Richie Rich is not leveling with us.
Warren Buffett’s call for the government to stop coddling the super rich like Buffett and ask them to pay higher taxes has serious flaws.
The main one is captured in a lead to a piece in today’s Wall Street Journal:
Barney Kilgore, the man who made the Wall Street Journal into a national publication, was once asked why so many rich people favored higher taxes. That’s easy, he replied. They already have their money.
President Obama, whose Holy Grail is higher taxes, immediately jumped on Mr. Buffett’s bandwagon. But Buffett’s proposal is riddled with half truths. For example, Mr. Buffett says his tax rate is 17.4 percent, a percent that is immediately going to evoke class hatred. Why is his tax percentage lower than his famous secretary’s?
Well, because tax already has been paid on Buffett’s income. It was taxed as corporate income before it became his investments, which are taxed lower.
So Mr. Buffett is advocating that money on which tax has been paid and which is now taxed again at 17.4 should be taxed the second time at a higher rate. As Mr. Kilgore said, Mr. Buffett has made his money-and he apparently doesn’t care if his prescription would hurt people who are still using their income to invest in new businesses or older people who live on their investments (and don’t kid yourself, it would filter down to older people who have saved all their lives and now hope to live on the proceeds of their sacrifice).
But don’t just worry about retired citizens who live on their earlier sacrifices:
Mr. Buffett wants to raise U.S. rates in a way that would make America less attractive for investment. Under a sensible tax reform, the feds would impose either a corporate tax or a dividend and capital gains tax, but not both.
Mr. Buffett’s plan would not hurt those who already have their money as much as it would hurt the middle-class-what the Journal calls “thousandaires:”
Mr. Buffett says it’s only “fair” to raise his taxes, but he’s lending his credibility to raising taxes on millions of middle-class earners for whom a few extra thousand dollars in after-tax income is a big deal. Unlike Mr. Buffett, those middle-class earners aren’t rich and may earn $250,000 for only a few years of their working lives. How is that fair?
It is interesting, the editorial notes, that Buffett doesn’t call for elimination of the loophole that saves millionaires and billionaires vast amounts of money: the charitable donation loophole. I’m sure he could argue that you deserve a tax credit for charity-I agree-but it’s interesting that this is a way for the very rich, who can give more than the rest of us, to do well by doing good.
Here is the kicker:
Mr. Buffett has also, the editorial notes, sheltered a vast amount of his fortune by putting it in a foundation.
Mr. Buffett is one of the great stock-pickers of his time, and we don’t begrudge him a single dollar of his wealth. We only wish that, having already made himself rich, he weren’t so intent on making it harder for others to become rich too. If he’s worried about being undertaxed, we’d suggest he simply write a big check to Uncle Sam and go back to his day job of picking investments.
I think what annoys me is that Buffett is hailed as not just a sage but as a moral leader.
Well, he is a sage, and I am sure he has used his money to do well.
But don’t listen to him on the matter of raising taxes.