Billionaire hedge fund guru Warren Buffett was the latest progressive recently calling for higher taxes on the rich* with an op-ed in the New York Times (somebody please send him this link). He claims he only paid seventeen percent in taxes last year; far less than others in his own company:
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Why do they feel so compelled? Are these "blessings" being showered upon them done out of the kindness of legislative hearts, or could there be other, more base reasons? Could it possibly be the millions of dollars people like Buffett shower on political campaigns? Perhaps the one-on-one exposure with certain members of government - exposure of which their own constituents (and the ones who ultimately pay the price for these dealings) can only dream? Or maybe the odd coincidence of so many former federal employees finding themselves jobs on Wall Street or K Street with the help of crony connections? A spotted owl is made endangered through no fault of it's own. The same cannot be said about the 'coddled rich'. It's called corruption, Mr. Buffett, and you are complicit.
In his op-ed, he raises good points about capital gains and other loopholes but ultimately, he isn't looking for tax reform, he's calling for tax increases.
What we need is tax reform - removing loopholes and carve-outs and widening the tax base. So why would he call for tax increases instead? Well, it seems there is a little piece of information that Mr. Buffett and the NY Times forgot to mention (full disclosure is for suckers). Apparently Mr. Buffett's company offers certain investment plans that, if taxes were to go up, would see a marked increase in business due to their sheltering natures, and thus a tidy profit for Mr. Buffett. Who will then instruct his small army of tax attorneys and accountants - who surely couldn't be part of the reason he only paid seventeen percent - to find every loophole possible (conveniently provided by his pals in Congress after some vigorous lobbying) to keep from paying as little of the new taxes as possible.
What a racket.
Lets not forget, too, that he gets to play the patriotic hero, swooping in to the rescue as well as giving his good buddy Obama a nice little talking point for the campaign trail. Everybody wins! Well, except the middle class, whose 'millionaires and billionaires' in the $200,000 tax bracket take one on the chin.
But wait, there's more!
Not only will Buffett profit quite tidily by the increase in business, but it turns out Omaha's favorite son's business has had a bit of a problem paying it's taxes. It seems that Berkshire Hathaway, Buffett's influential investment firm, hasn't paid it's taxes in almost a decade - since 2002, to be exact.
Which begs the question: Why, exactly, he is demanding taxes be raised because of 'shared sacrifice', when he isn't even paying what he owes now?
But wait, there's more!
Last week, President Obama made a little phone call to his dear friend Buffett, giving him a heads up on the situation with the floundering Bank of America. Buffett had a bathtub epiphany and decided to invest $5 billion (the article is really wonky but highly enlightening) in the company. Except he really didn't. Technically, the warrants BofA offered him equals about half the amount he invested - $2.45 billion:
So Buffett is really only injecting $2.55 billion of new capital into Bank of America and receiving $300 million per year in interest (6% * $5 billion). If you divide $300 million by $2.55 billion, you get an effective interest rate on Buffett’s investment of 11.8%. That’s pretty expensive for a bank that claims it doesn’t need any new capital!
Guess what else he got out of the deal? A nifty little tax break. It doesn't take an oracle to see why he jumped all over this deal. Did I mention Buffett is throwing a big fundraiser for Obama at the end of September? Apparently the party favors will be back scratchers.
The only problem for Buffett is that it is beginning to seem like he is using his reputation of having a nose for deals to promote the Obama agenda and people are starting to question whether his famous instincts haven't been dulled by ideology. The cash infusion into BofA was supposed to foster confidence. Instead, there are grumbles about how much trouble the bank is really in.
With our paychecks shrinking and the cost of goods rising, it's getting harder and harder to pay the bills and put dinner on the table. Getting lectured by the billionaire buddy of the Spender-in-Chief about "shared sacrifice" as his political connections help him make hundreds of millions of dollars in profits while simultaneously evading taxes is rather hard to swallow.
* "Rich" being 'millionaires' and 'billionaires' making a staggering $200,000 and up. Also known as making enough to be taxed but not enough to be able to afford the accountants and lawyers to get out of the taxes, like real millionaires and billionaires. Bye-bye small business and middle class!