Warren Buffett reveals the news no American taxpayer wants to hear as the government tackles rising debt - here's what it means for you

Warren Buffett has said he expects the US government to increase taxes rather than reduce spending.

The declaration, delivered Saturday, comes as the US is hard-pressed to address widening fiscal deficits, and as the national debt recently topped $34 trillion - an amount nearly as big as the entire US economy.

More concerning is the fact the Fed and other money-minded officials have no plan  in sight, paving the way for the Berkshire Hathaway boss's unsettling prediction. He aired it at his hallowed hedge fund's annual shareholder meeting in Omaha, attended by some of the top CEOs in the country.

There, the conglomerate reported that its collection of businesses generated some $11.2 billion of operating earnings, up 39 percent from the year before. 

Despite those results being a sign of a relatively robust economy, the 93-year-old who is valued at more than $131billion said he believes a federal tax hike is on the horizon.

'I think higher taxes are likely,' he said, pointing to how the Congressional Budget Office has estimated in its latest long-term budget projections federal deficits will rise to 8.5 percent of GDP in fiscal 2054 from the 5.5 percent seen today.

'They may decide that some day they don't want the fiscal deficit to be this large because that has some important consequences,' he added.

'So they may not want to decrease spending and they may decide they'll take a larger percentage of what we own, and we'll pay it.'

The unprecedented problem comes as US budget deficits are expected to dissipate if and when tax cuts introduced in 2017 are renewed next year.

But given current market conditions, there rate cuts remain uncertain, and inflation also remains stubbornly high.

These factors led to Buffet's Berkshire reducing its stake in Apple, one of the many blue chip manufacturers, home builders, insurance companies or retailers in its stable. 

As a result , Berkshire reported a $135.4 billion holding in the iPhone maker at the end of the first quarter, down from $174.3 billion seen in December. 

The move quickly became a topic of discussion as the meeting unfolded in real time, with CEO Tim Cook one of the high-powered figures in the room.

 Despite the more than $40billion sale, Buffett assured the crowd of thousands in Nebraska, Apple is an 'even better' stock than American Express and Coca-Cola, two of the other 'wonderful' businesses in Berkshire's portfolio.

He said unless something changes dramatically, Apple will continue to hold the distinction of being Berkshire's biggest position - glowing praise coming from one of the most respected minds in the country when it comes to finance.

He added that the iPhone, released in 2007, was one of the greatest products of all time, and hinted that tax implications played a part in the sale.  
Asked whether he was worried about the rapidly rising US debt, Buffett, who continues to serve as chair despite his age, said what really concerns him was the fiscal deficit was now larger the Treasuries market, which itself nearly $27 trillion.

Pointing to the U.S. dollar's place as the world's foremost reserve currency, he theorized: 'My best speculation is that U.S. debt will be acceptable for a very long time because there's not much alternative.'

He added that while the main focus right now may be on the Fed's next steps to quell inflation following a litany of interest rates, the bank's looming fiscal policies could be the real issue.

'Jay Powell is ... a very, very wise man,' he said, referring to the central bank's top official. 'But he doesn't control fiscal policy.'

Throughout the day, Buffett also spoke about his age and the prospect of a successor.

When asked, he assured shareholders the company's future was in good hands, and said Greg Abel - his appointed successor and vice chairman of Berkshire's non-insurance operations - should take over capital allocation whenever the need arises.

'When you've got somebody like Greg and Ajit, why settle for me?' Buffett said, referring to Ajit Jain, Berkshire's vice chair of insurance operations. 

'It has worked out extremely well.'

Buffett also cited the changing of the guard that occurred a few years back Apple, when Cook took over for longtime boss and iPhone visionary Steve Jobs.

'Buffett made it very clear that the structure of the firm is in place,' J. Dennis Jean-Jacques, founder and chief investment officer at Ocean Park Investments, told Bloomberg of Buffets words Sunday.

'It's going to become more important for shareholders to ensure the board of directors and managers keep the structure in tact - they are smart people and are not afraid to write to the CEO to let them know things are going wayward.'