Gnoso

I have high regard for Warren Buffett and his unmatched investment record. He’s clearly a very intelligent man; however, I can’t help but be astonished at his comments on taxation. Buffett has long been a proponent of increasing taxes on the rich. He’s recently made waves by stating that he pays less taxes than anyone in his office, including his receptionist.

First, I must make the obvious point that Buffett certainly does not pay less taxes than his staff. He is referring to the percentage of his income that he pays in taxes. I know that’s kind of a “duh” statement, but it should be pointed out. Secondly, it would appear that Buffett makes most of his income as capital gains. That is the only way that his tax could be 17.7% given that the capital gains tax rate is 15% and the top income tax bracket is 35%. I don’t think you can claim that Buffett is the typical rich person. Buffett is in an interesting position, because most of his income is in the form of capital gains rather than payroll. This is true of pretty much anyone who makes their living primarily from investing in undervalued assets as long as they turn them over slowly enough for the long-term capital gains rule to kick in.

Buffett’s profits are invested right back into the companies he owns. He’s famous for it. Invested money is used to build production capacity, hire workers, mitigate risk, etc… By saying that the government should raise his taxes, he is implying that giving tax money to the government is a better investment than his businesses. Of course, the Feds would “invest” his money in earmarked pork-barrel projects and other nonsense. I really do think he’s being disingenuous with these statements. If he is really that concerned about the issue, he should put his money where his mouth is. He could always take the money that he is donating to the Gates Foundation and give it to the Feds instead. Maybe they could use it to bolster Social Security [kidding].

Uncle Sam doesn’t need more money, it needs more self-control. Buffet’s mantra is investing for the long term. Well, investing in America for the long term means investing in infrastructure, people and technology (with accountability) not shuffling money between well-heeled Washington power brokers so they can dole it out as rewards to their supporters.

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