The U.S. government may be gearing up to take a larger slice of corporate profits, prompting Warren Buffett, the chairman of Berkshire Hathaway (NYSE: BRK.A), to strategically adjust his investment moves.

During Berkshire Hathaway’s annual shareholder meeting, Buffett addressed his recent sale of 115 million shares of Apple (NASDAQ: AAPL) , attributing it to his anticipation of potentially higher taxes. 

Dubbed the ‘Oracle of Omaha’, Buffett expressed his belief that companies, including his own, might soon face increased tax burdens under evolving fiscal policies.

He remarked, “With present fiscal policies, I think something has to give. And I think higher taxes are quite likely.”

U.S. tax rates

Buffett’s insights stem from his observation of historical tax rates. He noted that the statutory corporate tax rate dropped to 21% from 35% during the Trump administration and suggested that it could rise again.

 Reflecting on potential governmental actions, he stated:

“They may decide that someday they don’t want the fiscal deficit to be this large… and they may decide they’ll take a larger percentage of what we earn, and we’ll pay it.” 

This sentiment echoes his longstanding advocacy for progressive taxation, exemplified by his remark that his secretary paid a higher tax rate than he did.

Biden proposes increased capital gains tax

The looming possibility of increased taxes arises amid concerns over the ballooning U.S. government debt and deficits. Buffett highlighted the government’s likely preference for tax increases over substantial spending cuts. He opined that addressing fiscal deficits might prompt the government to opt for extracting a larger portion of citizens’ earnings. 

Buffett’s anticipation of tax hikes aligns with recent discussions within the Biden administration regarding proposals for higher capital gains taxes, according to the proposal, the top marginal rate on long-term capital gains and qualified dividends would rise to 44.6%. 

Despite uncertainties surrounding U.S. fiscal policies, the investing guru remains pragmatic about the country’s economic stability. Buffett acknowledged previous downgrades of U.S. sovereign debt by credit rating agencies such as Standard & Poor’s and Fitch.

However, he expressed confidence that U.S. debt would remain acceptable due to the lack of viable alternatives. 

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