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How Tax Reform Benefits Berkshire Hathaway

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Mar. 1 2018, Updated 7:31 a.m. ET

Warren Buffett on tax reform

In December 2017, US Congress passed the tax reform bill. The broader market S&P 500 Index (SPX-INDEX) (SPY) and the Dow Jones Industrial Average (DJIA-INDEX) (DIA) .

Tax reform is having a significant effect on US business. The reduction in the US corporate tax rate from 35% to 21% will help US companies increase their net profit. They can use this profit in capacity extension, new projects, and dividends.

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Warren Buffett, the CEO and chair of Berkshire Hathaway (BRK-B), recently disclosed that Berkshire’s net worth increased in 2017. It stood at $65.3 billion in that year and a $29 billion improvement is coming due to the tax reform. He wrote, “I would like it in the sense that it would be good for a million shareholders of Berkshire in terms of their returns.”

However, Warren Buffett hasn’t been in favor of lowering taxes for wealthy individuals in the US. Earlier, he said that the US tax system isn’t hurting US businesses.

He wrote, “It certainly means corporations will pay quite a bit less in tax than they otherwise would. When we make money in 2018 domestically, and subject to a lot of little things here and there, basically we’ll be paying at 21 percent instead of 35 percent. That’s a lot of money.”

In the next part of this series, we’ll look at Warren Buffett’s investment philosophy when inflation hits.

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