Buffett parries Trump by releasing some tax information

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Warren Buffett

Buffett said Monday that he earned adjusted gross income of $ 11.6 million in 2015 and paid $ 1.8 million in federal income tax. He said his income was offset by $ 5.5 million in deductions, which included $ 3.5 million in charitable donations and almost all of the rest in state income taxes.

The size of the charitable deduction was limited by law, Buffett said, even though he donated a total of $ 2.86 billion last year. He also said he never has claimed on his personal tax return a loss carryforward deduction of the sort that has become controversial for Trump. Loss carryforwards allow taxpayers to use previous losses to reduce taxes due on income in future years.

Tax specialists said Buffett’s 2015 income was low relative to his net worth, which Forbes recently pegged at $ 65.2 billion. The numbers help show how wealthy Americans who earn money from investments can end up paying taxes at lower rates than people who rely on wages.

“It’s less than 0.02% of his wealth,” says Roberton Williams, a tax expert at the nonpartisan Tax Policy Center in Washington. “Almost all of his income is in unrealised capital gains, which aren’t taxed until he sells assets.”

Buffett’s effective tax rate was 16%, less than half the 34% rate paid by Bill and Hillary Clinton on their 2015 income of $ 10.6 million.

“Every share of Mr. Buffett’s Berkshire Hathaway stock has been pledged to philanthropy. None will ever be sold by him, so he will never receive anything from Berkshire except for his $ 100,000 a year salary,” said Buffett’s assistant.

The point-counterpoint came after a week in which Trump has faced questions about tax documents showing he may have avoided paying federal income taxes for years.

Asked during Sunday night’s debate with rival Hillary Clinton whether he had used a reported $ 916 million in losses—disclosed in portions of his 1995 tax return obtained by the New York Times—to reduce his federal income taxes, Trump responded: “Of course I do,” though he didn’t say for how many years he had avoided paying taxes. He added: “So do all of her donors,” and asserted Buffett had taken a large deduction as well.

In an email, a spokesman for Trump said the campaign already has commented on the issue and declined to elaborate further.

Buffett, a supporter of Clinton, has long acknowledged paying a relatively low tax bill and has argued that tax laws should be changed for the ultrawealthy.

In 2011, Buffett, the chairman and CEO of the conglomerate, released some information about his taxes to show that he paid a lower rate than his office assistants.

Trump has said he won’t release his tax returns while he is under audit by the Internal Revenue Service. Buffett, who only released highlights of his returns, goaded Trump for the lack of disclosure, saying he, too, was being audited by the IRS.

“I have no problem in releasing my tax information while under audit,” he said. “Neither would Mr. Trump.”

Income and deductions from Trump’s businesses flow through to his personal tax returns and are taxed at rates for individuals. His lawyers have said he is under audit for years since 2008.

Buffett has long used the tax code to his and Berkshire Hathaway’s advantage, said Jeff Matthews, a hedge fund manager who has written books about the company.

Matthews said Berkshire’s utility companies have used tax credits when investing in renewable energy, and Buffett’s charitable donations come mostly in the form of Berkshire stock, which allows him to avoid estate and capital gains taxes on the appreciation in value.

“Hidden beneath the Uncle Warren folksy image is a guy who, to his credit and to Berkshire shareholders’ benefit, knows the tax law 18 times better than Donald Trump,” Matthews said.

Write to Nicole Friedman at nicole.friedman@wsj.com, Laura Saunders at laura.saunders@wsj.com and Richard Rubin at richard.rubin@wsj.com

This article was first published by The Wall Street Journal

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