Buffett holds off on doing this one thing in anticipation of tax cut
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Billionaire
investor Warren Buffett on Tuesday said Berkshire Hathaway is holding
off on selling any holdings until it sees whether a Republican push to
cut corporate taxes is successful by the end of the year.
“Right now we’re sitting and watching because within three months, actually less than that, we’ll know the answer,” Buffett told CNBC in an interview.
Buffett said he would “feel kind of silly” if Berkshire BRK.A, +0.36% BRK.B, +0.36% realized $1 billion in gains and paid $350 million in tax when “if I just waited a few months I would have paid $250 million.”
See: Buffett’s Berkshire buys 38.6% stake in travel center operator Flying J
Buffett said such considerations might be having an effect on the market, perhaps delaying “hundreds of billions” of dollars in profit-taking.
“It would tend to depress stocks that have behaved badly, because people would be taking the losses now. And it would tend to defer gains and reduce sellers currently that would be in stocks with very big appreciation,” he said.
It
is an “actual factor” at Berkshire, Buffett said, adding that it has
“very seldom” been a consideration over the course of his investing
career.
President Donald Trump and congressional Republicans last week kicked off an effort that includes a cut in the top corporate tax rate to 20% from 35%. Revived prospects for corporate tax cuts have been credited with lifting shares of financial and industrial companies as well as domestic-focused small-cap companies which are seen as more exposed to top tax rates.
U.S. equities continued their record run on Monday. The S&P 500 SPX, +0.11% is up 13% since the end of 2016. The small-cap Russell 2000 RUT, -0.28% which had lagged far behind for most of the year, is now up more than 11% year-to-date. At the end of August, the index was up just 4% on the year.
The stock market moves are reminiscent of the so-called Trump trade that followed last November’s presidential election, but soon faded as expectations for quick action on tax cuts and infrastructure spending faded. Some market bulls, however, had argued that small-caps were due for a resurgence if tax-cut prospects improved.
Read: Here are the actual tax rates the biggest companies in America pay
Buffett was upbeat on prospects for tax cuts after Trump and congressional Republicans failed to repeal Obamacare. “I would think with Republicans controlling both houses and the presidency, they would not have a shutout in their first year,” he said.
Buffett also argued that the effort, despite being described by proponents as a reform of the tax code is relatively uncomplicated and could potentially be bipartisan.
“I think they can get it done. It’s not a tax-reform act, it’s a tax cut act,” he said, adding that ”any politician that can’t pass a tax cut is probably in the wrong line of business.”
“Right now we’re sitting and watching because within three months, actually less than that, we’ll know the answer,” Buffett told CNBC in an interview.
Buffett said he would “feel kind of silly” if Berkshire BRK.A, +0.36% BRK.B, +0.36% realized $1 billion in gains and paid $350 million in tax when “if I just waited a few months I would have paid $250 million.”
See: Buffett’s Berkshire buys 38.6% stake in travel center operator Flying J
Buffett said such considerations might be having an effect on the market, perhaps delaying “hundreds of billions” of dollars in profit-taking.
“It would tend to depress stocks that have behaved badly, because people would be taking the losses now. And it would tend to defer gains and reduce sellers currently that would be in stocks with very big appreciation,” he said.
President Donald Trump and congressional Republicans last week kicked off an effort that includes a cut in the top corporate tax rate to 20% from 35%. Revived prospects for corporate tax cuts have been credited with lifting shares of financial and industrial companies as well as domestic-focused small-cap companies which are seen as more exposed to top tax rates.
U.S. equities continued their record run on Monday. The S&P 500 SPX, +0.11% is up 13% since the end of 2016. The small-cap Russell 2000 RUT, -0.28% which had lagged far behind for most of the year, is now up more than 11% year-to-date. At the end of August, the index was up just 4% on the year.
The stock market moves are reminiscent of the so-called Trump trade that followed last November’s presidential election, but soon faded as expectations for quick action on tax cuts and infrastructure spending faded. Some market bulls, however, had argued that small-caps were due for a resurgence if tax-cut prospects improved.
Read: Here are the actual tax rates the biggest companies in America pay
Buffett was upbeat on prospects for tax cuts after Trump and congressional Republicans failed to repeal Obamacare. “I would think with Republicans controlling both houses and the presidency, they would not have a shutout in their first year,” he said.
Buffett also argued that the effort, despite being described by proponents as a reform of the tax code is relatively uncomplicated and could potentially be bipartisan.
“I think they can get it done. It’s not a tax-reform act, it’s a tax cut act,” he said, adding that ”any politician that can’t pass a tax cut is probably in the wrong line of business.”