Wednesday, August 17, 2011

Buffett: Well raise my rent

The WSJ has a good column today on Warren Buffett’s plea for higher taxes, beginning with a great quote:
“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.’

The Journal makes the point that Buffett is being taxed at a lower rate than others because his income is from dividends and stock sales which are being taxed at the corporate gains rate, and that he is leaving out that this is on top of the corporate tax which was paid on profits.  It also makes the point that others have made, namely that if Buffett thinks he isn’t contributing enough to the nation’s treasury there’s nothing stopping him from paying more.

I take this last to be slightly unfair in that acting alone Buffett would be doing nothing but reducing his own wealth.  But it is only slightly unfair.  There is nothing stopping Buffett from using his influence and connections to band together similarly minded wealthy individuals to pay into the treasury.  Such voluntary associations are actually rather highly esteemed in America.

Moreover, one doubts whether Buffett has foregone the use of tax attorney’s and accountants to manage his affairs with an eye towards reducing his tax burden.  The WSJ brings up, for example, the trusts and foundations that Buffett has established.  Kilgore’s point can be expanded to note that the wealthy have the means to avoid paying those higher rates they favor.

Finally, I wonder why Buffett doesn’t apply his fundamental analysis to the government.  If he did, he might notice that it really doesn’t do much of anything well, that it has grown enormously over the years, and that it has made long term commitments that it can’t keep.  An opportunity perhaps for a restructuring but not as is. In short, that the problem isn’t revenue but scope creep (more like a gallop actually) and spending.  On taxes we can safely tune The Oracle out

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