Credit God for Talent, But Pay the IRS
By Matthew Miller, Syndicated Columnist
Back on orange alert? Cut taxes for the wealthy. Economy sluggish? Cut taxes for the wealthy. Mideast peace prospects dimming? Cut taxes for the wealthy. Heartbreak of psoriasis? Let’s try the acronym for variety: CTFTW.
This recap of Bush administration economic policy has evoked too little outrage from business leaders who ought to know better. But when Warren Buffett weighed in against “dividend voodoo” on the op-ed page ofThe Washington Post the other day, he made an argument that could inspire a sea change in national priorities.
Buffett noted that today both he and the receptionist at his firm, Berkshire Hathaway, pay about 30 percent of their income in overall federal taxes (including taxes on income, capital gains and the payroll tax). If dividends became tax-free to recipients, and Berkshire decided to pay $1 billion dividends next year, Buffett’s share would be $310 million in additional income.
Under the Bush plan, of course, Buffett would owe not a penny more in taxes. As a result, his federal tax rate would plummet to 3 percent. His receptionist would still be at 30 percent. “She would be contributing about 10 times the proportion of her income that I would to such government pursuits as fighting terrorism, waging wars and supporting the elderly,” Buffett writes.
The reason such a result strikes Buffett as absurdly unjustified comes down to one word: luck. Buffett says he and his receptionist both know that were lucky to be born in America. “But I was luckier,” Buffett adds, “in that I came wired at birth with a talent for capital allocation-— valuable ability to have had in this country during the past half-century.”
“Credit America for most of this value, not me,” the multibillionaire continues, “If the receptionist and I had been born in, say, Bangladesh, the story would have been far different. There, the market value of our respective talents would not have varied greatly.”
Put simply, Buffett is crediting luck—where he was born and what talents he happened to come into the world with—with being the major force in explaining differences in economic status.
Buffett’s sensitivity to the “pre-birth lottery” ends to be in short supply among America’s well-to-do. Polls show that the richer people are, the more likely they are to feel that their wealth is a function of effort as opposed to luck.
But who in public life ever challenges America’s elite to examine that premise as a way of thinking about national tradeoffs? Especially at a time when it is simply not possible to have endless tax cuts targeted to the rich and also provide things like basic health coverage to the uninsured?
Besides Buffett, there’s only one group of well-to-do Americans I can think of who routinely look at things this way: Hollywood stars. They don’t gripe about taxes the way many other wealthy Americans do—and they overwhelmingly support Democrats who seem likelier to raise them. Why?
My theory is that these super-talents are more sensitive than the average rich person to the portion of their wealth that’s attributable to luck. Yes, there’s hard work and persistence and making your own breaks, but the voice, the presence, the body (well, minus certain modern enhancements) clearly come from God.
The idea that beneficiaries of such income-enhancing blessings might be asked to bear more of the burden of government seems fair to them, not cause for resentment. Even though similar accidents of birth (i.e., brains) account for the lofty incomes of, say, corporate lawyers, they’re much more likely to credit their toil, presumably because what they do all day is less pleasant.
(If I’m right, maybe the platonic ideal for tax reform would combine a flat tax on income that’s due to one’s own efforts and character, with sharply higher rates on cash derived from an excess of gifts from God. Over to you, IRS.)
Buffett, who has peerless credibility in the business and financial worlds, should be encouraged to make his luck-based view of political economy a crusade. Given the stakes for the nation at today’s fiscal and moral crossroads, an op-ed here and there won’t do it. At 72, maybe it’s time for the Sage of Omaha to consider that a campaign on behalf of “value politics” could be the logical coda to a lifetime of “value investing.”
Reprinted with permission from mattino@worldnet.att.net
