Buffett vs Buffett

Eli,

Buffett in the NY Times says taxes don't matter.

Suppose that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.” 

Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.

Buffett in his 2011 letter to shareholders (emphasis in the original):

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.

You don't have to be an investing genius to recognize purchasing power is reduced if taxes increase. And just one step further, if your expected after tax purchasing power is reduced because of higher taxes there are investments he won't make, that he would make in a lower tax environment.

Further in the letter he writes of returns on US Treasury bills since 1965 when he took over at Berkshire:

During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor’s visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points.

Again, when it's his money, taxes matter.

Buffett is smart enough to know investment leads to growth. Encourage investment, encourage growth. Discourage investment, discourage growth. And he obviously knows taxes matter.

I'm pretty sure I could go through every one of  his annual letter to shareholders and find clear statements by him that taxes matter greatly in his investment decision.

Bill

PS. Look at Greg Mankiw's post, A Master of Tax Avoidance, on the Buffett letter.