September 22, 2019

Berkshire Hathaway Profit Rises 51%

Results beat expectations, and were released after Berkshire shares earlier in the day closed at a record high. On Saturday, Warren E. Buffett, the company’s chairman, and Charlie Munger, the vice chairman, will field shareholder questions at the company’s annual meeting in its hometown, Omaha.

Net income increased to $4.89 billion, or $2,977 per Class A share, from $3.25 billion, or $1,966 a share, a year earlier. Operating profit increased 42 percent to $3.78 billion, or $2,302 a share, from $2.67 billion, or $1,615 a share.

Revenue rose 15 percent from a year ago to $43.87 billion.

Analysts on average expected profit of $1,996 a share, according to Thomson Reuters.

Book value a share, Mr. Buffett’s preferred measure of growth, increased 5.5 percent from year end to $120,525 per Class A share, and Berkshire’s cash stake grew over that period to $49.09 billion from $46.99 billion.

About $12 billion of cash is being used to finance a purchase by Berkshire and Brazil’s 3G Capital of the ketchup maker H. J. Heinz.

Operating profit from insurance operations, including the Geico car insurance and General Re reinsurance businesses, doubled to $1.7 billion from $845 million.

Nearly all of the improvement came from underwriting, where profit rose to $901 million from $54 million, in part because of a $255 million pretax gain in its reinsurance business.

Operating profit from noninsurance business rose 12 percent to $2.25 billion from $2 billion.

Berkshire owns more than 80 business units that sell things like athletic apparel, chemicals, furniture and ice cream. It also owns tens of billions of dollars of common stocks like Coca-Cola, International Business Machines and Wells Fargo.

In trading on Friday, Berkshire Class A shares closed up $2,047, or 1.2 percent, at $162,904. Its Class B shares closed up $1.34, or 1.2 percent, at $108.64.

Article source: http://www.nytimes.com/2013/05/04/business/berkshire-hathaway-profit-rises-51.html?partner=rss&emc=rss

DealBook: Berkshire Hathaway to Acquire the Rest of IMC for $2 Billion

Warren Buffett, chairman and chief executive of Berkshire Hathaway.Cliff Owen/Associated PressWarren E. Buffett, chairman and chief executive of Berkshire Hathaway.

Berkshire Hathaway has agreed to buy the 20 percent of the IMC International Metalworking Companies that it does not already own for $2.05 billion, giving it full control of the company.

The deal was announced on Wednesday, just days before Berkshire holds its annual shareholder meeting, where Warren E. Buffett is expected to tell investors that he remains on the hunt for big deals.

It is the second big acquisition by Mr. Buffett’s company this year, following the blockbuster $23 billion takeover of H.J. Heinz by Berkshire and 3G Capital.

By buying the rest of IMC, an Israeli tool maker, from its founding Wertheimer family, Mr. Buffett is completing an acquisition that he began seven years ago. Berkshire’s initial purchase of an 80 percent stake for $5 billion was one of the largest takeovers of an Israeli company in that country’s history.

In a statement, Mr. Buffett attributed the 64 percent rise in IMC’s valuation over the seven years to the tool maker’s enormous growth.

“Since the time IMC entered our lives, my partner, Charlie Munger, and I have enjoyed Berkshire’s association with the company, the Wertheimer family, and the company’s management team,” Mr. Buffett said in a statement. “We look forward to continuing our stewardship of this unique company founded by the Wertheimer family in Israel 60 years ago and nurtured into a truly global enterprise.”

Berkshire was advised by its usual law firm, Munger, Tolles Olson. The Wertheimers were counseled by Wachtell, Lipton, Rosen Katz.

Article source: http://dealbook.nytimes.com/2013/05/01/berkshire-to-buy-rest-of-imc-for-2-billion/?partner=rss&emc=rss

Wall Street Shares End Flat

Stocks were steady on Thursday as renewed worries about Europe overshadowed an encouraging report on jobs in the United States.

Germany’s economy, the largest in Europe, shrank more than expected late last year, and the slowdown deepened the region’s ongoing recession. The report was a troubling sign for the United States because sales to Europe have been a boon for American companies.

The Dow Jones industrial average fell 9.52 points to close at 13,973.39.

After a strong start, the stock market has been steady over the last week with few major events to sway investors. That calm could disappear soon, Doug Cote, the chief market strategist at ING Investment Management, said Thursday.

With recessions in Europe and Japan and weak growth in the United States, he is bracing for some turbulence. “Everybody is too complacent,” Mr. Cote said.

Cisco Systems, the world’s largest maker of computer networking equipment, reported earnings late Wednesday that surpassed Wall Street’s expectations, but the company predicted sales growth that was weaker than previous estimates and its stock fell 15 cents, or 1 percent, to $20.99 a share.

The Standard Poor’s 500-stock index edged up 1.05 points to 1,521.38. The Nasdaq composite index rose 1.78 points to 3,198.66.

The S. P. 500 index has climbed 1.6 percent this month and has gained 6.7 percent for the year.

The number of people applying for unemployment benefits fell to 341,000 last week, the lowest level in three weeks, according to the Labor Department. Besides a few weeks last month that were affected by seasonal trends, that is the lowest level in nearly five years.

Among deals announced Thursday, American Airlines and US Airways agreed to merge, creating the country’s largest airline. Warren E. Buffett and 3G Capital, a private equity firm, also plan to buy the food maker H. J. Heinz for $23 billion. US Airways sank 67 cents to $13.99, while H. J. Heinz rose $12.02 to $72.50.

Constellation Brands was up 37 percent, the biggest gain in the S. P. 500, after reaching a deal with Anheuser-Busch InBev. InBev agreed to sell a brewery in Mexico and rights for Corona and Modelo beer in the United States to Constellation for $2.9 billion. Constellation Brands gained $11.87 to $43.75 a share.

In the market for United States Treasury debt, the yield on the 10-year Treasury slipped to 1.99 percent, down from 2.03 percent late Wednesday.

The 10-year Treasury yield, used to set a variety of borrowing rates, began the year around 1.70 percent and has climbed steadily since then. As worries about a recession ease, traders have shifted money out of the Treasury market, driving yields up.

Whole Foods Market, the grocery chain, slumped 10 percent after trimming its forecasts for sales and earnings this year as a result of its plans to open more stores and put more lower-priced goods on its shelves. Whole Foods lost $9.40 to $87.50.

General Motors fell 3 percent after saying it made money in North America and Asia and nearly doubled last year’s fourth-quarter profit.

Article source: http://www.nytimes.com/2013/02/15/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: Berkshire and 3G Capital to Buy Heinz for $23 Billion

Heinz will be sold to Berkshire Hathaway, the conglomerate controlled by Warren E. Buffett.Don Ryan/Associated PressHeinz will be sold to Berkshire Hathaway, the conglomerate controlled by Warren E. Buffett.

10:12 a.m. | Updated

Warren E. Buffett has found another American icon worth buying: H. J. Heinz.

Berkshire Hathaway, the giant conglomerate that Mr. Buffett runs, said on Thursday that it would buy the food giant for about $23 billion, adding Heinz ketchup to its stable of prominent brands.

Mr. Buffett is teaming up with 3G Capital Management, a Brazilian-backed investment firm that owns a majority stake in a company whose business is complementary to Heinz’s: Burger King.

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Under the terms of the deal, Berkshire and 3G will pay $72.50 a share, about 20 percent above Heinz’s closing price on Wednesday. Including debt, the transaction is valued at $28 billion.

“This is my kind of deal and my kind of partner,” Mr. Buffett told CNBC on Thursday. “Heinz is our kind of company with fantastic brands.”

In many ways, Heinz fits Mr. Buffett’s deal criteria almost to a T. It has broad brand recognition – besides ketchup, it owns Ore-Ida and Lea Perrins Worcestershire sauce – and has performed well. Over the last 12 months, its stock has risen nearly 17 percent.

Mr. Buffett told CNBC that he had a file on Heinz dating back to 1980. But the genesis of Thursday’s deal actually lies with 3G, an investment firm backed by several wealthy Brazilian families, according to a person with direct knowledge of the matter.

One of the firm’s principal backers, Jorge Paulo Lemann, brought the idea of buying Heinz to Berkshire about two months ago, this person said. Mr. Buffett agreed, and the two sides approached Heinz’s chief executive, William R. Johnson, about buying the company.

“We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz,” Mr. Johnson said in a statement.

Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo.

Mr. Buffett told CNBC that 3G would be the primary supervisor of Heinz’s operations, saying, “Heinz will be 3G’s baby.”

The food company’s headquarters will remain in Pittsburgh, Heinz’s home for over 120 years.

Heinz’s stock was up nearly 20 percent in morning trading, at $72.51, closely mirroring the offered price. Berkshire’s class A stock was also up slightly, rising 0.64 percent to $148,691 a share.

Heinz was advised by Centerview Partners, Bank of America Merrill Lynch and the law firm Davis Polk Wardwell. A transaction committee of the company’s board was advised by Moelis Company and Wachtell, Lipton, Rosen Katz.

Berkshire’s and 3G’s lead adviser was Lazard, with JPMorgan and Wells Fargo providing additional advice. Kirkland Ellis provided legal advice to 3G, while Berkshire relied on its usual law firm, Munger, Tolles Olson.

Article source: http://dealbook.nytimes.com/2013/02/14/berkshire-and-3g-capital-to-buy-heinz-for-23-billion/?partner=rss&emc=rss

Among the Wealthiest One Percent, Many Variations

But when the subject was his position as one of America’s top earners, he balked. Seated at a desk fashioned from a jet fuel cell, wearing a button-down shirt with the company logo, he considered the public relations benefits and found them lacking: “It’s not very popular to be in the 1 percent these days, is it?”

A few months ago, Mr. Katz was just a successful businessman with five children, an $8 million home, a family real estate company in Manhattan and his passion, 10-year-old Talon Air.

Now, the colossal gap between the very rich and everyone else — the 1 percent versus the 99 percent — has become a rallying point in this election season. As President Obama positions himself as a defender of the middle class, and Mitt Romney, the wealthiest of the Republican presidential candidates, decries such talk as “the bitter politics of envy,” Mr. Katz has found himself on the wrong end of a new paradigm.

As a member of the 1 percent, he is part of a club whose name conjures images of Wall Street bosses who are chauffeured from manse to Manhattan and fat cats who have armies of lobbyists at the ready.

But in reality it is a far larger and more varied group, one that includes podiatrists and actuaries, executives and entrepreneurs, the self-made and the silver spoon set. They are clustered not just in New York and Los Angeles, but also in Denver and Dallas. The range of wealth in the 1 percent is vast — from households that bring in $380,000 a year, according to census data, up to billionaires like Warren E. Buffett and Bill Gates.

The top 1 percent of earners in a given year receives just under a fifth of the country’s pretax income, about double their share 30 years ago. They pay just over a fourth of all federal taxes, according to the Tax Policy Center. In 2007, they accounted for about 30 percent of philanthropic giving, according to Federal Reserve data. They received 22 percent of their income from capital gains, compared with 2 percent for everybody else.

Still, they are not necessarily the idle rich. Mr. Katz, who sometimes commutes by amphibious plane and sometimes carries luggage for Talon Air passengers, likes to say he works “26/9.”

Most 1 percenters were born with socioeconomic advantages, which helps explain why the 1 percent is more likely than other Americans to have jobs, according to census data. They work longer hours, being three times more likely than the 99 percent to work more than 50 hours a week, and are more likely to be self-employed. Married 1 percenters are just as likely as other couples to have two incomes, but men are the big breadwinners, earning 75 percent of the money, compared with 64 percent of the income in other households.

Though many of the wealthy lean toward the Republican Party, in interviews, 1 percenters expressed a broad range of views on how to fix the economy. They think that President Obama is ruining it, or that Republicans in Congress have gone off the deep end. They favor a flat tax, or they believe the rich should pay a higher marginal rate. Some cheered on Occupy Wall Street, saying it was about time, while others wished the protesters would just get a job or take a bath. Still others were philosophical — perhaps because they could afford to be — viewing the recession as something that would pass, like so many previous ups and downs.

Of the 1 percenters interviewed for this article, almost all — conservatives and liberals alike — said the wealthy could and should shoulder more of the country’s financial burden, and almost all said they viewed the current system as unfair. But they may prefer facing cuts to their own benefits like Social Security than paying more taxes. In one survey of wealthy Chicago families, almost twice as many respondents said they would cut government spending as those who said they would cut spending and raise revenue.

Even those who said the deck was stacked in their favor did not appreciate anti-rich rhetoric.

“I don’t mind paying a little bit more in taxes. I don’t mind putting money to programs that help the poor,” said Anthony J. Bonomo of Manhasset, N.Y., who runs a medical malpractice insurance company and is a Republican. But, he said, he did mind taking a hit for the country’s woes. “If those people could camp out in that park all day, why aren’t they out looking for a job? Why are they blaming others?”

To many, 99 vs. 1 was an artificial distinction that overlooked hard work and moral character. “It shouldn’t be relevant,” said Mr. Katz , who said he both creates job and contributes to charitable causes. “I’m not hurting anyone. I’m helping a lot of people.”

The Enclave

The placid sliver of Long Island that F. Scott Fitzgerald immortalized in “The Great Gatsby” as West Egg and East Egg seems almost to have shrugged off the recession.

A stretch of northwest Nassau County that includes Great Neck, Manhasset and Port Washington, this area has the country’s highest concentration of 1 percenters, and one of the lowest unemployment rates in the state. Houses in Port Washington are worth only 10 percent less than they were at their peak, according to the Standard Poor’s Case-Shiller Home Price Index, a far smaller decline than in the rest of the country. Yearly sales at the Americana Manhasset, the upscale granite and glass shopping center, have already exceeded their prerecession high. Even in down times, the 1 percent has staying power, being far more likely than any other group to stay where they are rather than slip to lower rungs of the economic ladder.

Article source: http://feeds.nytimes.com/click.phdo?i=cbff5e3f85b83a2229f0a093b005966c

DealBook: Lampert’s Hit-or-Miss Portfolio

Edward S. Lampert, chairman of the Sears Holdings CorporationGregory Bull/Associated PressEdward S. Lampert combined Kmart and Sears in 2005, to great expectations.

After reporting disappointing holiday sales, Sears announced on Tuesday it would shut up to 120 stores nationwide, another blow to the billionaire investor Edward S. Lampert‘s dream to transform the beleaguered retailer.

Six years ago, Mr. Lampert pushed the storied retailer to merge with Kmart, betting that by combining the two he could wrench savings and bolster profits. But the merger has been an albatross for Mr. Lampert, who is chairman of the Sears Holdings Corporation. Shares in the company have dropped nearly 80 percent from their 2007 peak, beset by flagging sales, increased competition and uninviting stores.

Mr. Lampert has at times been likened to Warren E. Buffett, the chairman of Berkshire Hathaway and famed billionaire investor. Like Mr. Buffett, Mr. Lampert takes concentrated positions in companies that he believes will increase in value and generate lots of cash. Sears Holdings was thought to be something of a Berkshire vehicle – a public entity with which to acquire businesses.

The negative Sears headlines seem to crowd out everything else he has done. But some of his other holdings are faring well.

A Sears in Montgomery, Ala. The company said it will close up to 120 stores.Mickey Welsh/Montgomery Advertiser, via Associated PressA Sears in Montgomery, Ala. The company said it would close up to 120 stores.

AUTOMOTIVE STOCKS
Mr. Lampert is the largest shareholder in AutoNation, the new- and used-car retailer, claiming about 56 percent of the company through his hedge fund and personal stakes.

As the country’s largest auto dealership with 257 stores in 15 states, AutoNation has seen its share price soar more than 250 percent since Mr. Lampert first began acquiring shares around 2001. During a 2008 dip, Mr. Lampert increased his stake significantly in the auto seller; since the financial crisis, shares have rocketed 180 percent. His firm, RBS Parnters, still owns about 61 million shares worth roughly $2 billion as of the most recent filing.

Mr. Lampert has also had a long affair with AutoZone, the nationwide auto-parts stores. He owns about 23 percent of the company, according to filings, and was acquiring shares as early as 2001. Since that time, AutoZone shares have gained an astounding 1,000 percent. Currently, Mr. Lampert owns a little less than $3 billion worth of AutoZone, or roughly eight million shares, according to his firm’s most recent filings.

RETAIL SHARES
His affection for retail extends to Big Lots, the discount store, and Gap. Mr. Lampert owns just under 7.5 percent of Gap shares, which have fallen more than 12 percent this year.

FINANCIAL HOLDINGS
Mr. Lampert also owns small stakes in a handful of smaller financial institutions, including Capital One, CIT Group, Genworth Financial and Wells Fargo. The stocks have mainly been a drag. Wells Fargo is down 10.39 percent so far this; Genworth is off 50 percent; CIT is down 24.6; and Cap One is up just 0.5 percent

Article source: http://feeds.nytimes.com/click.phdo?i=ab87ca15631a931102aff161cd0828b2

DealBook Column: New Buffett Manager Gets Higher Taxes and Less Pay, by Choice

Ted Weschler shows that the rich do not necessarily make all decisions based on the financial bottom line for themselves.Matt Eich/LUCEO, for The Wall Street JournalTed Weschler shows that the rich do not necessarily make all decisions based on the financial bottom line for themselves.

How would you feel about taking a pay cut and paying more in taxes?

Meet Ted Weschler. He just did both. And he’s happy about it.

You might have heard about Mr. Weschler. He was hired by Warren E. Buffett last week to help invest Berkshire Hathaway’s piles of cash.

Mr. Weschler, a successful but little-known 50-year-old hedge fund manager, plied his trade from a small office in Charlottesville, Va., above an independent bookstore, reaping huge returns for his investors, some 1,236 percent over a decade. In the process, his $2 billion fund put him comfortably in the millionaires’ club, and at the rate he was going, he was on his way to the more exclusive cadre of billionaires.

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Here is a quick measure of his wealth: he paid $2,626,311 in a charity auction to have lunch with Mr. Buffett in 2010. That’s how they met. A year later, Mr. Weschler paid $2,626,411 to dine with him again.

In his new job at Berkshire, he is expected to be paid significantly less than he was making. (We’ll get to the formula for his compensation in a moment.) And he is going to be giving up a huge tax break. Instead of paying the 15 percent capital gains rate on most of his income like most hedge fund managers and private equity executives, he is going to be taxed at the 35 percent ordinary income level as an employee.

His decision — and his compensation structure — are worth considering as the country weighs President Obama’s proposal to increase taxes for the ultra wealthy in what has been called the “Buffett Rule.”

The plan is aimed at ensuring that millionaires pay the same effective rate as middle-income families. In part, it takes aim at the controversial “carried interest” income, or the profits that hedge fund managers and other big investors take home as part of their pay. That compensation is now taxed at the capital gains rate of 15 percent, far below the 35 percent top rate on ordinary income. Mr. Obama hopes to close that loophole.

Many Republicans have derided the Buffett Rule, saying it would hurt the economy. “If you tax job creators more, you get less job creation,” Representative Paul D. Ryan, Republican of Wisconsin, argued on “Fox News Sunday. “If you tax investment more, you get less investment.”

Perhaps Mr. Ryan should dine with Mr. Weschler. The view that “millionaires and billionaires” will stop, or slow down, working or investing may be a myth.

“When you have enough money to live the lifestyle you want,” Mr. Weschler told me in a brief conversation, money and taxes are less of a consideration than “who you want to work with.”

Mr. Weschler — and his colleague Todd Combs, another successful hedge fund manager who joined Mr. Buffett last year — demonstrate that people of great wealth don’t necessarily make all decisions based on their own financial bottom line.

“Neither would have voluntarily paid more than 15 percent when working at their hedge fund simply because of the feeling that they were a favored class,” Mr. Buffett said. “But neither will feel the least bit abused because the earnings from their daily labors will now be taxed at a higher rate.”

Like Mr. Buffett, Mr. Weschler says he doesn’t believe the tax loopholes for hedge fund managers make sense. “When my accountant first told me about it,” he said he responded “You can’t be serious.” But he added quickly, “I’m not complaining.”

That’s not to say he will be paid like a pauper at Berkshire. Mr. Weschler and Mr. Combs will earn seven figures, and potentially more. But they won’t make John Paulson money. He reportedly made $5 billion last year.

Unlike hedge fund managers, at Berkshire Mr. Weschler and Mr. Combs don’t take home the standard “2 and 20,” collecting a 2 percent management fee and 20 percent of all the profits. Instead, Mr. Buffett has tightly linked their pay to the performance of the Standard Poor’s 500-stock index, a system that some big institutional investors should be pressing hedge funds to adopt.

“Both Todd and Ted will have performance pay based on 10 percent of the excess return over the S.P., averaged over multiple years,” Mr. Buffett told me. “If the S.P. averages 5 percent annually in the future, this means that the average hedge fund manager has received a 1 percent performance fee — 20 percent of 5 percent — before Todd and Ted receive anything.”

“Nevertheless, I expect them to make a lot of money,” he added. “The difference is that they have to earn it by true investment performance.”

In addition, both men receive modest salaries that Mr. Buffett said “will work out to about a tenth of 1 percent” of the assets they manage. “This compares to the 2 percent nonperformance fee which most hedge fund managers charge, even if they are losing money.”

Mr. Buffett’s critics complain that while he supports higher taxes on the wealthy, Berkshire is structured to pay little in taxes and he has sidestepped Uncle Sam by giving away his wealth.

Some have even suggested that he mail the Treasury a check if he wants higher taxes. The Senate minority leader, Mitch McConnell, Republican of Kentucky half-jokingly said on NBC News program “Meet the Press,” “if Warren Buffett would like to give up some of his benefits, we’d be happy to talk about it.”

But Mr. Buffett shrugs off the naysayers. “When I ran my partnership in the 1950s-1960s, I was generally taxed at 25 percent, considerably below the rate on similar amounts of ordinary income,” he said. “I knew I was getting favored treatment compared to the local doctor, lawyer or C.E.O., but I made no voluntary payments to the Treasury, nor does any hedge fund manager of whom I’m aware.”

Article source: http://feeds.nytimes.com/click.phdo?i=988b3f126ae00a652a5abaf365eb3d10

Republicans Call Obama’s Tax Plan ‘Class Warfare’

Representative Paul Ryan, chairman of the House Budget Committee, said the tax proposal, which Mr. Obama is expected to unveil on Monday, would also weigh heavily on a stagnating economy.

“It adds further instability to our system, more uncertainty, and it punishes job creation,” Mr. Ryan said on “Fox News Sunday.” “Class warfare may make for really good politics, but it makes for rotten economics.”

The pushback from Republicans — Mr. Ryan was not the only one to use the words “class warfare” — was in response to a White House assertion that Mr. Obama would call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

With a special joint Congressional committee starting work on a bipartisan budget deal, the proposal adds a new and populist feature to Mr. Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future cuts to Medicare and Medicaid.

Indeed, Richard J. Durbin, a Democrat who is the senior senator from Illinois, took direct aim at the Republican speaker of the House when he said Sunday on CNN’s “State of the Union”: “I wonder if John Boehner knows what it sounds like when he continues to say the position of the Republican Party in America is you can’t impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio, where people are struggling paycheck to paycheck.”

Mr. Durbin said that taxes should be raised on “those who are wealthy and comfortable and wouldn’t even notice it.”

Mr. Obama, in a bit of political salesmanship, plans to call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers because investment gains are taxed at a lower rate than wages.

The Senate minority leader, Mitch McConnell of Kentucky, said Sunday that there was “bipartisan opposition to what the president is recommending“ because it would slow growth in difficult times.

Still, “if Warren Buffett would like to give up some of his benefits, we’d be happy to talk about it,” he said on the NBC News program “Meet the Press” before adding, a bit more seriously, that Republicans were ready to consider means-testing as part of broader reforms to the big entitlement programs — meaning that the well-to-do would receive less.

Senator Lindsey Graham, Republican of South Carolina, who was among those to speak of “class warfare,” suggested on CNN that the proposed tax would bring in far less revenue than the administration has implied.

Mr. Graham said that raising taxes on billionaires and millionaires would add a minimum amount of money to the Treasury to pay off the debt.

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline on Monday.

The proposal could invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all.

Two former government economists said Sunday they would like to see a more all-encompassing approach.

The economists, Alice Rivlin, who was director of the White House Office of Management and Budget under President Bill Clinton, and Douglas J. Holtz-Eakin, who led the Congressional Budget Office during George W. Bush’s presidency, said Mr. Obama’s proposal would simply add a complication to a tax code that needs more fundamental reform.

The special committee, said Ms. Rivlin, has a rare opportunity to “reform entitlements and reform the tax code and put us on a sustainable deficit track.” She and Mr. Holtz-Eakin both spoke on CNN.

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats. It is a theme he can carry into his bid for re-election in 2012.

It could also reassure Democrats who have feared that Mr. Obama would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes.

The administration wants to replace the alternative minimum tax, which was created decades ago to make sure that wealthy taxpayers who have plenty of deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class. Mr. Obama has said that many average Americans would see a tax cut if the system was overhauled, since ending many tax breaks would allow for lower rates while raising more revenues from the wealthiest.

The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year in an effort to raise revenues, reduce deficits and make the tax system simpler and fairer, said administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity.

The millionaires’ rate would apply to fewer than 450,000 taxpayers, they said; 144 million returns were filed for 2010.

Behind the arguments of Mr. Obama, Mr. Buffett and others about the inequity of the tax system is the difference between taxpayers’ marginal rate, popularly known as their tax bracket, and the effective rate they end up paying after subtracting for deductions, credits and other breaks.

Under Mr. Obama’s proposal, Mr. Buffett and others with taxable income of more than $1 million would pay a minimum tax rate closer to that of the people they employ. But Mr. Obama will leave the details of how such a rate would be calculated — whether to focus on the overall federal tax burden of middle-income individuals generally or on their marginal rates — to the debate over rewriting the tax code.

Mr. Obama, in his plan, will call for more than $300 billion in savings from Medicare and Medicaid, but not for any changes in Social Security.

Article source: http://feeds.nytimes.com/click.phdo?i=369f3656bdebe18c22971bffb0b82bd3

Obama Tax Plan Would Ask More of Millionaires

With a special joint Congressional committee starting work to reach a bipartisan budget deal by late November, the proposal adds a new and populist feature to Mr. Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future cuts from Medicare and Medicaid.

Mr. Obama, in a bit of political salesmanship, will call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday.

Mr. Obama’s proposal is certain to draw opposition from Republicans, who have staunchly opposed raising taxes on the affluent because, they say, it would discourage investment. It could also invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all. Mr. Buffett’s critics say many of the rich actually make more from wages than from investments.

In a speech on Thursday, Speaker John A. Boehner, Republican of Ohio, agreed with Mr. Obama that the deficit-reduction committee “can tackle tax reform, and it should,” to get rid of many tax breaks and allow for lower marginal rates.

“Tax increases, however, are not a viable option for the joint committee,” Mr. Boehner said. Instead, he emphasized that meeting the deficit-reduction target should come largely from overhauling benefit programs like Medicare, Medicaid and Social Security.

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012.

It could also reassure Democrats who have feared that Mr. Obama would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes.

The administration wants such a tax to replace the alternative minimum tax, which was created decades ago to make sure the richest taxpayers with plentiful deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class. Mr. Obama has said that many average Americans could see a tax cut if the system is overhauled, since ending many tax breaks would allow for lower rates while raising more revenues from the wealthiest.

The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year, both to raise revenues for reducing deficits and to make the tax system simpler and fairer, said the administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity.

The millionaires’ rate would affect only 0.3 percent of taxpayers, they said. That would be fewer than 450,000; 144 million returns were filed for 2010.

Mr. Obama’s proposal comes a month after Mr. Buffett began reviving his longstanding objection that he and “my megarich friends” pay a significantly lower percentage of their income in federal taxes — income and payroll taxes — than everyone else, thanks to the tax code’s favoritism toward the rich, and especially toward investors like him.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” he wrote in an opinion article in The New York Times, a complaint he has repeated in talks and media interviews since. “It’s time for our government to get serious about shared sacrifice.”

Mr. Obama has been citing Mr. Buffett as he promotes his $447 billion job-creation plan. He proposes to offset the cost of that plan and reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.

Mr. Obama’s proposed Buffett Rule puts a new spin on that pitch, as he tries to put Republicans in Congress and in the presidential race on the defensive for their rigid stand against higher taxes.

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DealBook Column: The Mystery of Steve Jobs’s Public Giving

Steve Jobs, a founder of Apple, has focused on his work to improve the lives of millions of people through technology.David Paul Morris/Bloomberg NewsSteve Jobs, a founder of Apple, has focused on his work to improve the lives of millions of people through technology.

Steve Jobs is a genius. He is an innovator. A visionary. He is perhaps the most beloved billionaire in the world.

Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist.

Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it.

None of this is meant to judge Mr. Jobs. I have long been a huge admirer of Mr. Jobs and consider him the da Vinci of our time. Before writing this column, I had reservations about even raising the issue given his ill health, and frankly, because of the enormous positive impact his products have had by improving the lives of millions of people through technology.

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And, of course, it is very possible that Mr. Jobs, who has always preferred to remain private, has donated money anonymously or has drafted a plan to give away his wealth upon his death. (There has long been speculation that an anonymous $150 million donation to the Helen Diller Family Comprehensive Cancer Center at the University of California, San Francisco may have come from Mr. Jobs.) His wife, Laurene Powell Jobs, sits on the boards of Teach for America and the New Schools Venture Fund, among others, and presumably donates money to those organizations, though neither she nor her husband are listed among its big donors.

But the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough while others like Mr. Jobs are lionized.

A spokesman for Apple declined to comment.

Mr. Jobs has clearly never craved money for money’s sake and has never been ostentatious with his wealth. He took a $1-a-year salary from Apple before stepping down as chief executive last week, though his stock options have made him billions of dollars. In a 1985 interview with Playboy magazine, he said of his riches, “You know, my main reaction to this money thing is that it’s humorous, all the attention to it, because it’s hardly the most insightful or valuable thing that’s happened to me.”

Which makes his lack of public giving all the more curious. At one time in his life, Mr. Jobs clearly spent time thinking about philanthropy. In 1986, after leaving Apple and founding NeXT, he started the Steven P. Jobs Foundation. But he closed it a little over a year later. Mark Vermilion, whom Mr. Jobs hired away from Apple to run the foundation, said in an interview, “He clearly didn’t have the time.” Mr. Vermilion said that Mr. Jobs was interested in financing programs involving nutrition and vegetarianism, while Mr. Vermilion pushed him toward social entrepreneurism. “I don’t know if it was my inability to get him excited about it,” he said. “I can’t criticize Steve.”

Two of his close friends, both of whom declined to be quoted by name, told me that Mr. Jobs had said to them in recent years, as his wealth ballooned, that he could do more good focusing his energy on continuing to expand Apple than on philanthropy, especially since his illness. “He has been focused on two things — building the team at Apple and his family,” another friend said. “That’s his legacy. Everything else is a distraction.”

Yet with not many exceptions, most American billionaires have taken up philanthropy in a public way and helped inspire future generations of charitable giving. And those that haven’t have typically come under scrutiny.

Before Bill Gates decided to focus on the Bill and Melinda Gates Foundation to give away their entire fortune, he was often cast as a greedy monopolist. Similarly, critics of Mr. Buffett sometimes zinged arrows at him before he announced his plan to give away the bulk of his wealth, using the foundation of his friend Bill Gates to allocate the money. Even after he announced his philanthropic plans, Mr. Buffett was criticized for not giving his money away earlier or for not devoting more energy to giving it away himself.

“He gave away 2 and one half cents for the first 70-some-odd years of his life. He gave away nothing and then in one fell swoop he gave away almost all of his money, thoughtlessly, to one guy,” Michael Steinhardt, the hedge fund manager and philanthropist, said in a somewhat surprising outburst on CNBC earlier this year. (Mr. Steinhardt has long held an inexplicable grudge against Mr. Buffett.)

Another billionaire, Sam Walton, the founder of Wal-Mart Stores, did not start the Walton Family Foundation until he was 69, just five years before his death. In his autobiography, Mr. Walton expressed misgivings about formal charity programs. “We have never been inclined to give any undeserving stranger a free ride.” He was also reluctant for Wal-Mart itself to give money to charity. “We feel very strongly,” he wrote, “that Wal-Mart really is not, and should not be, in the charity business.”

Of course, some wealthy executives give away money, in part, to buff their image — and Mr. Jobs has never needed any help in that department.

Last year, Mark Zuckerberg, a founder of Facebook, gave a $100 million challenge grant to Newark’s troubled school system. The donation was made a week before the movie “The Social Network” was to be released and many speculated, perhaps unfairly, that the donation was timed to blunt any negative repercussions from the film. And programs like the Giving Pledge have been criticized by some philanthropists as more about getting attention than being selfless.

Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation.

And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”

Mr. Jobs’s views on charity are unclear since he rarely talks about it. But in 1997, when Mr. Jobs returned to Apple, he closed the company’s philanthropic programs. At the time, he said he wanted to restore the company’s profitability. Despite the company’s $14 billion in profits last year and its $76 billion cash pile today, the giving programs have never been reinstated.

While many high-growth technology companies have philanthropic arms, Apple does not. It does not have a company matching program for charitable giving by its employees like some other Fortune 500 companies. The company did donate $100,000 in 2008 to a group seeking to block Proposition 8, a ballot measure that would have banned same-sex marriage in California. But over all, Apple has been one of “America’s least philanthropic companies,” as termed by Stanford Social Innovation Review, a magazine about the nonprofit sector, in 2007.

Still it is worth noting, and commending, Mr. Jobs for his role last year in helping push California to become the first state to create a live donor registry for kidney transplants. Mr. Jobs suffers from pancreatic cancer and underwent a liver transplant in 2009 in Memphis, in part because no livers were available in California. A conversation he had with Maria Shriver, then California’s first lady, led Gov. Arnold Schwarzenegger to help take up the cause.

Mr. Jobs helped introduce the legislation at the Lucile Packard Children’s Hospital with Mr. Schwarzenegger, but that appears to be the last time he publicly advocated on behalf of cancer patients. Unlike Lance Armstrong and other celebrated cancer survivors, Mr. Jobs has not used his prominence to promote charitable giving.

In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”

Yet Mr. Jobs has always been upfront about where he has chosen to focus. In an interview with The Wall Street Journal in 1993 , he said, “Going to bed at night saying we’ve done something wonderful … that’s what matters to me.”

Let’s hope Mr. Jobs has many more years to make wonderful things — and perhaps to inspire his legions of admirers to give.

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