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Another significant issue not often referenced when discussing real returns is **increased taxes** on individuals and corporations. Warren Buffett has frequently highlighted that the growing fiscal deficit may necessitate higher taxes, impacting how much investors ultimately retain from their gains.

He recently pointed out that current tax rates, while relatively moderate, could rise substantially, diminishing the net returns on investments for individuals. For investors, a higher tax rate, coupled with an already challenging inflation environment, could mean a dual hit on their expected profits.

## Valuations and Market Rationality