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  • Retorts to Buffett Stress Benefits of Free Market

    Warren Buffett’s demand last week that the federal government stop “coddling” the country’s wealthiest citizens – meaning that it should take more of their income with even more confiscatory tax policies – has earned him rebukes from a few fellow members of the billionaire club.

    In today’s Wall Street Journal, former American Express CEO Harvey Golub writes:

    Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?

    Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?

    Here’s my message: Before you “ask” for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you’ll need less of my money.

    Charles Koch, co-owner of Koch Industries, the second largest private conglomerate in the United States, and a ubiquitous bogeyman for the liberal left, made a similar point in his reply to Buffett:

    Much of what the government spends money on does more harm than good; this is particularly true over the past several years with the massive uncontrolled increase in government spending. I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.

    Both these billionaires are saying essentially the same thing: I can spend my money better – more efficiently and effectively – than Washington can spend my money. These are two of the most successful businessmen in the country. President Obama has never owned or operated a private business. His Treasury Secretary has never even worked in one.

    There are a couple other facts that should be noted regarding Buffett’s punitive tax proposals. First, they do not amount to a debt reduction plan, since, quite simply, the country cannot balance its budget through tax increases. Putting aside the fact that federal revenues have never in the history of the country exceeded 21 percent of GDP, “the rich” simply do not have enough wealth – let alone annual income – to cover the colossal budget shortfalls the country is experiencing, and will continue to experience if its spending habits continue unchanged.

    PJTV’s Bill Whittle – with an assist from Iowahawk – explained the problem in entertaining but sobering fashion:

    The budget cannot be balanced with tax hikes alone, but it can be balanced with spending cuts alone. Since we know therefore that spending cuts will have to be part of any proposal to balance the budget, any debate over tax rates is not a policy question, but a political one: how much do taxes need to be raised in order to secure sufficient liberal support for a budget plan to pass?

    The other point that should be noted: Buffett stands to personally profit from liberal economic policies.

    Americans very often buy life insurance in order to hedge against the Death Tax (the pinnacle revenue raiser of the class war). The large tax payments that result can be offset with life insurance policies. Berkshire Hathaway owns six life insurance companies.

    Buffett invests in businesses with the anticipation of government intervention. He made a cool billion by betting that the federal government would bail out Goldman Sachs, for instance. So why wouldn’t Buffett want higher tax rates? That’s just more money for him to secure in various handouts to his businesses.

    Meanwhile, capital gains taxes – the ones he specifically proposed raising last week – have almost no effect on Buffett’s personal bottom line. Berkshire Hathaway has a preferred asset holding period of, as Buffet likes to say, “forever.” He sells – and therefore pays capital gains taxes – very rarely.

    Posted in Scribe [slideshow_deploy]

    5 Responses to Retorts to Buffett Stress Benefits of Free Market

    1. JeffC says:

      I would point out that Buffet is not a business manager, he is a very good investor in businesses. The number of staff he directly manages is quiet small.

    2. MNJ says:

      Mr. Buffet, The IRS will take your personal check – say, $20,000,000,000 (that's billions) for starters – you can set an example for all the other 400 or so billionaires in the USA – then again, even if the government confiscated all the assets of you 400 or so, it would only wipe out one year's deficit. After you all are broke, then where does the government go?

      Sir, for being so financially successful, the fact that you can make a statement like this is mind-boggling. You invest in companies (note, companies, not governments) that know how to balance their books and make a profit. Maybe someone else is doing your books and that's fine but to make a statement like this and assume it will solve any of our over-spending problems is naive at best and who knows at worse – all i know is my kids and grandkids will have to pay for this if we don't STOP SPENDING

    3. DewyB says:

      No one has suggested we balance the budget on tax increases, that's a straw man argument. Balancing the budget is done with BOTH increases and cuts… cuts only benefit the wealthy who are already paying the lowest taxes in 30 years.

      Second strawman argument is that anyone suggested taking everything from the top 2% of earners to balance the budget… instead what was suggested is that we remove the supposedly temporary Bush Era tax breaks for the top 2% which will raise income by $2.2 trillion dollars a year. Using your analogy we could take everything owned by the bottom 51% which also figures out to be about $2 trillion dollars… then they would have nothing and could not manke money to pay sales taxes which fund things on a local level.

      So your "conservative" view point has a reek of greed to it… don't take mine because I have plenty, take theirs because they have some.

    4. HHH says:

      DewyB,

      Tax cuts do not only benefit the "wealthy," obviously! What cuts, credits, and deductions are we talking about?

      "The lowest taxes in 30 years," is not an excuse to mess around with marginal brackets, since revenue as a % of GDP really only fluctuate with the business cycle.

      The fixation on the "Bush tax cuts" is nonsense and dubious, since the data clearly illustrates that total revenue as a % of GDP doesn't change much. A lot of people fall for the "marginal bracket" nonsense and fail to see what the average tax rates are, and they are decidedly progressive.

      The only argument I see as legitimate and stemming from some knowledge of what is ACTUALLY happening with the tax code and its effects is increasing the long term capital gains tax rate. I don't know if we can still get increased marginal returns.

    5. Dan says:

      The rich do not need to be punished. Their work grows our economy. Their investments drive our economy. To tax them more would only take away from their ability to do this. Don't occupy Wall Street; congratulate Wall Street (and then leave them alone)!
      https://www.facebook.com/CongratulateWallStreet

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