CNBC Transcript: Warren Buffett on 'Fiscal Cliff' and Taxing the Rich

ANDREW: But maybe without the deduction you would've done it differently?

BUFFETT: No, because I don't get the deduction on virtually everything I give away. I've got a $10 billion charitable loss carry forward or charitable deduction carry forward, which I'll never use. So I get to take a deduction for maybe—well, not more than 1 percent—less than 1 percent of the—of the value of what I give away every year.

JOE: You can send me that instead of a brick. I have a $10 billion loss carry—but you can't do that.

BUFFETT: A charitable deduction carry forward.

JOE: You can't do that.

BUFFETT: What I give away to private foundations is limited to 20 percent of my adjusted gross income.

JOE: Right.

BUFFETT: So the deduction has nothing—if there was no deduction allowed, it would not change my charitable giving a penny. And that's true of a number of wealthy people, but there's some other people that it's not true of.

ANDREW: Right.

JOE: You did like Simpson-Bowles, Warren.

BUFFETT: I said...

JOE: I mean, if we did—if they did that and did the 28 percent rate and then what would the cap be for the maximum amount of deductions a person could take? Would it work that way? You could take 15 and everything else is gone?

BUFFETT: I don't know the answer to that. But I...

JOE: Would it work?

BUFFETT: But I—there are a lot of things that will work, Joe. I mean, it—you know, we've had all kinds of things that have worked over the last 50, 60 years.

JOE: But you'd be OK at 28 percent if it was a—there was no deductions, and you had to pay 28 percent on all your income, that would be OK?

BUFFETT: I'd be fine. I'd be fine.

JOE: OK. All right. Not everybody's fine with that. I think that's a...

BUFFETT: Well, we've had—listen, I mean, we've had—we've certainly had times when the normal rate for a high-income person was at the 50 percent level.

JOE: Except they had—they had a bunch of other deductions and they...

BUFFETT: No, they didn't.

JOE: Really? At 90 percent they did, right?

BUFFETT: No, I mean, listen, I can show you my tax returns. I literally in the last 10 years, my tax rate has averaged way less than when I was in my 30s and 40s, and believe me, I'm making more money now.

ANDREW: Warren, one thing we haven't talked about is investing, and I wonder given the fiscal cliff and the volatility that we've seen thus far and perhaps we may see even more, what you're doing.

BUFFETT: It doesn't change anything. If you own a farm and you like the farm, are you going to buy—are you going to sell the farm because of a fiscal cliff? Are you going to sell an apartment house you have? Are you going to share your McDonald's franchise?

ANDREW: No, but if there's a couple of cheap farms out there, you might buy them.

BUFFETT: Well, you might buy them, sure. Well, I like to buy. But I...

ANDREW: What are you doing? Have you done anything interesting in the past couple of weeks?

BUFFETT: The fiscal cliff has nothing to do with long-term investment decisions.

ANDREW: Have you doubled-up—doubled-down on anything, though? Given the price?

BUFFETT: Well, on balance, we buy. But we're buying just like we were buying six months ago or so. I mean, the fiscal cliff does not enter into my investment decisions.

ANDREW: OK. But no new names to share.

BUFFETT: Not today. No. When I get another movie, I'll let you know.

ANDREW: We've got to try.

JOE: Carol, Carol, what about you? No new—oh no, I already did, I already said I wouldn't answer that.

LOOMIS: No...(unintelligible).

ANDREW: Carol's a big investor, though. She's...

JOE: Oh, really?

ANDREW: Oh, she's a great investor.

LOOMIS: Oh, well, I wouldn't say great, but I've learned a lot from Warren over the years about investing, and I don't panic. So many—so many people are very emotional, and when the stock goes down, they are ready to sell and as Warren says, he buys when the stock goes down. And I'm inclined to do that, too. So I'm not worried about that.

BUFFETT: How long have you held Berkshire?

LOOMIS: I've held Berkshire since the early—the early '70s.

JOE: Oh my God.

LOOMIS: I mean, we've never—we've never sold.

BECKY: Wow.

LOOMIS: Except for one trade when—in the first year that John bought originally. He did—he did sell once in the first year, but other than that, we have never sold a share of stock.

BECKY: Wow.

JOE: Those aren't B shares, either, are they?

LOOMIS: Well, no, thankfully they're not.

JOE: Do you have a round lot? I'm trying to get to the bottom...

LOOMIS: No, no, no, no, no, no.

JOE: Trying to get to the bottom of this.

LOOMIS: No. I think we could not. As a matter of fact, I think I've forgotten a lot of the details, so that's very good that I've forgotten them.

BECKY: Hey, Carol, you first wrote about Warren back in 1966. You put one line into a story you were working on about Alfred Winslow Jones.

LOOMIS: That's right.

BECKY: And it was a story about hedge funds. And I just wonder, as you've watched hedge funds over the years, what's surprised you about the way industry has evolved?

LOOMIS: Well, it's grown way beyond anything I could've expected. As a matter of fact, the second time—we do need to mention the first time I wrote about Warren, I misspelled his name.

BECKY: Ah.

JOE: Buffett.

BECKY: Yeah.

LOOMIS: I left off—I left off the second T.

JOE: Yeah.

LOOMIS: But then four years later, I was writing a story called "Hard Times Come to the Hedge Funds," and it was a time, just a temporary one as it turned out, when they had enormous problems. Warren was getting out at that point. And I could not have imagined then that it would've—they would've grown to the importance that they have today. And I think much of it is—or some of it is probably not good that it worked out that way.

BECKY: Yeah. I heard in another interview that "Tap Dancing to Work" was not the first name you had come up with for the book. What were your first choices?

LOOMIS: Well, no, no, they—I think I'm not going to mention the first title that the publisher wanted to use. It would—we might spend a lot of time talking about that. But no, no, actually, I gathered that negotiation between the publisher and the author and Fortune, in this case, is often a very important part of the—of the process by which a book gets named. And I wasn't accustomed to that. Never written a book before, never really thought I was going to write a book. And so it just—it took us a while, but not as long as you'd think. And then when I came up with "Tap Dancing to Work," the publisher immediately said, 'That's it.' And it is, because it's such a perfect discussion—perfect description of how Warren feels about going to work every day at Berkshire Hathaway.

BECKY: Warren, what's your favorite story in the book? And you're not allowed to say any of the ones that you wrote.

BUFFETT: Oh, not the ones I wrote. I—well, I think—no, I think the favorite story has the most drama in it, certainly, is the story of Solomon. I mean, that—that would've made a good movie at the time, and Carol knew all the details and I think she wrote about it brilliantly.

ANDREW: Hey, guys, I saw you guys yesterday and we were talking about preparations. You were going on "The Daily Show" last night with Jon Stewart. I saw some of the clips, including the reference to calling you communists. So I wanted to get a report card on the experience.

LOOMIS: Well, and Andrew, a nice shirt, by the way.

ANDREW: Thank you. Somebody likes it.

LOOMIS: It was—it was great fun. It really was. It's a whole new experience. My daughter was in the audience. And you know, it's a different class of viewer, and we had a great time.

BUFFETT: We had a terrific time.

BECKY: All right. Warren, Carol, thank you both for joining us this morning. Again, the book for anybody who hasn't seen it, it's called "Tap Dancing to Work." It's on sale now, and we appreciate your time joining us today. We hope to see both of you again soon.

BUFFETT: Thanks for having us.

LOOMIS: Thanks for having us.

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