Watch What Warren Buffett Does, Not What He Says
4:16 PM, Nov 26, 2012 • By ADAM J. WHITE
In fact, as he explained in his 1986 letter to investors, changes in the 1986 tax reform act posed a specific threat to certain investment decisions:
That last point is key: When taxes change, would-be investors will certainly change their decisions about where to direct capital, even "though the companies' operating economics will not have changed adversely at all." Buffett saw this clearly in 1986, with respect to Berkshire's own investment decisions; it's hard to believe that Buffett no longer believes that today, with respect to private investors.
Now, none of this is to say that the capital-allocation effects of tax changes ultimately require the nation to forego tax reforms that would increase certain tax revenues. But it certainly is one consideration that must be kept in mind. When Buffett and others simply assert that tax increases don't affect investment decisions, they're whistling past the graveyard.
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