Buffett’s call on taxes falls on deaf ear

Warren Buffett , worth about $50 billion, paid 17.4 percent in income tax last year.
Warren Buffett , worth about $50 billion, paid 17.4 percent in income tax last year. (SCOTT EELLS / Bloomberg News)
Posted: August 19, 2011

The ink was barely dry on my column about exorbitant executive compensation when, late Sunday, billionaire investor Warren Buffett pulled the political equivalent of a cannonball in a luxury-resort swimming pool.

As midnight neared, the New York Times spread word via Twitter that Buffett had penned a commentary piece for Monday's issue. The following headline lit up smartphones like a tiny firecracker with a loud bang:

"Op-Ed Contributor: Stop Coddling the Super-Rich."

Buffett, worth an estimated $50 billion, whose investment conglomerate, Berkshire Hathaway Inc., is so savvy its shares trade for about $105,000 apiece, practically begged the government to raise taxes on him and his fellow tycoons.

Why? Because what he and others pay in income tax each year, Buffett argued in laying bare his own bill, is much lower percentage-wise than what most working stiffs give to Uncle Sam.

His message, in a nutshell: I won't go hungry. Nor will my friends. We won't even become unrich. Trust me; I'm a money guy. I'm swimming in it. I get this stuff.

Other gajillionaires, predictably, did not follow with their own clarion calls for tax-policy adjustments. For that and other reasons, Buffett's very public punditry was remarkable.

At a time when courageous solutions are needed to recalibrate a deeply wounded economy that has shifted dangerously out of whack to the detriment of the majority of Americans, the nation's political culture has become toxic.

Economists are split over the best course of action for creating jobs and trimming the nation's deficit. Financial markets of late have been equally capricious.

But policy debates have become increasingly dominated by the anti-Buffett crowd. They toss around the phrases middle class and ordinary Joes while promoting agendas that protect the interests of the mega-rich, who also happen to be some of today's most generous political patrons.

These politicians, pundits, and party benefactors claim that keeping taxes super-low on the super-rich will help everyone. So maintaining the status quo is their pinnacle of achievement.

The recent deficit-reduction debacle showed this inaction in action: Reasonable tax- and fiscal-policy options, such as tax increases on the wealthiest Americans (a small numerical minority of the citizenry) to help ease the federal deficit were incinerated by rhetorical fear-mongering.

Buffett pierced the ideological fog with the conviction of a pure capitalist.

He, too, is a member of the uber-exclusive club that most benefits from having things stay the same, people whose wealth has expanded to historically high levels while middle-class wages have stagnated or soured and excessive college debt has become a loan-sharked pathway into a diminished jobs sector.

Buffett also cannot easily be pegged a demagogue or political opportunist. At 80, the Midwesterner has an uncommon financial acuity and commonsense worldview. Dubbed the "Oracle of Omaha," he is admired or envied by haves and have-nots alike.

So it should not be surprising that the power of his words had great reach. His essay has been among the best-read pieces on the Times' website for most of this week.

"While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks," Buffett wrote.

Last year, he wrote, his federal tax bill was $6,938,744. That's equal to 17.4 percent of his taxable income, a low percentage resulting from the fact that the mega-rich - who, Buffett said, make money on money - pay little to no payroll taxes.

By contrast, he wrote, the middle class typically "fall into the 15 percent and 25 percent income-tax brackets, and then they are hit with heavy payroll taxes to boot."

Buffett tickled and slapped Congress on the collective cheek for its generosity in upholding such a tycoon-friendly tax code:

"These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.

"It's nice to have friends in high places," he wrote.

The last time Buffett took a populist stance on an issue so near and dear to his politically influential peers was in 2007, when he opposed GOP-led congressional efforts to eliminate or reduce federal taxes on inheritances. He argued that the riches of the super-wealthy should be recycled back into society through the government treasury to prevent the formation of "an aristocratic dynasty of wealth." That way, economic opportunities - jobs, wealth, etc. - would keep flowing to people who earned them.

In a delicious irony, the same year, for the first time ever, the only people able to make it onto Forbes magazine's list of the 400 richest Americans were billionaires. Apparently, millions no longer cut the mustard.

For his latest provocation, Buffett naturally took some heat. An editorial in the Wall Street Journal suggested his tax-adjustment strategy would effectively block other folks from becoming the next global billionaires. He was also lambasted for calling for the change only after he had tucked away his own billions in untouchable charitable foundations.

In anticipation of that tired refrain, Buffett included this in his essay: Even much higher 39.9 percent capital-gains tax rates in the late 1970s did little to deter money-making in the decades that followed.

"People invest to make money, and potential taxes have never scared them off," he wrote. "And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000.

"You know what's happened since then: lower tax rates and far lower job creation."


Contact Maria Panaritis at 215-854-2431, mpanaritis@phillynews.com, or @panaritism on Twitter.

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