Monday, October 24, 2011

Questions for Warren Buffett

Do you remember when reporters used to ask tough, probing questions in an effort to get to the bottom of the issue of the day, rather than simply regurgitating the talking points they are fed? Today, however, the media unquestioningly repeats the President’s mantra as established fact, never bothering to raise the glaring questions to the source of those claims, Warren Buffet.

There are so many questions which need to be asked about Buffett’s claim that his secretary pays a higher tax rate than he does.

Mr. Buffet, who exactly is your secretary and what percentage of her income does she pay in Federal income taxes? What would her tax bill be if she hired your team of accountants and tax attorneys to fight the IRS on her behalf? How is your secretary’s income tax equivalent to your capital gains taxes paid on growth of money you have already paid income taxes on?

Mr. Buffett, if you believe that you should pay more in taxes, why did you spend the last decade fighting to avoid paying a billion dollars in back taxes?

Mr. Buffett, exactly how much do you feel you should pay in taxes, and why have you not voluntarily contributed that amount to the Federal Treasury? They do accept donations.

More important than probing into the untruthfulness and hypocrisy of Warren Buffett’s claim is a query into the flawed philosophical assumptions behind it.

Mr. Buffett, does a nation become more prosperous because of bigger government or more private sector investment?

Mr. Buffett, who is responsible for creating more jobs, you or your secretary? Who is responsible for creating more wealth, you or your secretary? Can you name one poor person who has brought prosperity to more people than you have? Can you name one government entitlement program which has produced more innovation, more goods and services increasing the mean standard of living more than you have by your investments in American corporations?

Mr. Buffett, your claim that the rich should pay higher taxes is being used by the President to support raising taxes to pay for his stimulus bill. Does the economy benefit more from you investing your money in growing, profitable businesses or from the government taking your money and distributing it to failing companies such as Solyndra? Do the companies you invest your own money in create more jobs than Solyndra? Which are the better criteria to determine which companies will most effectively use the money they receive to create jobs and boost the economy: a solid business model producing profitability and growth potential, or political cronyism?

Mr. Buffett, if the government confiscated all of your wealth and distributed it equally to every American citizen, giving every American roughly $127, how many jobs would we create with our $127?

Mr. Buffett, you are famous for earning a consistently high return on investment. What is the return on investment of the Federal Government?

Mr. Buffett, if the government confiscated 100% of your income from last year, would the deficit be reduced by even one one-hundredth of a percent?

Mr. Buffett, you have pledged to give 99 percent of your wealth to charity. Why do you think that money confiscated from you by the government will do more good for mankind than if you gave it to a charity of your choice?

Mr. Buffett, in a free market economy where buying and selling transactions are voluntary, the only way to make a profit is to produce goods or services which are worth more to the buyer than the price for which you sell them. Thus earning a higher income indicates that you have produced more value for more people than someone who did not earn as much. Why should producing more value be punished by higher taxes?

Mr. Buffett, did you invest your money in Solyndra? Why not? If you determined that Solyndra was not a good investment, why would you want the government to take your money and give it to Solyndra?

Mr. Buffett, the President's first stimulus bill spent nearly a trillion dollars and cost $412,500 per job created, and two years later, unemployment is higher than it was before the stimulus. Would you invest in a company which produced that kind of return on investment?

If not, why would you want to pay more taxes for the wasteful Federal Government to squander?


Monsoon Matriarch said...

Grrrr... Got me riled up! Here's the secret about Mr. B: Berkshire Hathaway stock pays no dividends. Instead it accumulates the profits, growing in PRICE. Until you sell a share, there is NO TAX on any of it. No cap gains, no annual dividend taxes, etc. ALSO, much of WB's salary is in BRK stock or 'freebees', like private air travel and staying at luxury locations owned by...Berkshire Hathaway. His salary is peanuts becaus ehe spends essentially nothing -- it's all expense account, but he's worth BILLIONS.

Until he sells a few personal shares of Berkshire Hathaway, he pays nothing on his wealth. WHen he does sell, he pays only the cap gains rate of 15%. THAT is most of why he pays a lower rate than his secretary.

He has lots of expensive MBA's, accountants and attorneys who have constructed his business to result in the lowest possible taxes for the business, his shareholders and Mr Buffett. It's also why his early shareholders love him. They bought at $5 or $10K a share and can live well by cashing in one share a year at $100K cap gains, and pay 15% caps gains tax minus deductions. Well engineered to avoid paying the gov much of anything.

Sooo it's EASY for him to sound like he WANTS to pay more. HORSEPUCKY. If he did, he'd change how his business and stock are structured first, before pandering to the party in power. He was probably angling to replace Biden on the ticket this fall...

John said...

Hi Don,
I'm confused by the idea that citizens should not feel like it is an earned duty to pay taxes. Without government, there would be no roads or infrastructure, no small business incentives, no international diplomacy. I can't even pretend to know all the things our tax dollars go towards.

I must confide I am Canadian. Wait! Don't delete! This is an opportunity to exchange ideas. I am interested in understanding how 49% of Americans seem to think so differently than myself. We are your neighbours and great admirers but there are issues we view quite differently.

I agree that government is inefficient in its spending and often corrupted by many who claim to want to do "public service" but are really there to preserve their millions. These are valid complaints about a system which hinges on money and not ideals of individual excellence and collective compassion. We suffer from this same ailment in Canada.

I would suggest that elected officials who take advantage of public coffers should be given similar jail sentences to crack dealers. Governments have a responsibility more sacred than the private sector to make good use of their shareholder's investment (ie. the people of America or Canada).

Continued in next post:

John said...

The trouble with the private sector/ big business/ "job creator" alternative to government, which has been the foundation of American economic theory since Reagan, is twofold:

#1. When push comes to shove the "heroic" private sector and the financial sector in particular, socialize their losses and privatize their gains. This was never so blatant as in 2008-9 when the Bush budget (which dictated economic policies until the end of fiscal 2009) earmarked $700 billion to be distributed to bad gambles by Banks that were "too big to fail" with little of it going to the homeowners they had bankrupted with their shell game. TARP and the stimulus bill were brain children of a Republican Administration to clean up a very badly behaved and under-regulated financial sector. Fun fact: under Obama, only $475 billion of that has gone out thanks to Dodd-Frank. A large chunk of this Obama diverted to save the American auto industry. An industry Romney would have let die.

And while we're on that topic: When he managed Bain Capital from 1985-1999 Romney was fabulously successful in generating high returns for Bain's investors. But he did so through heavy use of TAX-DEDUCTIBLE DEBT, usually to finance crazy dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain while Romney and his chums kept off-shore banks in business. Romney privatized the gains and socialized the losses. That he calls himself a job creator is an insult to job creators everywhere.

#2. In a recession, it is difficult for private business, especially small businessmen, who should be the engine of a healthy economy, to risk making big investments in infrastructure and R&D which will give them a competitive advantage. Even large businesses are keeping their money out of the economy for fear of another 2008 collapse. Apple's coffers exceeded $100 Billion in 2012, 2/3 of which is kept in offshore accounts. They have yet to bring it into the open market to stimulate the economy.

This is when the government coffers (taxpayers money and money borrowed from China (1 trillion of which would be saved if the Bush tax cuts are rescinded)) are instrumental to grease the wheels of the economy - to invest in jobs and new technology and small business so that the economy can begin to grow again. And yes, sometimes the government is going to pick the wrong horse. But so does anyone trying to be on the forefront of emerging technology.

Here is a statement I am sure you will find hard to believe: Under "fiscally conservative" Republican governments, spending historically rises at a much higher rate than under Democrat administrations. It is a myth that conservative governments bring smaller government and less spending. This is true in Canada as well. I am compiling this evidence in a paper which I would be happy to share with you. I must sound totally biased and probably am but I assure you, Canada is so envious of the U.S. having a statesman of Obama's calibre and character. I just wish all Americans could see it.

I look forward to hearing from you and having a vigorous and stimulating debate.
All the best,