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Why You Should Listen to Warren, Not Buffett

Author's Note: The original version of this article suggested that Russia's social and economic woes are a symptom of low taxation. This is an unjustifiable conclusion. Rather, Russia's ills demonstrate that a low tax rate, in a vacuum, offers no guarantee of economic prosperity. The sixth paragraph has been rewritten to this effect.

NEW YORK ( TheStreet) -- Elizabeth Warren is already making waves in her pursuit of a Massachusetts Senate seat. As of Thursday morning, Warren -- a Harvard Law School professor and staunch defender of consumer protections -- is the most searched person on Google.

Elizabeth Warren

The reason for Warren's newfound Internet stardom is simple. She was able to articulate -- in a few words -- what the Democratic Party has been unable to communicate for years:

"There is nobody in this country who got rich on his own. Nobody.

You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along."

Whether or not you agree with Warren, she is worth listening to. And for those who argue that lower taxes are a guaranteed path to prosperity, Russia's ills demonstrate that a low tax rate -- in a vacuum -- offers no guarantee of economic prosperity. The Economist writes:

"...[Russian] corruption crushes the prospects of active and talented people...Investing in innovation and raising productivity makes little sense when your well-connected competitor can hire the tax police and prosecution service to force you out of business.

Parents send their children abroad not to learn to run their businesses more efficiently, but so they never have to come back...They are looking for things they cannot buy: recognition of achievements, protection of property rights, physical safety, a functioning health service, a proper education for their children.

They want to live a life which does not involve paying bribes, or losing one's business for political reasons, or being jailed at the whim of a corrupt bureaucrat."

Alas, the U.S. is mired in a myopic debate over taxation, with Warren Buffett -- a politically connected billionaire with questionable ethics -- serving as a poster boy for the Democratic Party and a class-warfare invoking hypocrite in the eyes of Republicans.

Ultimately, the American political debate would be better served by understanding how an effective social system allows capitalism to exist, grow and flourish.

We should be talking about how our tax dollars are being invested -- for the sake of our capitalistic system and the future of our country.

-- Written by John DeFeo in New York City


Did Elizabeth Warren Miss the Point on Taxes? >>
One of TheStreet's readers responds to Elizabeth Warren's comments on taxation.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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