donated virtually 100 percent of his estate to charitable organizations. Because he has owned his Berkshire shares for many, many years with no dividend distributions, it is virtually certain that the bulk of his estate will therefore never be subject to taxation by the U.S. government.

“My question is that, if Mr. Buffett feels that he should pay more taxes, how should the tax system be changed?”

WARREN BUFFETT: Well, you could have a wealth tax, would be one way. I mean, you could tax — I don’t know how many countries do that now, Charlie.

In effect, you have that with a property tax in certain ways, but you could have a wealth tax. I would say this: he is absolutely correct. If you want to give away all of your money, it’s a terrific tax dodge. (Laughs)

Although, I will say this also. In the tax return I just filed, on the “charitable contributions” line, I have an unused carry-forward of something over $7 billion that I haven’t gotten a deduction for. (Laughter)

But I welcome the questioner or anybody else following my tax dodge example and giving away their money. They will save a lot of taxes that way, and the money will probably do a lot of good. (Laughs) (Applause)

Taxes — if we continue to spend 25 percent or 26 percent of GDP, as a country, and we made those elections through our representatives, we are not going to be able to keep taxation at 15 percent of GDP.

Now, we’ve got a deficit commission. You couldn’t have two better guys than Erskine Bowles and Alan Simpson heading it. You have got two classy individuals there. They’re smart, they’re decent. People like to work with them. I mean, the president made a great choice in picking those two.

But in the end, they’re either going to — they’re going to have to recommend, and it will be some combination of taxes quite a bit higher, and expenditures quite a bit lower, and then they won’t be quite as popular as they are today.

And I doubt very much if you’re going to be able to increase taxes significantly as a percentage of GDP and do it, essentially, from taxing lower income people a higher amount. So it’s going to be an interesting equation to solve and I wish them the very best. They’re two terrific fellows.

Charlie, what do you have to say about taxes?

CHARLIE MUNGER: Well, I think those who worry about your unfairly low taxes should be consoled by the fact that eventually you pay 100 percent. When you die and they ask, “How much did old Warren leave?” the answer will be, “I believe he left it all.”

WARREN BUFFETT: And I hope they emphasize old. (Laughter)

No, it’s kind of interesting. I mean, just take Berkshire. You know, essentially, I will never sell a share of Berkshire.

But I’ve known that for a long, long, long time. So basically, that’s fine.

If I was a trustee for some trust and they owned Berkshire, which, in effect, I am, you know, it’s a lot of fun to run and everything. And I’ve got everything in life I could possibly need, and I always will.

And, you know, in the end, because Berkshire’s done well, we can give away the rest.

Now, if you want, you can argue that if I gave it all to the federal government instead of giving it to the charities, society would be better off, but I don’t think many of you would want to hold that position. (Laughter)