2021: Would Berkshire prefer dividends to buybacks if the capital gains rate increased dramatically?

BECKY QUICK: Okay. This comes from Gary Gambino. He wants to know if Berkshire would switch its capital return policy to dividends from buybacks. If the capital gains rate goes up to 43.4%, dividends would far more tax advantaged for shareholders under that scenario.

WARREN BUFFETT: Yeah, we literally did have a vote by our shareholders. Now we’ve got a different group of shareholders than a REIT would have, or an MLP might have. I mean, there’s different… People select what they go into and people that go into SPACs are hoping the stock goes up next week, I mean basically, and we’ve got a bunch of people, that were assembled over 55 years. But they started with a base of people that it was a lifetime investment. And if they wanted to cash out, they thought they’d get a fair price at that time. But they really didn’t, they bought it with no intentions like that.

So we had a vote and it was something like 97% or something of the shareholders said that they don’t want a dividend. And now that wouldn’t be true at other companies and it’d be crazy to be paying a regular dividend like Coca-Cola has done for many years. And then all of a sudden change the policy on millions of people who have bought it with one expectation in mind and try and change it into a different animal. But Coca Cola isn’t going to change to Berkshire and Berkshire isn’t going to change the Coca-Cola. We’ve got a different group of owners and, it will keep self-selecting because people have a choice every day. Which do you want to, sort of thing, do you want to be in it? And Berkshire is a certain kind of animal in that respect.

So we will not jig around the tax laws. That’s really got nothing to do with the decision. I mean, we’ve got a very substantial majority of people that don’t want us to reinvest the money. And, what they’re more concerned about is whether we find something to do with the money, the a hundred billion or something, and repurchasing shares is something that helps them in their… they own a larger percentage of Berkshire as they go along. And they bought, they love to see us buy another business, but they don’t mind us intensifying their interest in the present business.