NEW YORK (Reuters) -Warren Buffett said he expects the U.S. government to increase taxes to tackle widening fiscal deficits rather than reduce spending.

"I think higher taxes are likely," he said on Saturday at Berkshire Hathaway (NYSE:)'s annual shareholder meeting in Omaha.

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

The Congressional Budget Office has estimated in its latest long-term budget projections federal deficits will rise to 8.5% of gross domestic product in fiscal 2054 from 5.5% in fiscal 2024. U.S. budget deficits are expected to deteriorate if tax cuts introduced in 2017 are renewed next year.

Asked whether he was concerned about the rapidly rising levels of U.S. government debt, Buffett said what worried him was the fiscal deficit more than the size of the Treasuries market - which is now nearly $27 trillion.

"My best speculation is that U.S. debt will be acceptable for a very long time because there's not much alternative," he said, referring to the U.S. dollar as the world's leading reserve currency.

Buffett said while the market focus is on the next steps the U.S. central bank will take to tackle inflation, fiscal policies could be more problematic.

"Jay Powell is ... a very, very wise man," he said, referring to the chairman of the Federal Reserve. "But he doesn't control fiscal policy."