Warren Buffett lauded Republicans' corporate tax reform as a "huge tailwind for businesses," and the chief of Berkshire Hathaway should know — his company went up $29 billion in net worth because of deferred tax liability.
A guest Monday on CNBC, Buffett extolled the benefits of a corporate tax rate that dropped from 35 percent to 21 percent, thanks to congressional Republicans and President Donald Trump.
"We had about $100 billion of unrealized gain in equities. When they're sold, you pay tax on that. And previously when the tax was 35 percent, we would have had a $35 billion reserve for taxes against that as a liability. That would drop to about 21 billion," Buffett told CNBC.
"So $14 billion, roughly, was a reduction in the amount of tax that when we sell those securities we will pay. It wasn't cash now. But it reduced a liability. When you reduce a liability, net worth goes up."
Berkshire on Saturday reported a record quarterly and annual profit, and its net worth increased last year to $65.3 billion, with almost half of that coming from the change in tax law.
"It's a huge tailwind and it's particularly a tailwind" for companies, like his, that benefit from bonus depreciation up front on things like railroad cars, in Berkshire's case.
"It's a big item. Not as many companies have lots of appreciation in marketable securities, but it's a big item for those that do," Buffett said.
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