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?