Warren Buffett’s latest annual letter to Berkshire Hathaway (NYSE:BRK.A) shareholders provides insights into the company’s financial contributions and long-term investment strategies. He reflects on its evolution from an unprofitable textile business to a corporation that has paid significant amounts in corporate income tax. The letter also touches on the role of capitalism in economic growth and the importance of financial prudence in national spending.
Berkshire Hathaway’s financial journey has been a subject of discussion for decades. Buffett’s previous letters often emphasized the company’s strategy of reinvesting earnings rather than distributing dividends, a decision that contributed to its growth. Over time, its investment portfolio has expanded to include major corporations like Apple (NASDAQ:AAPL), American Express, and Coca-Cola. In past communications, Buffett has also expressed concerns about fiscal responsibility at the national level, echoing similar sentiments in his latest letter.
Berkshire Hathaway’s Tax Contributions
Buffett states that Berkshire Hathaway paid $26.8 billion in corporate income tax last year, which accounted for approximately 5% of total corporate tax revenue in the U.S. He highlights that the company has contributed a cumulative $101 billion in taxes to the U.S. Treasury, underscoring its financial impact. This level of taxation, he notes, exceeds that of even the most valuable technology companies.
“To be precise, Berkshire last year made four payments to the IRS that totaled $26.8 billion. That’s about 5% of what all of corporate America paid,” Buffett wrote.
Investment Philosophy and Capitalism’s Role
Buffett reiterates his investment philosophy, emphasizing the importance of holding shares in well-established businesses. He points to Berkshire Hathaway’s stake in companies such as Apple, American Express, and Coca-Cola as examples of this approach. He acknowledges capitalism’s shortcomings but also mentions its ability to generate long-term wealth and innovation.
“We own a small percentage of a dozen or so very large and highly profitable businesses with household names such as Apple, American Express, Coca-Cola and Moody’s,” he said.
The letter also addresses concerns related to economic inequality and financial misuse. Buffett acknowledges that the American economic system has experienced instances of fraud and misallocation but maintains that overall, it has led to significant growth. He attributes Berkshire’s long-term success to its strategy of reinvesting capital rather than distributing dividends, which has allowed the company to expand its influence.
Reflecting on Berkshire Hathaway’s future, Buffett mentions that the company remains well-positioned for ongoing operations. He asserts that, unlike individuals, companies are not bound by aging and can sustain themselves through strategic decision-making. He further emphasizes the significance of a stable financial system and urges policymakers to ensure responsible economic management.
Buffett concludes with a message directed at the government, advocating for prudent use of corporate tax revenue. He acknowledges that economic disparities exist and encourages policymakers to allocate resources in a way that benefits those who face financial challenges. Additionally, he stresses the need for maintaining a stable currency, as it is crucial for economic stability and growth.
