The Five Dumbest Things on Wall Street This Week: Nov. 30
3. Buffett's Tax Dodge
On the plus side, at least he didn't bring up his secretary's taxes again.
In an op-ed titled "A Minimum Tax for the Wealthy" in Monday's New York Times, billionaire Warren Buffett repeated his call for America's richest individuals to pay higher taxes. The so-called Oracle of Omaha waded into the fiscal cliff budget battle, positing that wealthy investors like him would never turn down a potentially profitable investment because of the prospect of higher taxes.
Buffett, whose fortune of approximately $46 billion ranks him as the second richest American behind his buddy Bill Gates, also suggested that Congress enact a 30% tax rate on incomes between $1 million and $10 million, and 35% on amounts above that."A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy," opined Buffett, who added that he supports President Obama's proposal to eliminate the Bush tax cuts for high-income taxpayers, but at $500,000 not $250,000. (In case you were wondering, Buffett's salary in 2011 was $100,000 and his total compensation from Berkshire Hathaway slid in just under that half a million mark at $491,925.) Great Warren! Thanks for the reminder. It's been so long since the election that we almost forgot how folks like Mitt Romney and yourself are not paying your fair share. Now if you really want to assuage your guilt, why don't you put your billions where your mouth is and write a damn check to Uncle Sam. It's time to pony up or shut up already. Look, we don't begrudge Buffett his opinions. This is an apolitical column and we truly have no view on his tax ideas one way or the other. They may very well be exactly what this country needs right now. Furthermore, as our long-time readers know full well, we have no great love for the billionaire class. In fact, we publicly pummel them every week when they step out of line. Seriously, we don't hate the plutocracy. We're just tired of Buffett's hypocrisy. He called derivatives "financial weapons of mass destruction" and then sold billions worth of long-dated put options across a slew of equity indexes. He ridiculed investors who "fondle" gold, yet not even a decade ago Berkshire Hathaway (BRK-B) accumulated more than 37% of the world's known silver supply. Wait, there's more. Despite being the ratings agency's biggest shareholder, he told Congress during its hearings over Moody's (MCO) massive negligence during the financial crisis that he didn't "even know where they're located". He attacked ABN Amro for making "a dumb credit bet," while defending his sweet investment in Goldman Sachs (GS), a firm that paid hundreds of millions in fines for selling toxic mortgage bonds to unknowing customers. And speaking of defending the dishonest, who can forget when Buffett exonerated his former deputy David Sokol from a clearly questionable -- and probably illegal -- insider trade in Lubrizol prior to Berkshire purchasing the company? Well, Buffett can forget the Sokol episode of course. That's always been his prerogative, right? Basically, he says whatever he wants and then and does whatever he wants, even if the two don't necessarily match up. And that same two-facedness pops up once again in this latest round of finger-wagging over taxes. Despite his public pleas for the rich to pay more in taxes, as Harvard professor Greg Mankiw rightly pointed out this week, Buffett has been a serial tax avoider his whole career. He doesn't pay a dividend, so neither he nor his investors have to pay taxes on that income. He doesn't sell stock, so he doesn't pay capital gains taxes either. And he is giving away most of his vast fortune to charity, so he gets a deduction at the full market value of the stock he donates, most of which is unrealized capital gains. Finally, as Mankiw blogged, "When he dies, his heirs will get a stepped-up basis. The income tax will never collect any revenue from the substantial unrealized capital gains he has been accumulating." What more can we say? Frankly, we find the whole thing rather taxing. Wait. There is one thing left to be said. Need to borrow a pen, Mr. Buffett?
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