Warren Buffett [1930- ] is undoubtedly the most famous American investment guru in the last century. I, among the millions of sensible small private investors, have enjoyed his brilliant investment/financial acumen, by investing in his Berkshire Hathaway mutual fund.
Buffett is famously unassuming and modest, depending on his common-sense approach to evaluation of old-fashioned strong dependable-product-oriented companies, to generate returns which have been the standard on Wall Street for three generations. Buffett's personal worth, or assets under his direct control, place him, at any given time, among the top 4 or 5 individuals on the planet.
Buffett would be the last person in the world to expect anyone to take his advice on political matters, but he's never been shy about offering opinions about what might make our domestic economy healthy, or healthier.
On Sunday, the New York Times published Buffett's opinion piece on Federal Tax policy, "Stop Coddling the Super-Rich."
Gore Vidal remarked once that in America, we have welfare for the rich, and laissez-faire capitalism for everyone else. This isn't what we usually hear, of course, since our media has traditionally been controlled by the rich and the corporations. In the old days, "yellow journalism" focused on the peccadillos of the well-to-do, but since World War II, the Fourth Estate has been under the control of capital in this country. If the business of America has been business, the business of media has been to protect the privileges of the wealthy and powerful.
Today, you will seldom see any opinion critical of corporate interests, or of the "super-rich." Let's be fair: Buffett is so rich, he can "afford" to be honest about the corruption of our tax system--even if he were paying ten times what he currently pays, he'd still be making out like a bandit. He's approaching his dotage; he's been responsible for more charity and good works with a flick of his little finger, than 99% of the rest of his countrymen. In short, he has the cred and the privilege to offer an opinion. He's not running for office, and he no longer has a vested interest in protecting his own little corner of the market, even as recreation.
Buffett informs us that he paid a total of $6,938,744 in federal income taxes in 2010. Given that Buffett is worth an amount just south of 100 billion dollars, in rough terms, that means he paid somthing like 2/3's of 1 percent of his total net worth to the Feds. If Buffett had contributed less to charity, he doubtless would have paid more, but how much more would be "fair"? No doubt the libertarians are shivering with discomfort at this point. Why should self-made men of distinction pay one dime of their earnings to support the general governance?
People who "work" for a living, trading their time and energy for fixed or variable rates of remuneration, won't have trouble understanding the inequitable imbalance of this situation. My wife and I pay fully 42% of all our income in taxes--Federal, state, local, fees, licenses, sales, penalties, etc. What this means in real terms, is that as middle-class householders, the claim that government can make on our income is at least 7 times what it can demand from someone in Buffett's situation. It doesn't take a genius to see that any income distribution scheme which dilutes the income generated by our society into proportionately larger segments of the population, would yield a considerably greater tax revenue than is realized through our present tax system. By concentrating the wealth of our economy among the top 1/10th of 1 percent of the population, and taxing them as if they "needed" this income to maintain their well-deserved wealth, is a recipe for a drastic truncation of entitlement.
Most people agree that the promises we've made to ourselves through exaggerated expectations of retirement or pension income cannot be sustained in an atmosphere of a tightening economic outlook. But we also know that the capital presently being held in private hands is unlikely to be invested in America, and even if it is, it's unlikely that it will generate significant increases in solid middle-class jobs (that is, a decent wage, plus health insurance and some modest pension program). Employment may grow, but the loss of real wealth among everyone below the $200,000 annual household income level, will continue, and probably even be accelerated. Our new "service-oriented" economy will mean that 2.3 wage-earners per household will earn less than their grandparents did with a single full-time wage-earning head of household in the 1950's or 1960's. That transformation has occurred in an environment of carping conservative bitchiness which demands more "shared sacrifice" from everyone but the defined well-off upper margins. The super rich today are four times richer than they were in 1990. The real tax burden of the rich (and super rich) has been steadily declining in real (as well as adjusted) terms for five decades. The corporate tax rates today are less than 30% of what they were in 1960.
The old wives' tale about discouraging jobs with higher capital tax rates is cited by Buffett: "I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation."
The Tea Party members of Congress swore that they'd hold the line against any tax "increases"--even if that threatened the full faith and credit of the U.S. Treasury. Putting aside for now the issue of the credit rating assigned by Standard & Poor, it's clear that these wild-eyed young arrivistes, had no real interests in the immediate effect their ideological position could, and will, have on everyone's economic interest. Were they simply stupid, or did they like the idea of staging a tantrum which could have no favorable outcome, for anyone? It's unclear from all the poles we hear about, what Americans actually think about the tax inequities presently in effect. Do they like the idea that our society is becoming increasingly top-heavy, while the rest of us keep losing ground? Statistics prove that the separation between the rich and very rich, and everyone else, is widening at an alarming rate. What this means in real terms is that the distribution of income is steadily driving the middle class into the lower echelons. Families which once could own homes, will now rent. Families which once could afford to buy an automobile on a three year loan, will now have to take out a long term "mortgage" to pay for it, or drive a used one. Aggregate savings balances by Americans continue to sink to all time lows.
Buffett was careful to add that raising the tax rates on the rich and super rich won't by itself solve the deficit problem we've gotten ourselves into. Practical solutions WILL involve shared sacrifice across the economic spectrum. Tax reform will not mean large tax cuts for the middle class, but it will involve addressing the inequities which Buffett, and others in his class, enjoy. Concentrated capital typically exerts an influence far in excess of its human numbers. Our country may never have been truly representative, in the sense that the Boston Tea Party gang originally understood it to mean. Our Congressional proxies in Washington now mostly defend the privileges of capital. We have the best government that money can buy, as the saying goes. Taxation without representation.
But if we continue to sink into further debt, everyone stands to lose, even those coddled rich. "Pay me now, or pay me later." Americans have been pretending for about 30 years that things are getting better, but the figures don't support that. Things have been getting better for the top one percent, despite the fact that inflation has been moderate to insignificant for decades. Given the actual costs of living in America--which includes health care--middle class people are living less well, and have fewer assets, on balance than they did a generation ago. Our schools, our infrastructure, our services are all worse than they were before. We can "afford" to mount expensive foreign wars, and to give the rich and the super rich big tax breaks, but we're less prosperous, as a population, than we were before.
This is the reality which Buffett acknowledges. It's time we all shared the sacrifice. He may be a traitor to his class, but we know in our hearts he's telling the truth.