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- Anonymous Shrewd
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 2
Has anyone run the numbers and done the thought experiment if we have a simple extension of the 21% corporate tax rate vs. the potential 15% rate (28.5% less)that Trump has mentioned. Even if those changes were in effect for only 4 more years, that change in rates would translate to dozens & dozens of billions more earnings retained over such time frame. The TCJA & 21% was passed for 8 years. I thought it was highly unlikely with a split Congress but if there is a red sweep, it could potentially happen.
I’m not going political, just trying to get my head around what it could mean & what type of value is added to Berkshire’s valuation. Just thinking out loud and I wonder how much Warren & Greg are thinking about this & may justify paying a bit higher price for buybacks.
No. of Recommendations: 2
I would check Chris Bloomstran's Semper Augustus letters for mentions of "TCJA" for possible insight.
No. of Recommendations: 5
The TCJA & 21% was passed for 8 years. I thought it was highly unlikely with a split Congress but if there is a red sweep, it could potentially happen.
Not sure about any 15% that was mentioned - I think 20% is the best one could hope for realistically. It is important to point out that the 21% corporate tax rate does not expire when the rest of the TCJA does. Congress and the president can change their minds at any time - but it does not require renewal to remain in place.
No. of Recommendations: 1
https://www.reuters.com/markets/us/wall-street-gir...Excerpt:
“Trump also wants tax reform, including reducing the corporate tax rate to 15%, for those companies that make their products in the U.S., after having cut the rate to 21% from 35% during his 2017-2021 presidency.
Such tax cuts - which will need to pass Congress - could support company earnings and sentiment for stocks, although the extent of such a boost remains to be seen.
Cutting the rate to 15% would boost S&P 500 earnings by about 4%, according to estimates by Goldman Sachs strategists.”
No. of Recommendations: 3
A possible offsetting note, it would be a big deal for BHE if there were any scaling back of tax credits for their renewable (or grid) efforts.
I have no idea how many of them are state level.
Jim
No. of Recommendations: 2
“Trump also wants tax reform, including reducing the corporate tax rate to 15%, for those companies that make their products in the U.S., after having cut the rate to 21% from 35% during his 2017-2021 presidency.
Such tax cuts - which will need to pass Congress - could support company earnings and sentiment for stocks, although the extent of such a boost remains to be seen.
Cutting the rate to 15% would boost S&P 500 earnings by about 4%, according to estimates by Goldman Sachs strategists.”I think it is now highly likely that the tax gets cut to 15%. This is a prominent part of Trump's agenda, and he now has a Republican House and Senate that are very likely to go along with this idea. And while a 4% earnings boost may be the average earnings boost for the S&P, that is because lots of those companies are already paying less than 21%, partly because they are not consistently profitable, partly because they get lots of tax deductions, and partly because they have significant operations outside of the US, where taxes are generally a bit lower. Although the federal rate is 21%, the average tax paid is only 13%, according to this source:
https://itep.org/corporate-taxes-before-and-after-....
Berkshire is a consistently profitable company with few deductions (with the notable exception of the utility businesses) and with almost all its operations in the US, so it pays much more than the average. Last year, for instance, Berkshire paid 19.2% overall, and paid 27.9% and 18.8% in the 2 previous years (p. K-104 in the annual report.) If Berkshire's taxes went from 20% to 14%, for instance, that would mean they keep 86% of earnings instead of 80%, which amounts to a 7.5% earnings boost. And while it is impossible to know how long that would last, it would likely only end if the Democrats control the presidency and both houses, so it might well be 10 years or more.
I think the Trump presidency provides other advantages for Berkshire, particularly in manufacturing, and while it is debatable whether this is a good thing for the planet, for other countries, and even for American prosperity, it is likely to be a good thing for most US companies that make things in the US, and Berkshire would be a very prominent example of a beneficiary. No wonder Buffett didn't endorse Harris.
dtb
No. of Recommendations: 1
if they applied the 15% to house sales for individuals, they could unlock the housing market, but i see nothing on this major part of the economy...
No. of Recommendations: 24
I am a little dubious about the claimed obviousness of upcoming advantages for US manufacturing. All manufacturers have inputs, and it may be rare for all of them to escape tariffs. Higher input costs aren't really great for any business making and selling stuff. Makers of washing machines didn't enjoy the steel tariffs.
And that's before you get to secondary effects (lower aggregate consumer spending power) and tertiary ones (trading partners raising tit-for-tat taxes on, or barriers to, your export goods).
I'm just guessing, as I don't have a MONIAC* handy, but I thing there's a decent chance that when things settle down the currently expected changes will be a net negative for at least half of US firms. Perhaps lower corporate income taxes on lower pre-tax profits from slightly-worse-off consumers in an economy that is slightly weaker overall from lower trade intensity?
I'm not saying it's all bad for manufacturers, but it's a complex system, with lots of moving parts and side effects.
Jim
*
https://en.wikipedia.org/wiki/Phillips_Machine
No. of Recommendations: 0
if they applied the 15% to house sales for individuals, they could unlock the housing market, but i see nothing on this major part of the economy.
Why would increasing the tax from 0% to 15% unlock the housing market??? (In the range where the vast majority of people are locked out of the housing market, the tax on gains, if you've lived there for 2 out of last 5 years, is zero)
No. of Recommendations: 0
the zero rate stays the same for those who qualify, the 15% is a %5 reduction from 20% for those who qualify which could help buy the house they want / need next as prices have increased dramatically. there are a lot of people who dont ...singles are unfairly penalized, and those who have to move , eg jobs, family circumstances ,may not qualify when they need to sell.
No. of Recommendations: 0
the zero rate stays the same for those who qualify, the 15% is a %5 reduction from 20% for those who qualify which could help buy the house they want / need next as prices have increased dramatically.The 20% capital gains tax rate only applies to people with very high incomes. A single person has to have a taxable income over $518,901 before they hit the 20% long-term capital gains tax rate! A married couple has to have taxable income over $583,751 before they hit the 20% rate. The vast majority of people, more than 98% of them, are in the 0% or 15% capital gains tax bracket.
See here for more information about capital gains tax rates -
https://www.kiplinger.com/taxes/capital-gains-tax/...
No. of Recommendations: 2
No. of Recommendations: 0
This chart may put perspective on the overall effect of a change in corporate taxes. It also highlights the expenditures that are relatively untouchable and those that are……….some incoming administrations wanting to blow up the Dept of Education.
https://www.visualcapitalist.com/breaking-down-the...ciao
No. of Recommendations: 3
This chart may put perspective on the overall effect of a change in corporate taxes. It also highlights the expenditures that are relatively untouchable and those that are……….some incoming administrations wanting to blow up the Dept of Education.
It's an interesting graphic and it does seem pretty discouraging, at first sight, for those of us who hope the government might balance the budget some day.
However, 2 things:
First, corportate taxes are a pretty small part of the mix - 11% of government revenue. And cutting the rates by 6%, from 21% to 15%, will not mean that corporate taxes paid come down by 6/21 = 29%, as many corporations already pay far less than 21%.
Second, the way the expenditures are presented makes it seem like no cuts are possible, without touching social security, medicare, medicaid, the defence, education, etc. But the point of the proposed expenditure review is to identify areas where too much is spent on administration of these programs, not to cut the actual spending that goes out to citizens, the army, students, etc. As an example, education is $305b of the budget, or 17% of the budget shortfall. How much of that $305 actually gets to students and teachers? The US apparently contributes 14% of the $878b in funding for K-12 education, or $30k per student, but this is far higher than in most OECD countries, so one has to wonder how much goes to the various levels of bureaucracy, and whether having a federal level on top is really necessary. I don't know enough about what the US federal DoE actually does to have an opinion, but it certainly seems worth examining.
dtbb
No. of Recommendations: 7
Everything should be on the table for examination, all the time. But in a practical matter, it is a lot easier to talk about cuts than to actually do cutting. The DOEd's largest area of spending for things like student loans, Pell grants, and other student aid on the secondary level. Next is spending on the K-12 level like grants to local school districts in impoverished areas, Native American schools, funding for special education, etc.
Any or all of that could be cut, but there is a constituency who doesn't want it cut. And do you really want to be the Congressman who voted to cut special education? My eyes tend to glaze over when a politician says he wanted to cut waste, fraud, and abuse. Everyone is opposed to waste, fraud, and abuse. But unless you really roll up your sleeves it is hard to fix and the cure can be worse than the disease. I used to do a lot of military contracting and I swear about half the budget was spent proving there was no waste, fraud, and abuse.
No. of Recommendations: 2
The US apparently contributes 14% of the $878b in funding for K-12 education, or $30k per student,It's not $30K per student. There were almost 50 million students enrolled in K-12 in the fall of 2022, and enrollment has been consistently above 40 million since 1985. Spending on K-12 education is more like $16K to $17 per student. Maybe you looked at spending for college and universities in the United States per student?.
https://nces.ed.gov/programs/digest/d23/tables/dt2...https://educationdata.org/public-education-spendin....
