Warren Buffett rebuffs Donald Trump's tax loophole claim
Countering Donald Trump's claims in the second presidential debate, investor Warren Buffett stated that he has never taken advantage of the 'carry forward' loophole when paying taxes.
Donald Trump had been fielding questions about his tax returns for months prior to Sunday night’s presidential debate. He has for the most part kept mum about his taxes, claiming to be unable to release returns due to an IRS audit. But on Sunday, he called in the big guns.
When asked about his use of the “carry forward” provision that allows business owners to avoid paying federal income taxes in the years after a big loss, Mr. Trump told viewers that "all ... or most" of Hillary Clinton's donors use that provision. Even third richest American Warren Buffett, Trump said, uses carryforwards.
Mr. Buffett responded on Monday, revealing that not only has he never used a carryforward, but his charitable contributions in 2015 totaled about two thirds of Trump’s net worth.
“I have paid federal income tax every year since 1944, when I was 13,” wrote Buffett in a statement, adding, “Though, being a slow starter, I owed only $7 in tax that year.”
“I have copies of all 72 of my returns and none uses a carryforward,” he said.
In 1995, Trump reportedly suffered a $916 million loss, which he claimed on his tax returns. During Sunday’s debate, moderator Anderson Cooper asked the Republican candidate whether or not he had used the carryforward provision to justify not paying federal income taxes for 15 years after his 1995 loss.
“Of course I do. Of course I do, and so do all of her donors, or most of her donors,” said Trump, referring to Democratic candidate Hillary Clinton’s donors, including George Soros and Warren Buffett.
In general, carryforwards can benefit investors and entrepreneurs by allowing them to take risks, and are frequently used by the investing community.
Yet, Buffett’s Monday statement reveals that although Trump may know about his own taxes, he certainly was wrong about Buffett. The Berkshire Hathaway CEO is in a different legal category than Trump, anyway, since he is a shareholder in the company, and so company losses and gains do not count as personal income.
Buffett says that his tax returns show an adjusted gross income of $11,563,931 of which $5,477,964 was taken out in deductions. Although Buffett’s tax returns indicate more than $3 million of the total deductions were in allowable charitable contributions, the billionaire says that his actual charitable contributions totaled $2.9 billion, a figure close to Trump’s net worth of $3.7 billion, as estimated by Forbes.
“The total charitable contributions I made during the year were $2,858,057,970, of which more than $2.85 billion were not taken as deductions and never will be,” wrote Buffett. “Tax law properly limits charitable deductions.”
As to Trump’s decision to withhold his tax returns due to an audit, Buffett says that due to the 2010 creation of the IRS’ “Wealth Squad,” many high earners are audited each year. But that presents no legal barrier to sharing tax returns, he says.
“I have been audited by the IRS multiple times and am currently being audited. I have no problem in releasing my tax information while under audit,” said Buffett.
“Neither would Mr. Trump – at least he would have no legal problem.”