My girlfriend, a devoted liberal, posted this link to facebook: Stop Coddling The Super-Rich. Buffett, as always, contributes an informed opinion to a reputable magazine in contrast to his own personal wealth. Buffett quickly separates himself as a usurer compared to "[earning] money from a job," in an effort to identify himself as a member of the super-rich and therefore qualified to speak for them. Being the third richest man in the world, this distinction should be obvious to any reader of a Buffett piece. What I would like to do here is provide a close reading of this article, examining word choice and positioning as to why Buffett would submit this besides gains in public respect such as he earned from my girlfriend.
Buffett immediately ingratiates himself with the American public, using the second-person plural "OUR." This dictates the tone of the piece: Buffett is not speaking as a wealthy man with his own interests, but rather at the level of the average citizen who has a hypothetical wealth. This is a hallmark of persuasive writing, indicating a willingness by Buffett to persuade as he integrates. Is this a bad thing? Hardly, it allows for a clearer voice to emerge that is more immediately relatable to the common reader.
So then why does Buffett transition so quickly to hard numbers? He slowly moves from the general second-person plural to a more specific class of people who classify their income as "carried interest," then finally goes directly into his own paid taxes. As a percentage of taxable income, he admits paying 17.4% of all earned funds. The details of how this number is reached are not probed, however; unless Buffett does all of his own accounting in the quickest way possible, there is a strong likelihood of tax loopholes and escapes present in his return. Again, this is no sin; every individual who has a dependent, for example, gets a break. It is simply that these breaks do not accumulate as well, "if you earn money from a job." Again Buffett relates to the average, implying that financial trading is not a job but simply money coming from money (which, in all fairness, it is).
Buffett attributes this gap to changes in payroll and personal income taxation, without directly mentioning the Bush tax cuts. He does, however, add that he paid these taxes in the 80's and 90's, so the Bush cuts look to be the fairest example of how this gap grew from Buffett's view. It is here that Buffett provides a grand insight into taxation for investors: If (Revenue - Tax) > Investment, the tax rate should not be considered as a fault. However, rising taxation creates profit scares, wherein a risk premium for taxes must be introduced should the investment be long term. This long term valuation is again scared by inflation, creating an equation more akin to ((Revenue * (1+Inflation) - (Tax + risk premium) > Investment. This is simplified of course, but is implied in Buffett's statement that "I have yet to see anyone...shy away from a sensible investment because of the tax rate on the potential gain." Without factoring in risk premiums for loss, in theory all the investor has to do is weigh his options for estimated revenue and plug and chug. Finance is by no means this easy, but let's just play simple.
Again, Buffett implies a fault in the Bush cuts, noting that, "You know what's happened since [1980-2000]: lower tax rates and far lower job creation. This is a grand nod to Keynesian theory, where government spending would create jobs, but the government can't spend without taxes. Looking back at the previous article on Rothbart posted here, we can see a traditional increase in spending and slight fluctuations and debt until the years following 2000. Oddly, Buffett fails to mention the recession of 1982 which was called back to many times in the wake of the modern crisis. This assumes a revisionist past, where Reagan did cut taxes or cut them effectively enough for Buffett to feel compassion outside of investment.
Buffett makes claims of his "super-rich" friends' desires for philanthropy and increased taxation, but makes no reference to whom outside of members of The Giving Pledge, wherein the super-rich pledge funds upon their death (if I remember correctly, and I am trying to keep this text based). For as noble as these individuals may be, it should be their accountants being asked. Philanthropy towards government organizations is not unheard of, and if they feel more taxation is appropriate, why not donate past the write off cap?
For all the talk of coddling, Buffett does not address the ability to be simply philanthropic. Buffett is known for being charitable, so this is in no way an attack on him. But if he possesses this money, this influence, and these tax happy friends, why not give more?
This article becomes, sadly, a puff piece. Money will flood the coffers of the super-rich during its writings, and those willing to believe they are as American as Warren Buffett will happily take this as a great sign. But Warren calls for no direct change outside of a general coddling, names no names, and avoids naming the source of these new tax cuts. There is implication of a greater good at work, yet nothing is being done. I'm glad to hear a usurer willing to help the poor. I'd just like to see it happen. No offense, Mr. Buffett, but name names. Start an action committee. Pay lobbyists. Do anything to bring this vision to reality.
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