KENT: And then there's going to be a lot of experiments, new experiments. I mean, the Chinese experiment of creating, you know, three-, 400 middle class in a decade is a huge experiment. It's never been done before. And there's always going to be learning, correcting, reinventing going forward. The European experiment, you know, where you have economic integration but no political integration...

BECKY: Right.

KENT: ...is a huge experiment that is, you know, going to have to adjust, fine-tune and go forward because, you know, one— some— one of the issues in Europe today is that you've got economic integration that in some parts went awry and didn't go right without the political integration. So there's adjustments that are taking place, indigestion right now taking place. And that's what we're seeing. But again, you know, at the last minute Greece did get the loan, and they're free from— pretty much from default until two— 2014, and that period is going to be a period where they need some oxygen to make the necessary changes and go forward. There'll be experiments here.

BECKY: But we talked— we talked about that in the last half-hour with Warren, and his concern is that this is a Band-Aid and it's still not a full-time fix, and you still, as you mentioned, have some serious concerns when you have this monetary system built up without the political system to back it up.

KENT: Sure, sure. And you've got, you know, tax policies, policy policies all in the hands of individual governments, and then a lot of stuff that is outsourced to the European commission. And there— but that's an experiment. Had it ever happened before? No. Europe actually has an overpopulation not in people, but in the number of states per square kilometer, rich states. And that's a— that's a fairly new experiment.

BECKY: Let me ask you about something else we talked about in the last half-hour, the idea of the taxation considerations in Washington right now. One idea that's been floated is allowing major global companies to repatriate money and bring it back to the United States. Are— what do you think about that? Because Coca-Cola obviously has huge profits that it makes overseas.

KENT: Sure, sure. Well, I think that would be another Band-Aid. I think the real necessity right now is to reform tax altogether in the United States so that the US corporations small, medium-sized and large can have a level playing field. You know, today if we— if I invest and create a business in a— in a foreign land and the taxation there is 30 percent, I pay that— or 25 percent, I pay that— I make profit, I pay the tax. And if I want to bring that money back here, I have to pay substantial amount of more tax compared to my competitors in other parts of the world that have a territorial tax system. I think it is long due to have tax reform in the United States. And so whilst I think that would be a good thing in a very short period of time, it would— we need to really solve the— from the long-term perspective, a tax reform that keeps the United States competitive, the US corporations on a level playing field with their competitors around the world. And I believe that's what's needed.

BECKY: What corporate tax rate did Coca-Cola pay last year in America?

KENT: Roughly in the mid-20s.

BECKY: OK. So when you hear arguments of lowering the tax rate to let's say 22, 23 percent and getting rid of loopholes and deductions, is that something that you'd go along with?

KENT: I would because there— you know, you've got— you've got a book that thick about all the different ways of interpretation and all the different exceptions to the tax code today. You've— we've— the future of the world belongs to simplification. We have to simplify bureaucracy, we have to make life less cumbersome and business less cumbersome so that it can be competitive.

BECKY: You know, Warren, I talk to CEOs, I've talked to some here, and anybody who's paying in the mid 20s or higher thinks that we need to reform the tax code.

BUFFETT: That's the problem.

BECKY: My— because my thought is that any corporation that paid less than 20 percent last year is going to fight this tooth and nail...

BUFFETT: Absolutely.

BECKY: ...and send the lobbyists to go try and change anything from getting done in Washington.

BUFFETT: Well, you majored in political science, as I remember. And, you know, we give you an A on that one.

BECKY: So is there a real opportunity for change, or is this something that is going to get held hostage by lobbyists in Washington?

BUFFETT: It takes a combination of leadership and outrage, and whether we've arrived at sufficient quantities of both to get— a major revision of the tax code means hurting a lot of people from their present situation. It also means helping a lot. It means hopefully that going more toward fairness and something that makes the economy work better. But the effort...

KENT: And with simplification.

BUFFETT: Yeah. And— but the effort is huge to do that because every line in the tax code has a protector to whom it's enormously important, and that protector hires lobbyists. And the other side is diffused, you know. The people that care about having stock futures held 10 seconds straight at 60— treated 60 percent long-term gains, believe me, they will care about that sentence to an extreme degree. The people that are actually where that revenue's being diverted, and they pay a little more because they're not getting it in that area, their interest is totally diffused. They don't— they don't— they're not going to organize a group, you know, to change the tax law in stock futures or something of this sort. So it's a terrific problem, it requires a lot of will, a lot of leadership and a lot of outrage. And maybe we're at that point.

BECKY: Well, it's one— it's one thing to try and attack the corporate tax law. That's going to be difficult enough. Trying to change the personal tax laws and get to a situation where people think it's equitable, the rich are paying their fair share, but at this point you also have about half of Americans who aren't paying any national...

BUFFETT: Well, they're paying— they're paying payroll taxes.

BECKY: They're paying payroll taxes, but they're not paying the national income tax.

BUFFETT: No. But payroll taxes are 40 percent of— 40 percent of the revenue in the United States comes from payroll taxes, 40 percent. And they're being— my cleaning lady is being charged a payroll tax. Her payroll tax, counting the portion her employer pays, is higher than my capital gains tax.

BECKY: So that's your argument for capital gains, why it needs to be— the rates there need to be raised.

BUFFETT: Oh, yeah. I mean, I am treated like I am— I am, you know, the bald eagle or something, that I have to be protected at all costs, you know, and they— I'm nurtured. I am paying— that's the reason that the 400 largest incomes in the United States paid an average of 16.6 percent last year, and they did not pay much payroll tax, I mean, just by the nature of it. That is so out of whack with our past history that, you know, it's no wonder that people get upset.

BECKY: You know, every time you say this on our air we have people who write in and say if you're so outraged about your tax rate, why don't you just pay more instead of giving your money to charities?

BUFFETT: Yeah. Well— yeah. Well, in the end, I just looked it up the other day, you can— you can check how much is voluntarily given to the United States every year by people, and that number in the last 15 years has ranged from $700,000 a year to $3 million a year.

BECKY: In total?

BUFFETT: In total, the whole...

BECKY: From everybody?

BUFFETT: The whole United States. You can look it up. And the highest year's been $3 million, the lowest year's been 700,000. So I would say that anybody that's advocating a tax system based on volunteerism is living in Never Never Land.

BECKY: Again, Muhtar, if you were asked, what's the most important thing that could make Coca-Cola and other major corporations create jobs right here right now, what would you tell them?

KENT: I would say we need a closer networking and collaboration with government, business and civil society than we have today. We need— I don't think that we often think that it's all resting with federal government; state and local governments have a huge role to play. And I do believe that we have the low-hanging fruit in terms of what still can be done for small and medium-size enterprises which is really the backbone, you know. Three out of— two out of three jobs in the United States has been created by companies that— small companies that have not been around for the last— you know, are only five years and younger, in the last sort of two, three years.

BECKY: Hm.

KENT: So I think much more can be done there. And large companies like mine have a very close relationship with their supply chain, and there's a multiplier effect. When we create one job, usually there's about 10 jobs created down the supply chain in advertising, in manufacturing refrigerators, in manufacturing racks, in components for our plants, in the building that goes on, etc., etc. So that— there's a— we need to make sure that that multiplier effect is much stronger than it is.

BECKY: Mm-hmm.

KENT: And a lot still can be done, I believe, with governors and states promoting a closer relationship between large corporations. And then allowing— making sure that the networks are there for small companies to export out of the United States. And that's what Germany did. The fact that Germany's— Germany is the second largest exporting company today, it's all about the middle...(unintelligible)...and it's all back to the courageous policies that were taken— decision that were taken by Schroeder back in two— five years ago when he had the agenda 2010 program that he implemented, and then he lost the election, of course.

BUFFETT: Becky, you can cut my tax rate to zero and I'll still drink five of these a day. But...

JOE: Hey, Beck...

BUFFETT: But if you cut my— if you get— if you cut my cleaning lady's rate on payroll taxes, she can drink one of these that she couldn't afford now.

BECKY: Oh.

JOE: All right, Becky...

BECKY:JOE:

JOE: Yeah, one more time— one more time, Warren. All right, just because nobody else does it and it's only 700,000 or 3 million, that's not stopping you from doing it. Now, you could easily write a check...

BUFFETT: Yeah.

JOE: ...you could write a check for a billion dollars a year easily to the government, but you have chosen to give it to charity. Do you— does that at least indicate that you think the dollars will be better spent by charity, because it's a better way to do it, than the inefficient government, or is there another reason...

BUFFETT: I think...

JOE: ...or is there another— do you like the deductions that you get to not pay taxes? I mean, I still don't know why you don't do it.

BUFFETT: No, the deductions I get— incidentally, I just— yesterday, I just gave— I made my annual gifts of, I don't know, a billion-seven or something of Berkshire stock. I've got a $10 billion charitable contribution carry forward. I've used 1/10th of 1 percent of all I've given as a deduction.

JOE: OK.

BUFFETT: So the deductions don't amount to anything.

JOE: Then that's not it.

BUFFETT: I do think there's something— I do think there are things that— in terms of medicine, in terms of all kinds of things, education, that certainly new ideas can be brought in in the— in the— through philanthropic organizations that are unlikely to get done through government.

JOE: Yeah, I agree. Agreed.

BUFFETT: But I think that the idea of saying we should do something on a voluntary basis is crazy. I mean, it isn't going to happen. A tax system is based on having a law and having some guys come around saying if you don't pay your taxes you go to jail.

JOE: Right.

BECKY: Carl, you have a question, too.

CARL: Yeah. Muhtar, I've got one last question here. We've talked about so many big things. The kind of question that Warren hates to answer because it's short-sighted and superficial. Do you think, if you were looking at North America, you could, at this point, declare an end, for at least for now, to the soft patch that we saw this spring?

KENT: I'm sorry? I couldn't hear the last part.

CARL: Do you think we could call an end to the soft patch we saw this spring, at least for now, in North America?

KENT: I think probably. I would say yes to that. I think that generally speaking, I would agree with that.

CARL: That's...

BECKY: And Muhtar, I know you mentioned at the beginning that when your consumers that you see here in America, they react very quickly to rises in gas prices. As gas prices have come back down, have they responded as quickly to that are they more hesitant?

KENT: I don't think they've come back down to where they were before the increase. I think it's a question of adjustment, getting used to things. They've come down a little bit. But as I said, the recovery is mixed. The consumer is still a little confused.

BECKY: Mm-hmm.

KENT: Fragile is a good word. But certainly as everyone— every segment of society currently looks into the future, they don't see as bleak a picture as they did 18 months ago. And I think that is really important from the point of view of the mind-set, also from the point of view of investment in the United States that will continue to create jobs. So businesses need to be— when they look into the tunnel, they need to see something that makes them invest and believe in the future. And I think that's coming— beginning to come back.

BECKY: And, Carl, I'm sorry, did you have a follow-up that you were asking on that?

CARL: No, no, no. Other than to say what a great hour it's been. A SQUAWK for the ages, as I think Joe would agree.

JOE: Mm-hmm. Absolutely.

CARL: Great work.

BECKY: They were. Gentlemen, thank you very much for joining us here this this morning.

KENT: You bet. Thanks.

BECKY: Again, Muhtar Kent and Warren Buffett. And we really appreciate your time. And guys, I miss both of you and we'll see you back there very soon.

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