Just As I Thought

Being Buffetted

The op ed piece by Warren Buffett in the Post this week is causing a stir amongst the well-to-do: they’re writing nasty letters to the editor. What’s curious is, they are not disputing the facts at all. Instead, they’re questioning Buffett’s motives and pointing out his low tax liabilities as evidence that he is a hypocrite. That may well be, but his mathematics stand unchallenged, and that’s what matters to me.

Warren Buffett [“Dividend Voodoo,” op-ed, May 20] believes we should all pay higher taxes because he feels guilty for having been “wired at birth with a talent for capital allocation” and becoming extremely rich as a result. I wish Buffett would write a check to the federal government large enough to palliate his troubled conscience and leave the other 291 million of us out of it.

Note the first sentence, a common spin by the conservatives. They’ve made it seem as if you’re actually raising taxes if you don’t cut them. Grammatical chicanery.

Millionaires are seething at Warren Buffett’s betrayal of their class. They suspect him of trying to polish his populist reputation at their expense. Easy for him to say he doesn’t need a tax cut; he liked his private jet so much he bought the company (Net Jets), and we can’t even afford our first jet, they whine. He not only doesn’t need a tax cut, he doesn’t need $29 billion of his $30 billion.

… In 2002, Buffett earned a salary of $100,000, as he has in each of the past 21 years, and received other compensation (primarily director’s fees) totaling $200,000. Unless he moonlights, the taxable earned income of one of the world’s richest men is $300,000, giving rise to a federal tax liability of about $90,000 (using the 30 percent tax rate he claims to pay). It is possible that the 1 percent of his net worth that is not invested in Berkshire shares — in Buffett’s case, $300 million — produces taxable investment income. It is also possible that this sum is invested in tax-free bonds, producing no annual tax liability. That’s where I would be investing my petty cash if I had 99 percent of my wealth in a single stock.

Assuming the 1 percent of his net worth not invested in Berkshire shares does not produce taxable income, Buffett’s lifetime federal tax bill has probably been less than $5 million, about .02 percent of the wealth he has accumulated.

… Ironically, if Berkshire Hathaway does decide to pay a billion-dollar dividend, as Buffett suggested it might, as a result of the reduction of dividend taxes to 15 percent, the federal taxes he would owe on his $310 million share of the dividend would be $46 million. It is entirely possible that Buffett would pay more in taxes on account of one year’s dividend than he has so far paid in his lifetime.
Isn’t it ironic that Buffett is being taken to task for taking advantage of the tax structure that benefits the rich… and those people who are criticizing him for it are supporting yet another tax benefit for the rich?

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