Dec 12 Warren Buffett's $1.2 billion share
buyback from a single unnamed investor likely helped that
person's estate save substantially on taxes, just one day after
the Berkshire Hathaway CEO said the rich should actually be
paying more, not less, when they die.
With the "fiscal cliff" looming and estate taxes set to rise
dramatically in less than three weeks, the timing was seen as
advantageous - and, according to Berkshire watchers, also out of
place in the context of Buffett's recent tax activism.
"I would say 'Warren, would you please just keep your nose
out of this.' He's not in a position to criticize what's good
for America and for everyone else's estate," said Anthony
Sabino, a professor of business at St. John's University. "He's
no doubt utilized the present tax code to maximum effect."
Berkshire said it bought 9,200 Class A shares from "the
estate of a long-time shareholder," whom it did not name, at
$131,000 per share, a price in line with where Berkshire has
traded in recent weeks.
Buffett's assistant didn't respond to a request for comment
on the shareholder's identity. The shares represent 1 percent of
Berkshire's Class A stock.
The repurchase came less than a month ahead of the looming
"fiscal cliff," automatic tax hikes and spending cuts set for
Jan. 1 that the White House and members of Congress have been
negotiating to avoid.
Among other levies, the estate tax is expected to rise in
the new year package by as much as 20 percentage points, which
may have spurred the anonymous shareholder to sell now.
Buffett was a signatory of an open letter released Tuesday
that called for a lower starting point for the tax and a higher
taxation rate, beginning at 45 percent.
"We believe it is right to have a significant tax on large
estates when they are passed on to the next generation. We
believe it is right morally and economically, and that an estate
tax promotes democracy by slowing the concentration of wealth
and power," the 33 signers wrote in the letter released by the
campaign, United for a Fair Economy.
He has also been publicly campaigning for more than a year
for higher taxes on the wealthy, even lending his name to a
proposal called the "Buffett Rule" that failed in Congress.
DEATH AND TAXES
Berkshire also said Wednesday it raised the threshold for
future share buybacks to 120 percent of book value from 110
percent, the level it chose when it first approved a repurchase
program in September 2011. The higher level allowed Berkshire to
complete this latest buyback, which was above the old threshold.
After news of the buyback, Berkshire's shares were up 3.1
percent at $134,850.
Based on the company's book value at the end of the third
quarter, the buyback limit would stand for now at $134,061.60.
The stock has traded below that level for most of this quarter.
Buffett was always loath to offer share buybacks and
consented to it last year only after Berkshire hit historically
low valuations. In its most recent quarterly filing, Berkshire
said it had not made any repurchases in the first nine months of
2012, after spending just $67.5 million on buybacks in 2011.
"I don't expect a significant repurchase program to be
announced as (Buffett) is clear that he is in acquisition mode,"
said Michael Yoshikami, founder and CEO of Destination Wealth
Management and a long-time Berkshire investor.
Berkshire ended the third quarter with $47.78 billion in
cash, and Buffett has made no secret of his desire for a
purchase in the $20 billion to $30 billion range.
Yet given his wealth and his own self-professed low tax
rate, Buffett has been called out in some quarters for not
practicing what he preaches.
"I have a problem with Warren, who's basically done with
this (issue), to say 'yeah, raise the estate tax,'" Sabino said.
"I think, again, with all due respect for his sagacity at
selling stocks, he's being incredibly short-sighted."