BMO Capital Markets’ chief investment strategist, Brian Belski, discussed potential investor concerns over market pullbacks on the program Making Money.
On Saturday, Warren Buffett, the chairman and CEO of Berkshire Hathaway, released his annual letter, highlighting the company’s record tax contributions last year and encouraging the federal government to utilize the funds judiciously.
Buffett reminisced about acquiring Berkshire Hathaway 60 years ago, noting that his business partner, Charlie Munger, had cautioned him about the textile company’s bleak future due to its inability to generate profits or pay taxes at the time. Buffett observed that in 1965, Berkshire did not pay any income tax, which was a signal of its impending decline, likening it to an economic warning typically associated with startups.
The letter further highlighted Berkshire Hathaway’s remarkable turnaround. Over the past six decades, the company has transitioned from its unprofitable status to setting records in income tax contributions, surpassing even major American tech firms in corporate tax payments. Last year, Berkshire made significant IRS contributions totaling $26.8 billion, accounting for about 5% of all corporate income taxes in the United States, alongside payments to foreign governments and various states.
Buffett outlined Berkshire’s aggregate income tax contributions to the U.S. Treasury as reaching $101 billion. He attributed this growth in taxable income to the company’s strategy of seldom distributing dividends, using retained earnings to expand its taxable base over time.
He noted the company’s investments in renowned businesses like Apple, American Express, Coca-Cola, and Moody’s, all of which deliver substantial returns on their operational equity.
Buffett also discussed the value of capitalism, acknowledging its faults but also its unrivaled potential among economic systems. He emphasized the importance of savers in America’s historical success, despite various misuses of capital and instances of financial malfeasance throughout history.
Buffett concluded by highlighting Berkshire’s role in the American economy, referencing the company’s youthful spirit compared to its condition in 1965. He commended the U.S. for its conducive environment, which allowed Berkshire’s success. He expressed gratitude to the government with the hope of future larger contributions, stressing the importance of thoughtful expenditure, assistance for those disadvantaged through no fault of their own, and maintaining a stable currency through wise and cautious management.
