I went back and read Warren Buffett’s op-ed in the NYT again this afternoon, and heck if I can make heads or tails from it.
His message seems to be “I’m rich, and I want the super-rich like me to pay more in taxes.”
That’s great. Write a check.
But that can’t be it. He doesn’t want the super rich to pay voluntarily , if he did this would be a very simple thing to do. He wants the government to tax the super rich at a higher rate because it’s the right thing to do. He’s tired of having politicians look out after him and other super-rich “…much as if we were spotted owls or some other endangered species…”
Okay, so how come they pay so little? Because they make money on investment income — capital gains. As I read this, he seems to be saying to raise the capital gains tax.
And then I get lost again.
Investing is the science and art of placing money where it does the most good — where it grows the most, or is the safest. Good investors — and Buffett is at the top of the list of great investors — make complicated financial decisions based on what’s the best place to put their funds.
You don’t get rich as an investor unless you are watching all the pennies. Perhaps Buffett is so incredibly awesome that an extra 20 or 30 percent in taxes right off the top doesn’t bother him, but for the rest of us mere mortals that’s a big chunk of change.
…Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. 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…
Ok, I’m calling bullshit. What does “sensible investment” mean? Does it mean the amount invested, the risk, and the amount expected in return? Because last I checked, you’d take the amount you’re getting in return and decrease it by your tax rate.
Either Buffett is making a point so fine I have missed it, or he’s just blowing smoke up my ass. He doesn’t know people who don’t invest when you decrease their return by a significant percentage? What? If he’s not fighting for each percentage point here and there, just what the heck kind of investing is he doing? Can I get in on some of this action?
So Warren is going to dicker and haggle each little dollar out of the other guy when he’s in an acquisition, yet willingly give up even more money than that on his taxes? Huh?
if I had a billion bucks, would I continue to invest it in the market with a heavy capital gains tax, or just drop it in tax-free municipal bonds? Wouldn’t I just do the math and figure out which option was best? How else would you make the decision where to invest?
How would you keep the rich from going into tax-free investments? Eliminate them? Only have them be tax-free for poorer people? Remember that these bonds finance a lot of very valuable government work around the nation. Having some really rich guy come in and pick up your City’s bonds says a lot about whether he thinks the city is making good investment decisions or not — it’s a critical part of the system of public finance.
His argument seems irrational. The entire purpose of investing is to handle things like this, right? That’s why you pay the tax lawyers and accountants incredible amounts of money. If you didn’t care about 10 or 20 percent, then just file your return differently. Do the simple return and pay the AMT. You could save all those legal fees and also pay your fair share. Nowhere is it required that you categorize everything to the last detail.
I thought to get rich and be a really awesome investor, you had to manage all the little details. Perhaps I got it wrong? Maybe 20 or 30 percent off your wealth each year isn’t that big of a deal? Who knows? I guess Buffett does, but he’s not telling.
I understand that people want higher taxes on the rich. I think it’s stupid, but I’m not going to argue about it. Have fun with it. To me this entire debate over “fair share” is a diversionary tactic to take people’s focus off of how totally screwed the economy is and how terribly-managed our nation’s finances are — a mess created by both political parties. I also think there is an argument that Buffett doesn’t make, but I suspect he really thinks: that with so many uber-rich sitting around, and so much economic destruction going on in the world, it’s much better to pony up now and look like a hero than try to fight the system and end up losing it all. This is a “pay up and do the right thing because the social structure depends on it” argument — that basically poor people are so stupid and envious that unless you are seen to be a huge patriot, they are going to punish you (and society might fall apart.) Society depends on the poor folks having a feeling that they are able to sock it to the rich guys, otherwise, chaos would reign.
His real argument is probably too snooty of an argument to make in print, but something tells me that’s what he’s really getting at. I wished he’d have just come out with it, though. It would have been a lot more honest.
I also would have understood it.If you've read this far and you're interested in Agile, you should take my No-frills Agile Tune-up Email Course, and follow me on Twitter.