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.