The Buffett Hypocrisy

Warren Buffett is the head of Berkshire Hathaway, a very successful investment firm that owns huge positions in such well established American owned businesses as:

·         Coca Cola

·         Geico insurance

·         BNSF railroad

·         IBM

·         Goldman sachs

·         Bank of America

Here is a link to a full list of their owned/invested companies --  http://www.berkshirehathaway.com/subs/sublinks.html 

His net worth is estimated by Forbes magazine at $40 billion, give or take.   Warren’s voice is an outspoken supporter of president Obama’s policies and he is the frequently quoted, by the president, proponent of making certain that he and his other well to do American taxpayers pay their fair share which means a percentage rate equal to at least what other less fortunate Americans are paying.  He often cites the example that his tax rate is 15% or so which is less that the tax rate being paid by his secretary, Debbie Bosanek.  This Warrenism has now come to be known as “the Buffett rule.”  That’s a quick summary of Warren’s public position on taxation and it is a quick summary of Obama’s use of Warren’s position to increase taxes on some of the very well to do.

For now, let’s leave the issue of why Warren pays a lower tax rate other than to say it has to do with the capital gains tax rate set lower than earned income tax rates on the economic theory that lower capital gains tax rates encourage business formations and other forms of risk taking which create jobs and promote economic growth.

Now Warren also has another public position that is not as well known and most certainly not as well cited by either Warren or his buddy in the white house.  This position has to do with what happens to Warren’s money when he dies. Warren does not want his fortune, much of which was earned here in the United States, to go to the United States government when he leaves Omaha permanently.  He wants it to go to a foundation so that it can be spent on the foundations works of charity and public good.  And when you ask Warren why he would rather get his money to a foundation rather than the gang in Washington DC who most certainly could use his $40+ billion for one of their several worthwhile public good causes, Warren will tell you that he concludes that the foundation will do a better job of spending it and achieving their good purposes and ends than will the gang in Washington DC.

Hmmnn.  Gets one to thinking doesn’t it?  We, at TheFundamentals, think it brings up two very interesting points.

1.    Warren knows that the well to do in the US are already paying much of the federal tax bill.  It works out to something like the top 10% earners pay about 70% of the collected federal taxes (please go to http://www.heritage.org/budgetchartbook/top10-percent-income-earners .)  So Warren has no problem with them picking up even more of the tab; say, 80 or even 90%.  Now why could that be?  We will come back to that question.

2.    Next, if Warren concludes, as he states, that his money can be put to better use after he is gone by giving it to a foundation then why wouldn’t Warren conclude about the same for everyone’s money which is mostly money coming from the well to do?  Sure, we know, Warren would say something like, “well, there are just some things they (government) have to do even if they don’t do them all so well.”  Okay, we agree but Warren is not saying much about the massive amounts of money they are spending which they don’t have and we doubt very much that Warren follows that form of financial irresponsibility (TheFundamentals calls this behavior “fiscal promiscuity) in his own life or in his business life.  What could be going on, we ask?

Here’s the part that Warren doesn’t mention.  His businesses are the great beneficiaries of the government borrowing and largesse (ditto for GE, Wall Street, Banks, Auto’s and Pharmaceuticals to name a few.)  Directly and indirectly, he earns a great deal of money through Berkshire Hathaway because of the federal government’s massive deficit spending.  And Warren is not about to point that out.  Neither is Obama nor the Hollywood media.  Better to just say, raise my tax rate and I will pay more and not add:  “because I am making a pile of money off the government deficits and the debt.”  And we think that is hypocritical as is Warren’s use of federal tax law to have his attorneys take his dough when he is gone and make sure the government of the United States cannot get their hands on it.

So we all know the so-called Buffett rule – well to do pay at least the same rate as the not so well to do.  But now we also know about the real situation – the Buffett hypocrisy.  Pay a little more because you make a lot more when the federal government wastes money all over the place but then make darn sure the federal government doesn’t get their wasteful hands on your dough after you’re dead.