TL/DR –
Warren Buffett, CEO of Berkshire, stated that the new 1% tax on stock buybacks has made it costlier for his company to buy back its own shares. This tax introduced under former President Joe Biden’s Inflation Reduction Act is aimed at reducing the historical financial advantage of buybacks over dividends. Buffett highlighted that this tax not only affects Berkshire but also impacts other companies it invests in, like Apple, which also performs numerous stock buybacks.
Warren Buffett Criticizes 1% Tax on Share Buybacks
Just before lunch, Berkshire’s CEO, Warren Buffett, addressed that the new 1% tax on share buybacks has made it costly for Berkshire to repurchase its own shares than for other investors.
Biden’s Inflation Reduction Act and Its Impact
The 1% excise tax on stock repurchases was introduced by Former President Joe Biden’s Inflation Reduction Act, applicable to repurchases made post-December 31, 2022. This tax, however, was delayed by the IRS in terms of reporting and payment until the previous year. The purpose of this tax was to balance the historical advantage of buybacks against paying dividends, which are taxed on individual taxpayers.
Effect on Berkshire and its Investments
According to Buffett, this tax raises the threshold for when it’s financially viable for Berkshire to buy back its own shares. It significantly impacts the companies in which Berkshire has investments, such as Apple, which also frequently repurchases its stocks.
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