Warren Buffett and Bill Gates Say Trump’s Tax Plan Won’t Help Businesses
The entrepreneurs said that the promised higher growth from the tax cut is overblown.
PHOTO CREDIT: Getty Images
In an interview with CNBC on Monday, both Gates and Buffett downplayed the benefits of Trump's proposed tax cut for businesses and said the promised higher growth from the cut was overplayed.
Trump, who released a one-page outline of the plan on April 26, wants to cut the federal corporate tax rate to 15% from 35% and has said doing so would create economic and business growth.
Buffett, however, was skeptical about the plan's effect on Berkshire Hathaway. He told CNBC’s Becky Quick he couldn’t think of a single Berkshire business in which the US tax rate put the business at a disadvantage compared with foreign companies. "For one thing," he said, "ours aren't as high as we think they are in many cases. They're not as low elsewhere."
Buffett is correct that many companies do not pay the headline tax rate. The statutory rate is 35%, but the rate after deductions and such, known as the effective rate, for companies in the S&P 500 is closer to 24%.
Buffett was also dismissive of the suggestion by the Trump administration that increased economic growth would help pay for the tax cuts and make up the loss in government revenue, a justification that comes from a method called dynamic scoring.
"Everybody that wants a cut in taxes can hire some academics and they look for dynamic scoring and they say the country will really be better off if I pay less tax," Buffett said. "I don't blame them -- it's very understandable, so be very, very, very suspicious of dynamic scoring."
Gates said any tax cut was unlikely to benefit businesses in the tech sector but would most likely help shareholders.
"I don't think that the success of the technology sector will be improved by some tax change," Gates said. "The tech companies are not starving right now, and this only comes up when you have profits, and these companies have very high profits. It's not like we're going to be stronger in the tech sector by making owners of those stocks richer."
Trump's tax plan has already faced opposition from Democrats and drawn concern from some Republicans. Despite initial promises to get it done by August, the Trump administration is reportedly concerned the plan may not get through Congress until 2018.
This post originally appeared on Business Insider.