T.J. Rodgers to Warren Buffett: Wise Up on Taxes | Cypress Semiconductor
T.J. Rodgers to Warren Buffett: Wise Up on Taxes
At the May 11 Cypress Shareholder Meeting, T.J. Rodgers rebutted Warren Buffett’s call to tax the rich, characterizing it as economically destructive. Watch the video below.
The PowerPoint presentation Mr. Rodgers used to visualize his points can be downloaded here.
For an excerpted transcript, please see below.
“BUFFETT RULE” COMMENTARY
By T.J. Rodgers
CEO Cypress Semiconductor, Annual Meeting 5/11/12
Cypress President and CEO T.J. Rodgers addressed Cypress shareholders today at Cypress’s Annual Shareholder Meeting. His remarks included a critique of the proposal advanced by Berkshire Hathaway Chairman and Chief Executive Officer Warren E. Buffett that Americans would benefit from a tax hike on the “Mega-Rich.” A transcript of Dr. Rodgers’ remarks appears below. Please visit www.cypress.com/go/TJRvsBuffett to see the presentation
I’m going to stay on this graph for a few minutes. It compares Cypress, with the recent stock decline, against Berkshire Hathaway and Dow Jones. As you can see, even with the current decline, our stock has gone up by a factor of four over the last five-year period [vs. a factor of 1.140 for Berkshire Hathaway and 0.972 for the DJIA].
Warren Buffett, of course, is the famous investor who runs Berkshire Hathaway. Although I am going to disagree with him strongly in the next few minutes, I don’t want to take away from the fact that he is a great entrepreneur and has a tremendous record.
On ABC television in 2012, he made the comment that he paid a 17.4% tax rate, while his secretary, Debbie Bosanek, paid 35.8%, and he thought that there should be a “fair” tax on the “mega-rich.” [He said] something’s wrong with that; his secretary is disadvantaged and is paying [more] tax than he does. That statement was attacked widely. For example, everybody pointed out that people in her income range paid an average tax of 7.7%, which is why there were people widely claiming that his statement was an exaggeration—there is no way a person at her level would pay 36% tax. Another article stated that if she did pay 36% tax, she would have to earn somewhere between $200,000 and $500,000 a year. So, there was a big cloud hanging over this pronouncement, but it doesn’t matter; it was made within a political framework, therefore facts don’t matter.
These are facts from the Internal Revenue Service. I am proudly a member of the Top 1%; I earned my damn way into the Top 1%. I create jobs and wealth. The Top 1% is good, not bad. The Top 1% of us get 20% of the income; we [thus] earn disproportionally 20 times more than the bottom 99%. We also pay 40% of all taxes, twice as much in tax as we get in income. This is a progressive system. By the way, this [40%] of taxes paid by the Top 1% was 20% in 1980 and has doubled to 40% [since then].
The Top 1% [total tax revenue is] greater than [that] paid by the bottom 90%. The Bottom 50% pay no taxes at all. So, the idea that there is somehow unfairness, that we are not pulling our weight is simply wrong; it’s demagoguery.
The third point is, I don’t think Mr. Buffett lives by his own words. For example, the IRS is suing NetJet for $366 million for not paying taxes. NetJet is a Berkshire Hathaway company. Also, if they’re so worried about the government getting money, then they would be the last one to the welfare trough. But the fact is Berkshire Hathaway companies received $95 billion in TARP money, which is the bailout money coming from Washington.
While he is making pronouncements about how the Top 1% isn’t treated fairly, he is in Washington regularly, making sure he gets his fair share of government pork. The “Buffett rule,” that people are talking about now, is that there would be an alternative minimum tax of 30%. Meaning, however you calculated your tax, at the end of the day, if that number was below 30%, then you pay 30%. Of course, that would mean Warren Buffett’s own taxes would [be] raised. But, once you’ve earned your first $44 billion at a low tax rate, it’s easier to give it up.
I don’t have a problem with a good investor making self-serving statements in the interest of his corporation. What I do have a problem with, is [that] this is now being used to [propose that we] change the way our country runs. Our current administration is using Warren Buffett to say this [Buffett Rule] is good for America, but it is very bad for America. Socialism is not good for anybody. If we were in Europe right now, we would be labeled a socialist democracy and we would be in the middle of the pack with regard to our tax structure.
I’m sure Mr. Buffett would say that Berkshire Hathaway, which has only produced 2.7% return for its shareholders over the last five years—that Berkshire Hathaway is more productive than our Federal Government. I certainly would say that, and I would say [the same for] the Dow Jones.
Let me talk about myself as an example of the typical Top 1% [citizen] of Silicon Valley. These are my investments: I own 8.2 million shares of Cypress outright. I own a bunch of SunPower. I was the chairman of SunPower, and I worked daily with SunPower, the second biggest American solar company, which was at the forefront of the solar revolution. I personally contributed, as well as financially. I own stock in a little company called Solar Bridge in Austin, Texas, which makes inverters. Inverters are the things that turn the power that comes from solar panels, DC power, into the AC power that we use on the grid. I think Solar Bridge’s product is going to revolutionize the way inverters work.
I have been working for eight years on a company called Bloom Energy, which is currently private. Bloom Energy makes fuel cells. I meet with Bloom Energy several times a quarter, and I help them much above and beyond the investment that I have made in them. I believe Bloom Energy will be the most important IPO ever in the high-tech [energy] sector. We’ll see if that works out, but this is a change-the-world kind of company.
I’ve also invested in Google and Intel. More importantly, I am an investor in venture funds. There are five funds that started Cypress; of them, Kleiner Perkins, Sequoia and Sevin Rosen [are companies] I continue to invest in. For example, I have invested for the last 30 years in Kleiner Perkins Funds 2 through 14. I put my money back into the venture fund that funded Cypress, and hope that that fund [will remain successful]. For example, they brought you Google; they helped with Facebook. I invest in that [venture fund] to invest back into the infrastructure of Silicon Valley. I also serve on their Advisory Board. From time to time, they call me because they’re reviewing a company. I take time to put my technical expertise to work and evaluate investments for them to help them make better investments. In other words, I invest a lot of [time and] money in the infrastructure of Silicon Valley.
If you ask about investments of a Top 1%, basically after you’ve met your needs—house, car & food—all the rest of the money goes into investment. That’s where all my money is, right there in Silicon Valley, with companies that I personally help and in venture funds that I have personally helped; [the funds] that built Silicon Valley. I also invest in a Donor Advised Fund; that’s my money for charity. When you give money to a Donor Advised Fund, it’s a one way move, the money goes into the DAF, and it’s gone. It must be given to a recognized charity. Companies in Silicon Valley, venture funds that build the infrastructure of Silicon Valley and charities—is where my money is.
With more taxes—if my taxes get raised to be “fair” because I am a “mega-rich” person—[more of my] money will go to the government. What will happen, instead of investing in Bloom Energy, for example, I will sell some stock or invest less in Bloom Energy, and I will invest in some “shovel-ready projects,” isn’t that a great tradeoff? Bloom Energy vs. shovel-ready projects. Instead of investing in Kleiner Perkins and helping them build companies in Silicon Valley, I’ll put my money in Cash for Clunkers. That’s the point! The rich people we’re abusing are the people who invest well, that’s why they’re rich to begin with. They create jobs and they’re good for us. To abuse them and say that they are [preferentially] treated, even though they pay 40% of the taxes for the country—and then say the country is going to get better if we do these junk [government] programs, as opposed to investing intelligently in Silicon Valley—is foolish. I don’t mind if Warren Buffett, the rich, powerful, smart, capable person says a foolish thing; I do care if our government acts on foolish things that are going to hurt everybody.
I’ll tell you, when [new] taxes suck money out of the Donor Advised Funds and put it into Cash for Clunkers, it’s going to hurt poor people too. This is bad; it’s wrong; it’s immoral, and somebody needs to say that. Warren Buffett—judicious words—is making deeply flawed statements that he should be embarrassed to make.