Billionaire investor and Obama-backer Warren Buffett is going against the Democratic grain in reportedly financing Burger King’s takeover of Tim Horton’s, a Canadian coffee chain, in order to take advantage of the country’s lower corporate tax rate.
Buffett, through his company Berkshire Hathaway, will finance 25 percent of the $10 billion deal in exchange for preferred stock, The Wall Street Journal reports.
The strategy is called a “tax inversion.” It involves U.S.-based companies legally incorporating overseas — often through corporate takeovers. The practice has come under fire from Obama and congressional Democrats.
Obama has called companies that engage in inversions “corporate deserters.” And Treasury Secretary Jack Lew has criticized the companies for failing to practice “economic patriotism.”
“I don’t care if it’s legal. It’s wrong,” Obama told a crowd last month.
After Burger King’s takeover was announced — but before Buffett’s financing was reported — Ohio U.S. Sen. Sherrod Brown called for a boycott of the second-largest U.S. burger chain.
Republicans — as well as some of the companies who opt for the tax inversions — have said that inversions are a consequence of the United States’ corporate tax rate, which is the highest of any large economy in the world.
According to accounting firm KPMG, the U.S. has a 40 percent corporate tax rate when state and local taxes are included, compared to Canada’s 26.5 percent overall tax rate.
It remains to be seen how Democrats will respond to Buffett’s backing of the deal. The famed investor has long been considered a Democratic darling. Besides donating heavily to Democrats, in public settings, Buffett has supported higher tax rates for the wealthy as well as the estate tax.
In 2011, he proposed what was dubbed the Buffett Rule, in which the wealthy would be required to pay taxes at rates equal to or higher than middle-class taxpayers. Obama embraced the rule, calling for a minimum 30 percent tax rate for people who earn more than $1 million.
Despite siding with Democrats on taxes, Buffett has parted with the party and with Obama on other key issues. Most notably, he has publicly supported the Keystone XL pipeline.
And while Buffett’s progressive tax stances have been celebrated, he still displays a capitalist bent.
“I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe. And that’s very simple,” Buffett told Fortune earlier this year, adding “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate.”