President Donald Trump’s plan to cut corporate tax rates to 15% would almost certainly be a boost to Warren Buffett and his company Berkshire Hathaway.
“The deferred taxes that are applicable to unrealized gains on securities would all be applicable to us,” Buffett said during Berkshire Hathaway’s annual shareholders meeting. “We have $90 or $95 billion in gains, and our owners, dollar for dollar, will participate in that… If the rate were to drop 10%, that $9.5 billion is real.”
Buffett added that the impact of lower corporate taxes, however, would be uneven across its holdings.
Regulated utilities, for example, aren’t likely to enjoy lower tax rates as savings, in Buffett’s view, would be passed onto customers rather than the utility. He also said that a lot of the benefits of lower corporate taxes would likely be competed away.
“Economists can argue about [the impacts on behavior from lower taxes] a lot, but I’ve seen it in action,” Buffett said.
“And we’ve had a lot of [tax cuts] in our lifetimes… it’s certain that some of a lower corporate rate would be competed away, and it’s sure that some of it would incur to the benefit of shareholders. It’s very company specific in how that plays out.”
Earlier this year, Barclays analyst Jay Gelb said a cut in the corporate tax rate to 20% from the current rate of 35% could boost Berkshire’s book value by $27 billion due to a decline in its deferred tax liability.
As of the end of the first quarter, Berkshire’s deferred tax liability totaled around $82 billion.