Author Topic: Tax Rate on Earnings from Operating Businesses  (Read 2497 times)

Valuehalla

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Tax Rate on Earnings from Operating Businesses
« on: February 24, 2018, 11:30:14 AM »
What do you think about the effective taxrate in 2018 on the following positions:

- Railroad Utility and Energy
- Other Businesses
- Insurance Underwriting
- Insurance Investment Income
- Investment Derivates & Losses

I think it overall in average 26 %... what do you think ?

(Gains of the portfolio are subject to 21 % deferred tax) .. so the question is about all the rest in avg

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John Hjorth

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Re: Tax Rate on Earnings from Operating Businesses
« Reply #1 on: February 24, 2018, 01:55:54 PM »
Two souls - one thought, Valuehalla!,

This is exactly the question I'm asking myself today with regard to Berkshire earnings power after tax going forward.

- Isen't BNSF a 100% US company?
- A part of the BHE business is UK based, right? - I'll hereby flash my ignorance, that I do not know the UK corporation tax rate.

- - - o 0 o - - -

It seems like we overetimated the one-off deferred tax advantage, by putting it at USD approx. USD 34 B, while it is now reported to be judged at about USD 28 B. [The qualifications was about deferred taxes outside USA [not affected by the US Tax Reform], and the "dent" from BEAT, now reported to about minus USD 1 B, right?].
« Last Edit: February 24, 2018, 02:03:51 PM by John Hjorth »
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Swedish_Compounder

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Re: Tax Rate on Earnings from Operating Businesses
« Reply #2 on: March 04, 2018, 12:07:42 AM »
When it comes to the tax act and the implications of it for Berkshire, I actually Think we have not seen the last of it yet. I would like to connect the change in organizational structure to the tax act. It is likely not coincidenntal that the promotion of Jain and Abel took Place now. Buffett needs to devote al his energy to Think about how to best utlilize the opportunities provided by the tax act.

There are multibillion dollar decisions to make both when it comes to CapEx decisions in existing businesses, but he can also paint new scenarios for prospective acquisitions. Think something similar to BNSF, which does not look cheap on the face of it, but due to a combination of CapEx/cost savings/debt strategy/dividend to parent Company decisions, he has made it into a homerun.

Thus, Buffett needs to sit undisturbed in his room and read + think.

Valuehalla

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Re: Tax Rate on Earnings from Operating Businesses
« Reply #3 on: March 05, 2018, 05:32:28 AM »
Could anyone out there provide an estimated figure for the 2018 overall average taxrate for

- Railroad Utility and Energy
- Other Businesses
- Insurance Underwriting
- Insurance Investment Income
- Investment Derivates & Losses

I think it overall in average 26 %... what do you think ?
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voyager

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Re: Tax Rate on Earnings from Operating Businesses
« Reply #4 on: March 05, 2018, 09:00:22 AM »
Well let's think this through... The big earners are: BNSF (Texas), Energy (Iowa), Precision Castparts (OR), Lubrizol (OH), Clayton Homes(TN), Marmon (IL), Shaw (GA), Fruit of the Loom(KY), Forest River (IN)

Iowa has the worst state tax rate in the country at 12% (note that you don't actually pay the full 12, more like 10) and the rest are pretty decent - between 6% and 8%.

So, if we were to estimated and not do the exact math since that would take a good amount of time, they'll probably pay 28%.

With that being said, there are lots of other tax effects on Berkshire, such as the interest rate cap, capex expensing, amortization, ect. 

It's hard to know what their after-tax returns would be since there is so much going on.  It's likely that investors will be pleasantly surprised by the new deductions though.