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A Message to Buffett on Taxes: Shut up and Play Bridge!
Posted By Michael Rulle On December 4, 2010 @ 5:00 pm In NewsReal Blog | No Comments
An updated version of the first blog I ever wrote (July 3, 2006)
Warren Buffet was back on television last weekend telling ABC News how the rich don’t pay their fair share of taxes. One would suppose that just the very fact of that statement, coming from a man worth $50 billion or so, who pays and has paid virtually no taxes, is 78 years old, and whose estate also will never pay taxes would be self evidently ridiculous. For some reason it is not. He apparently agrees with Obama’s definition of the rich as a married couple making $250,000 (in New Jersey for example) whose marginal income tax rate is over 50%. Let me explain the nature of Buffet’s tax advantages.
But one should have a problem with his tax views. Most of his income comes from unrealized capital gains, so he pays no taxes. He pays himself a small salary. Most people who invest, first pay taxes on income and then invest. He does not. He initially invested successfully with other people’s money and has effectively been able to grow his wealth virtually tax free through his percentage ownership of the publicly traded Berkshire Hathaway. But why does he want to prohibit others from the opportunity of earning tax free compounded wealth? His philosophy on taxation may be divined from a quote in a May 1977 article in Fortune Magazine.
“A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Proper selection of ancestors similarly can result in lifetime supplies of such tickets upon birth. If zero real investment returns diverted a bit greater portion of the national output from such stockholders to equally worthy and hardworking citizens lacking jackpot-producing talents, it would seem unlikely to pose such an insult to an equitable world as to risk Divine Intervention”.
So does Buffett believe he was really lucky due to his random cosmic receipt of superior investing powers? This statement above is “communist manifesto light” (“from each according to his abilities and to each according to his needs”). If the government is such a moral allocator of wealth, why does he not contribute, say, 40% a year of his annual increase in wealth to the Feds? If it’s good for people making $250k to do it, how much better must it be for those worth $40 billion?
His deterministic philosophy has not prevented him from maximizing total control of his own wealth. Worse, this implied deterministic attack on existential freedom (is it really just the right “vocal chords” which makes one a singing star?) seems to be something that excludes himself. Who should decide from whom and to whom one is to “divert” these portions of national income? Well, people like Warren Buffet, of course, whose legacy foundation (with Gates) will never surrender its economic freedom. Surrendering freedom is for dopey “hardworking citizens lacking jackpot-producing talents” but make more than $250K a year. He views himself a philosopher king. Like so many people with great talent in one field he believes this talent translates to other fields. But Buffett is a philosophical naif and a borderline moral ghoul. One of his great “charitable causes” is global birth control, an activity perfect for persons who feel comfortable making choices for others.
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