Buffett Says He May Trade Some Stocks Based on Where Trump's Tax Plan Ends Up

  • Congress will likely succeed in changing tax code, he says
  • Plan now would be to sell losers and defer gains, he says

Libby Cantrill Says Tax Overhaul Is Only in Second Inning

Warren Buffett said he’s following tax proposals in Congress and may be compelled to buy or sell shares in his investment portfolio based on the outcome of the legislation.

"We’ve got actions on both sides that we would take,” he said on CNBC Tuesday. Buffett added that he thinks Congress and President Donald Trump will succeed in cutting taxes.

The comment builds on remarks he made at Berkshire Hathaway Inc.’s annual meeting earlier this year. It’s also a rare admission from Buffett, who frequently said he focuses on the fundamentals of a business when he decides whether or not to hold an investment.

“We have lots of stocks with lots of gains and we have a few stocks with losses,” he said. “I would feel kind of silly if I realized $1 billion worth of gains and paid $350 million of tax on it if I just waited a few months and would have paid $250 million.”

Berkshire’s stock portfolio was valued at more than $135 billion at the end of June. Some of the largest holdings -- like Coca-Cola Co. and American Express Co. -- have gained significantly since Buffett purchased them. But another major holding, International Business Machines Corp., hasn’t done well.

President Trump and Republican leaders announced their long-awaited tax plan in September. The framework proposes cutting the top individual rate to 35 percent -- but leaves it up to Congress to decide whether to create a higher bracket for those at the peak of the income scale.

The rate on corporations would be reduced to 20 percent from the current 35 percent, and businesses would be allowed to immediately write off their capital spending for at least five years. Pass-through businesses would have their tax rate capped at 25 percent.

Buffett said selling winners and losers based on the outcome of taxes “very seldom enters into our thinking. On balance, we’d rather sell things with losses than gains, but right now we’re sitting and watching.”

Congress will probably pass the tax cut in part because lawmakers are under pressure after failing to succeed on health care and since they haven’t moved forward on infrastructure, he said.

Republicans probably don’t “want to have a shutout in their first year,” given that they control both houses of Congress and the White House, Buffett said. “Any politician that can’t pass a tax cut probably’s in the wrong line of business.”

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