Something curious happened as Trump was “draining the swamp” – the man who by some accounts owns the swamp, Hillary Clinton’s billionaire backer Warren Buffett, may be about to get some $29 billion richer, if only on paper, thanks to Trump’s tax-rate cut policies which would boost the book value of Berkshire by as much as $29 billion.
According to an analysis by Barclays, Berkshire may soon enjoy a $29 billion boost to its book value under Trump’s proposed tax reform. “We would view this magnitude of increase as favorable for Berkshire shares since it is generally valued on price to book value,” Barclays analysts led by Jay Gelb said in a note to investors Monday first reported by Bloomberg. Berkshire’s book value was more than $270 billion as of Sept. 30; it would surpass $300 billion should Trump’s proposal for a 15% corporate tax rate be enacted.
Joining in the overall market frenzy, Berkshire has jumped about 8% in New York trading since Trump won the November 8 election, helped by the increasing value of Buffett’sholdings in bank stocks as interest rates climbed, however it appears the prospect of sharply lower taxes has helped.
Gelb’s analyzed Berkshire’s deferred tax liability of about $50 billion at the end of 2015, a figure that includes potential costs if Buffett sells investments that gained in value. The review doesn’t take into account the DTLs at some energy operations, where benefits wold be enjoyed by utility customers and not Berkshire shareholders. The value of the liability is based on the current 35 percent tax rate and would fall by about $22 billion at a 20 percent corporate tax rate and drop by $29 billion at 15 percent, Gelb wrote. Trump has called for cutting the business tax rate to 15 percent, while the House Republican “blueprint” for tax changes proposes 20 percent.
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