Sunday, September 18, 2011

Buffett's Proposal

This week, we'll here President Obama ( and of course the media outlets ) tout the so called "Buffett Proposal" to tax the rich.  The idea is that the President will float the idea of raising the income tax rate on people making over 1 million dollars  per year.

Was Warren Buffet's Suggestion to Tax the Rich Genuine? 

Long before Warrent Buffett, the Omaha investor proposed in his NY Times Op Ed to raise taxes on the rich, he sheltered his own massive fortune in the Gates Foundation.  In 2006, he gave most of his money ( at the time 44 Billion worth of stock )  in a tax exempt charity.   His agreement involves giving away one tenth of his wealth each year, until he's given all of it away to tax exempts.  His scheme would not work at all if the Government were to take a huge piece of the money.   He has also indicated that he will give the rest away to non taxable charities before he dies, or at his death.  This has been integral to Mr. Buffet's notions of acquiring vast wealth.   The U.S. Government will not see any increase in taxes from Mr. Buffett.   

Tax Exempt is not Paying Taxes

The very idea of a tax exempt shelter is to avoid paying taxes on money.  Regardless of how good the cause, whether it be inoculating African kids against measles or bringing computers to every class room, the entire purpose of charitable giving is two fold:  1.  To "give" the money to a worthy cause, or at least something the giver deems worthy.  and 2.  Keep the government from taxing the money.

Reversing the Capital Gains Effect

Had Warren Buffett been paying a 38% Tax on his capital gains (or 30% or 20%) throughout his lifetime, he would not have been worth #400 million when he first entered the Forbes "Richest Men in the World" List.  As a matter of fact, he wouldn't have been on the list at all.  He would have been worth closer to $100 million when he first entered the list.

Warren Buffett is 80 years old, and has been investing other people's money, and living off his capital gains for 60 years.  He is NOW deciding to suggest that the system change for the super wealthy, AFTER he has benefited by the system more than any other human being alive.

President's Proposal to Tax People Making More than A Million Dollars Per Year

Obama's so called "Buffett Proposal" to tax people making more than a million per year is named because of the NY Times Op Ed piece "Stop Coddling the Rich"   But if you read the open letter Warren Buffett wrote on August 14th, 2011, he mentioned the SUPER RICH.   Mr. Buffett was clearly directing his message toward those who should be giving more to charity, and in lieu of that, be willing to pay a higher percentage in income tax.  If you read it thoroughly,  Mr. Buffett was referring to those who make $227.4 million on average from Capital Gains.   Not salaried income workers whom he felt already pay their fair share.

As a matter of fact, Warren Buffett was really directing the article at the "Richest" people on earth, or the Top 400 ( Forbes List ) and many of the people on the list do not even reside in the United States.

Taxing the Rich is Just Code Speak to Increase the Size of Government

When Warren Buffett says he thinks it's a great idea to tax the Super Rich, he means they should pay a larger portion of their taxes to government.  But when Mr. Obama says to "Tax the Rich" he means to increase the size the government.

The U.S. Government tax receipts for 2010 are already 4.5 Trillion dollars.   Taxing the rich for another 100 Billion or 200 Billion or 300 Billion may just be a way to curry favor with the middle class, but will do little to pay down our national debt.

Warren Buffet Has Tried to Encourage Other's Before

The Oracle of Omaha by anyone's standard is a humble man.  He lives in a 6,000 square foot house he bought in the 50's.  He doesn't throw his money away on lavish parties, and stunts.  He has encouraged others to give by his own example, and it's easy to accept his notions of charity. 

His wordage in the Opt In piece tells the story:

        I know well many of the mega-rich and, by and large, they are very decent  people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
The "Stop Coddling the Rich" piece does not affect Warren Buffett.  He is 80 years old, and has sheltered his own wealth, and given away much money to charity.  He intends to give it all away before he dies.  He is not giving his money to the United States Government.  Not at all ... Out of his net wealth of 44 Billion, he has paid 7 million in taxes last year, less than a tenth of one percent of what he is worth. 

R.J. Kirk's Views on Warren Buffett's Op Ed Piece:

"Why would anyone care about the views on personal income tax rates of a person who has annual income of only 1/7,000 of his net worth? The opinions of small-business owners, who pay a much higher ratio of tax to net worth, are far more informative and important."

Trying to convince Congress to tax his clients, and those who benefit from his investing tactics; suggesting that higher taxes is a substitute for charity;  and writing letters in the NY Times seem all very good for Mr. Buffett's image.  It may also ameliorate his own guilt after amassing his fortune by the existing rules, and then giving it away to tax sheltered charities.

Isn't it easy to suggest what other's should do after milking the system for all it's worth for his entire professional career?

The Obama administration may well rue the day it decided to use Warren Buffett's name in it's proposal to tax the rich.  When the average tax payer is still unemployed, jobs are scarce, food is more expensive, and gasoline still near $3.50 a gallon, this entire argument is basically a side show.

Buffett's Proposal may do well to fool some voters, and take their attention away from the real issues, but it is hardly a way to solve the country's fiscal problems.


Lon Dunn writes on Evan Carmichael as a productivity and efficiency expert. He wrote and edited The Thesaurus News from 1995 to 2001 with a specialty in Telephony Infastructure Stocks. With over 20 years following the Mobile Industry, Lon helps Companies, Professionals and Organizations develop Mobile Marketing Strategies combined with Social Media Strategies to strategically target specific markets and demographics to rapidly increase revenues. His most recent book available on Amazon is “How to Use Twitter for Local Business” with Tips and Mobile Marketing Strategies that anyone can do themselves. You can download the free “Kindle App for PC to download the book to your Desktop available on the Kindle Site:

1 comment:

  1. I think this is all politics. It makes Obama look like he's out for the little guy without any real hope of passing this into law. It is interesting that half the people in the United States pay NO taxes, and that the Government just wants to grow, and grow, and grow, even in the face of the worst recession ever. When will the Administration stop asking for money?? It's getting aggravating to see this President stubbornly request more money!! Drives me crazy.

    Oh, and hi, Lonny. Thanks for all you do for everybody, you are really an unselfish, and helpful person. And smart, too.

    Jean @SexyJeans on Twitter