Friday, August 26, 2011

Is Warren Buffett A Hypocrite?

Warren Buffett (left) is living proof that amassing great wealth does not automatically imply that the gazillionaire understands how government works. And sitting next to fellow gazillionaire Bill Gates, one can also infer that great wealth does not confer good taste in clothing, either. Where did he get that hideous chartreuse monstrosity? OK, back to the topic.

Buffett, often referred to as the Sage of Oamaha, recently came out in favor of the Obama plan to save the economy by increasing the tax rate on the rich. As we know, that idea is both wrong-headed and not viable either from the viewpoint of economics or simple accounting. If the "rich" were taxed next year at 100%, it would barely make a dent in the annual budget deficit. Yes, the rich can afford to pay more, but that doesn't mean they should be required to do so. Every dollar spent on taxes is a dollar less available for hiring employees and investing in new ventures.

The tax codes allow for anyone who chooses to do so to simply write a check to the U.S. Treasury to help the government to help us. Since Buffett has chosen not to do exactly that, he has been called a hypocrite. The loose change in the crevices of Buffet's couches could probably fund the food stamp programs for Nebraska for a year. Writing a check to the government for 1/1000 of his wealth could provide 52" wide-screen high-def TVs for all the "poor" in the United States east of the Rockies (and probably west of the Rockies as well).

Does this make Buffett a hypocrite? I'm not sure that the term actually applies to him. I think "misguided" and perhaps a little senile are more apt. In his tax-the-rich-until-it-hurts comments, Buffett said that he paid "only" 17.4% of his taxable income while the twenty employees in his home office paid from 33% to 41%. Either those employees have never heard of TurboTax, or they need to hire new accountants. The Congressional Budget Office says that the top fifth of wage earners paid an average rate of 25.1% with the highest end paying 29.5% in 2009.

Despite the provision in the tax codes, the gazillionaires last year contributed a total figure of somewhere between $2 million and $3 million voluntarily toward reducing the government's debt burden. Warren Buffett carries that much every day in his wallet. You never know when he might have to take the President to lunch. Buffett doesn't suggest that his overburdened employees' taxes should be cut, but rather that his own taxes should be increased.

But here's where I think the "hypocrisy" label may go off-track. Buffett (and his associate, Gates) have both set up trusts and other legal vehicles that will ultimately dispose of 99% of their personal wealth to charity. He talks about not being required by tax law to "share the sacrifice" that those who are not mega-rich are saddled with. Yet he gives away almost his entire estate to charity. How many of us plan on doing that?

That is the reason I consider Buffett to be more misguided than hypocritical. The question becomes "why would he prefer giving to charity over simply writing a ginormous check to the feds?" Simple. By his (and Gates's) own admission, he knows the money at the charities will "do far more good and be used more effectively than it would if the government were the disbursement agent." Yet by his own logic, every dollar paid in higher taxes to the government would be used inefficiently and will be a dollar less given to charity which would use it for good. It seems to me his heart is in the right place, it's just his head that's off-kilter.

Buffet simply doesn't understand the clear distinction between coercion ("progressive" income taxes) and volunteerism (giving that money to charity and working for free instead). Sure, many of the mega-rich won't do what Buffett and Gates have done, but so what? It's their money, not the government's. Buffett also doesn't seem to understand that his friend Obama's plan is not to "help people who need it," but to redistribute income from the working "rich" to the idle "poor."

He also doesn't comprehend the Founding Fathers' warning that when the majority can vote themselves largess from the public treasury, they will. He may be paying only 17.4% of his income, but that's a big help to that near-50% who pay no taxes at all. It's a parasitic relationship that eventually sucks all the blood out of the wealth-creators, leaving everyone equally poor. Only the political elite are left with big bucks, and in case Buffett doesn't know it, that's the exact history of every rigid socialist economy which has ever existed.

Buffett knows how to accumulate wealth, and his charitable donations show that he knows how to distribute it. So his suggestion in the New York Times that Americans should "Stop Coddling the Super-Rich" and raise their taxes demonstrates less hypocrisy than plain fuzzy-thinking. Meanwhile, Warren, why don't you just write that big check to the government to prove that you put your money where your addled brain is?


Tennessee Jed said...

excellent, Hawk and so right on target. There have always been two "tracks" for criticizing the leftist tax and spend policy, the philosophical and the practical.

First, it is an infringement of individual liberty and freedom that punishes achievement and stifles individual achievement; and second, even if one ignores the philosophical argument, it is clear that there are FAR more efficient ways to help the needy. The government creates buracracy and waste, even if one agrees with what they are theoretically trying to do.

T-Rav said...

LawHawkRFD, fashion critic.

Some liberal friends posted this on their Facebook page the other day and were talking about how the rich don't pay their fair share in taxes or something. My response was to post the mailing address for the IRS's Office of Charitable Donations--that pretty much killed the conversation.

BevfromNYC said...

Great article. My issue is that probably at the same time that Buffet and Gates are giving huge somes of money to charities, their accountants are deducting that from their income taxes. If they were really serious, then they should just make it clear to their accountants to NOT take any deductions?

Gates to me is the real hypocrite. He made his vast fortune (and Steve Jobs too) by the enslavement of others. Not here of course because slavery has been abolished. But in countries where slavery is much more acceptable.

The misguideness also links to this. If Gates, Buffet, and all the other megawealthy who are so willing to pay higher taxes were REALLY serious, they would move all those manufacturing and customer service jobs that they shipped off shore (for which they made their vast wealth) back to this country.

Creating more taxpayers is much more beneficial than Buffet and Gates paying more taxes OR dispensing their vast wealth after their deaths.

AndrewPrice said...

Sorry Lawhawk, I gotta disagree.

Buffett is a crony capitalist of the worst kind. He hides behind talk of “free markets” and then shoves his hand into our pockets to pay for his investments. And he only advocates policy changes in Washington from which his ventures will benefit.

What he’s trying to do is raise taxes on Americans (not himself) so that he can keep getting benefits from Uncle Sam, like the windfarm in Texas where he wants Congress to pay for the infrastructure to make it work. Or the $5 billion dirty deal with Goldman Sachs that the Treasury underwrote with TARP funds. And now he’s bought $5 billion worth of Bank of America. . . another company underwritten by the Treasury.

Plus, he’s hosting a massive Wall Street fundraiser ($35k a plate) for Obama. . . the most anti-free market President this country has ever had.

LawHawkRFD said...

Tennessee: Well said. From the practical side, government should be efficient. We know that it's a human institution, so it will never be perfect. But the progressive income tax is so complicated that the IRS's own agents can't decipher it, and that's a guarantee of inefficiency.

On the philosophical side, too many people think that the government should be benevolent. That's a fallacy. The government should be neither benevolent nor malevolent. It's supposed to be neutral. When it takes sides, that's when you get socialist redistribution.

LawHawkRFD said...

T-Rav: And I never wear white after Labor Day. LOL

Giving your liberal friends the address of the OCD (appropriate name, huh?) was an excellent idea. I'm still trying to figure out how punishing Americans for their success is "fair."

LawHawkRFD said...

Bev: I can't really argue with your assessment. It addresses why I want to see corporate tax rates and inheritance tax rates lowered while closing the tax loopholes. That actually encourages domestic hiring and production while at the same time blunting the argument that the left (and Buffet) are beating Republicans over the head with about "corporate jets."

LawHawkRFD said...

Andrew: I don't think we actually disagree by much. Crony capitalists need love too. I don't think it's hypocritical to take advantage of the obnoxiously complicated tax codes to benefit your own companies and investments. But I will concede that it's a bit hypocritical to crow about it while you're doing it.

As John Huston said in Chinatown, every great fortune started with a great crime. Buffet avoided that by staying within the law, however cleverly. But since I have no firm opinion either way on hypocrisy versus enlightened self-interest, I made it clear that it was my opinion that Buffet was more misguided than hypocritical. Your conclusion is just as valid as mine absent provable fact that he is acting purely on hypocritical grounds.

As for giving fundraisers for Obama, that could be a short-sighted attempt to gain temporary personal advantage. But it ignores the fact that in the long run, it will hurt him as much as it will hurt us. But as you've said, it could also be just plain hypocrisy.

I guess I'll just have to say we have [slightly] differing opinions on Buffet's statements, but until I can actually get inside his head, I'll lean more toward "misguided" than toward "hypocritical."

Writer X said...

Agreed! Walk the talk, Buffett! And buy yourself a new shirt. I think he's trying to channel Jimmy Buffett with that shirt. My eyes hurt.

LawHawkRFD said...

WriterX: I had a toy car when I was little that was that color. I blew it up with a cherry bomb.

StanH said...

Warren Buffet is the worst kind of scoundrel in my opinion. His tax plea is a straw-man, a way to increase taxes on the regular guy, you know the rich people who make $250K or more. What would that entail 80-90% of all small business, S-Corps, or LLC’s. They’ll say, “see Warren Buffet is willing to pay higher taxes.” …but he won’t and say he did. He’s the king of Venture (vultures) Capitalist, swooping in for the rescue –wink-wink- Wachovia Bank, BoA, and countless other corporations. The Oracle of Omaha is the poster child of crony-capitalism. I don’t begrudge anybody their success, but don’t begrudge me mine. I know he and Gates (The Gates Foundation) are going to give away 99% of their money, but just like J.D. Rockefeller and the Rockefeller Foundation, it’ll be around long after they are dead, affecting our country for good or ill, usually swerving hard left. Though his magnanimity sounds gracious, call me skeptical.

LawHawkRFD said...

Stan: He also uses his capital gains as his income instead of drawing a salary. That already puts him in a lower tax category, so I have my doubts that he thinks "the mega-rich should pay more" applies to him. But as I said in the article, that may make him a scoundrel or even a legal tax-dodger, but I'm not sure it makes him a hypocrite. On the other hand, since I have no intention of defending him, "hypocrite" will do as well as "fool."

Post a Comment