Wednesday, October 31, 2007

Buffett on Taxes: Apples vs Oranges

Warren Buffett stated on NBC News Monday evening that his taxes are too low in comparison to his employees. Here is the exchange with Tom Brokaw:

Tom: You've talked about in your office, for example, you pay a much lower tax rate with all of your wealth than, say, a receptionist does.

Warren: That's exactly right, Tom. And I-- I think the only way to do it is with specifics, and-- and - and in our office, 15 people cooperated in a survey out of 18. I didn't make anybody do it. And my total taxes paid-- payroll taxes plus income tax-- and the payroll tax is an income tax. It's based on income.

Tom: Yeah.

Warren: Mine came to-- 17.7 percent. That-- that was the-- that was line 61 I think-- or, no, line 43-- is the percent of taxable income, plus payroll taxes, 17.7 percent. The average for the office was 32.9 percent. There wasn't anybody in the office from the receptionist on that paid as low a tax rate. And I have no tax planning. I don't have an-- I don't have a-- an accountant. I don't have tax shelters. I just follow what the U.S. Congress tells me to do.

Here is the problem, one which Mr. Buffett surely understands but that may be well beyond the pay grade of Mr. Brokaw; Mr. Buffett is comparing apples and oranges. Mr. Buffett has arranged to be compensated with stock and dividends (which has likely helped the companies that Berkshire Hathaway owns and the firm's own shareholders) rather than taking a salary, causing his compensation to be paid as capital gains. A good friend pointed out that Mr. Buffett is likely attempting to point out the disparities in tax treatment between the rich and everybody else. Among other things the rich can afford estate and tax planning. Mr. Buffett claimed to not have a tax planner and if he is trying to make the point that my friend believes that he is attempting to make then Mr. Buffett needs a decent PR person. His words are being used in an attempt to raise taxes across the board; is Mr. Buffett not familiar with Mr. Brokaw and what he does?

Others have properly pointed out that Mr. Buffett could simply send an extra check to the government to cover whatever he believes he owes and that is true. However it is noteworthy that Mr. Buffett is complaining about a pay structure that he has implemented. On some level he sounds like his buddy Bono. Bono has spent years telling Americans that they need to pay more in taxes in order to give a larger share of our efforts to those deemed needy by Bono and others. The rub is that Bono has been using an Irish tax scheme that subsidizes the artist of that nation. So Bono has been paying in the area of 1% of his substantial income in taxes. With little else to do Bono now spends his days whining that others are not as moral as he is because they do not pay what he believes that those others should pay in taxes.

Mr. Buffett is being used by those who have every desire to stifle American growth in order to feed their own pathetic and envious phyches. It would be a shame if Mr. Buffett's legacy ends up as being a dupe for those who wish to destroy what Mr. Buffett has spent a lifetime building. Mr. Buffett should know by now that society in Washington is likely more stultifying than society in Omaha, so he shouldn't suck up to Brokaw and his ilk.

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