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>if the government's share is worth 34x its annual take, does that not imply that the shareholders' share is worth the same multiple of annual after-tax earnings?<

<<I don't think so... The government can take it's share in cash and still expect next year's payment to be greater. This is true because the rest of us don't take our share in cash, but reinvest it for the benefit of all-including the government.>>

Interesting brainteaser. It still seems to me that if you assume Berkshire's pre-tax earnings are growing at a certain rate forever, and apply a perpetuity formula to get the multiplier, the same multiplier ought to apply to the government 35% share and Berkshire's 65% share. Both pieces continue to grow at the same rate forever. Each year the government's take increases, but so does Berkshire's at the exact same rate. So I would still argue that the multiplier "ought to be" the same for both pieces.

Now when you introduce the double taxation issue at the shareholder level, you add another moving part that complicates the analysis. Perhaps WEB would say the double taxation means that a lower multiple ought to be applied to the after-tax earnings of the corporation, because the only way shareholders can get access to the cash is buy getting a dividend or selling shares, both taxed at a maximum of 15% at today's rates. But then what do you do with taxpayers in a lower bracket, or with shares held in an IRA which eventually will get taxed at regular rates when distributions are taken from the IRA. Are you going to say that the value of a Berkshire share varies from one person to the next, and also depends on the type of account in which the shares are owned. That would really open a can of worms.

Anyway, enough of this theoretical stuff. If anybody wants to buy some BRK shares for 34x earnings, shoot me an email.

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