Buffett's Op-Ed on Taxes Too Little, Too Late

BOSTON (TheStreet) -- Warren Buffett's opinion article in The New York Times, in which he volunteered to pay higher taxes and said his super-rich friends would be willing to do the same, has become a rallying cry for average Americans fed up with partisanship in Congress that led to a downgrade of the country's coveted triple-A rating.

The only problem is that the billionaire investor's published view on tax breaks comes far too late after the debt-ceiling debate, and now Buffett's argument begs more questions about his timing, leadership and motivation.

Warren Buffett

While the rich have been "spared," as he put it, from the shared sacrifice thanks to tax breaks, Buffett points out the inequity in the fact that the poor and middle class have been fighting wars for the U.S. while tightening their own belts. Buffett says he would raise rates immediately on taxable income in excess of $1 million, including dividends and capital gains. Those who make $10 million or more would see an additional increase, according to Buffett's proposal.

For people mad as hell at the U.S. government for the embarrassing way it handled the debt-ceiling debate, Buffett's assertion that the super-rich would be amenable to paying higher taxes was downright cathartic. Facebook lit up Monday with shared links to Buffett's piece, "Stop Coddling the Super-Rich," while "Warren Buffett" himself became a trending topic on Twitter.

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As celebrated as Buffett's view is, much of it rings hollow. For one, if Buffett was taking advantage of tax breaks when paying his income tax, why couldn't he simply have ignored the exemptions on his taxable income? Buffett notes that he paid only 17.4% of his taxable income for 2010, well below the other 20 people in his office.

If he feels so guilty about the tax breaks he has exploited, and if his Giving Pledge philanthropy effort isn't enough, why doesn't Buffett simply cut a check for the U.S. government to pay down the debt? The Treasury Department is taking online donations to pay down the U.S. debt, so the Oracle of Omaha could throw a few million dollars at the debt from the comfort of his own home if he were truly serious about combating the country's fiscal woes.

Buffett isn't leading by example, at least in this instance. In October 2008, at the height of the financial crisis, he was telling investors to buy U.S. stocks, saying he was using his personal account to do the same. This time around, Buffett isn't putting his money where his mouth is, at least not yet. Paying higher taxes and announcing a willingness to pay higher taxes are not the same.

Take Howard Schultz, CEO of Starbucks ( SBUX), on the other hand. He privately emailed other company executives in the U.S. to urge them to join him in boycotting political contributions "until the Congress and the President return to Washington and deliver a fiscally disciplined long-term debt and deficit plan to the American people."

Second, why has Buffett decided to address the tax-break situation now, rather than during either the debt-ceiling debate weeks ago or in late 2010 when the Bush-era tax cuts were debated and ultimately extended? There are a few possible explanations for this, not all of which are flattering for Buffett.

It could be that, out of the goodness of his heart, Buffett is offering himself and other mega-rich taxpayers up to the 12 members of Congress tasked with sorting out the country's finances. Buffett says it's imperative to cut spending but also increase revenue in order to find a compromise that truly deals with the fiscal problems in the U.S. If anything, this bails out Congress by giving them ammunition to raise taxes on the super-rich.

This could also be a very well-orchestrated PR campaign by Buffett, who has endured a rocky stretch recently. Buffett may be known as the savviest of value investors, eating cheeseburgers and drinking Cherry Coke in the local diner in Omaha. But the billionaire investor has seen his credibility called into question several times over the past few years.

For example, Buffett famously called derivatives "financial weapons of mass destruction," comparing them to venereal disease. "It's not just whom you sleep with, but also whom they are sleeping with," Buffett warned. And yet, Buffett's Berkshire Hathaway ( BRK-A) has made hundreds of millions on derivatives bets.

Earlier this year, after Buffett announced the acquisition of Lubrizol ( LZ), it was revealed that former Berkshire lieutenant David Sokol bought $10 million in stock of the chemical company after recommending it as a buyout target. Buffett initially defended Sokol but later called the insider dealing "inexplicable and inexcusable." Sokol's lawyer lobbied back, calling Buffett's reversal a "flip-flop and resort to transparent scapegoatism."

Most recently, Buffett said Standard & Poor's, a unit of McGraw-Hill ( MHP), was wrong to cut the triple-A rating on U.S. debt. Instead, he said the U.S. deserved a quadruple-A rating, evidently forgetting that such a classification doesn't exist. Fitch Ratings on Tuesday reaffirmed the U.S.'s triple-A rating, but Moody's ( MCO) could still cut its credit rating on U.S. debt.

In order to avoid another potential PR nightmare, it makes sense that Buffett would push congressional leaders to cut more and raise taxes in order to prevent further credit downgrades. After all, Buffett owns shares of Moody's. While he says he doesn't look at ratings when deciding on investments, Buffett could face some heat for owning shares of Moody's if it chooses to follow S&P and downgrade the U.S. credit rating.

For now, though, Buffett appears to be a champion for the middle class because he publicly said what many have been thinking for months. But here's a warning, Mr. Buffett: If those tax breaks are still the status quo come April 15, I'll be sending my W-2 form to you in Omaha for your charity. After all, paying more in taxes isn't that big of a deal, right?

-- Written by Robert Holmes in Boston.

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