The liberal world may one day realize that we free marketeers are not all about the tax code and not paying anything at all in taxes. Listening to an endless stream of hate the rich class warfare and hyperbole over GE not paying any taxes at all, it is tough sometimes to avoid having this argument over what is a fair and equitable way to divide up our national expenses on the terms of the debate’s loudest participants. Millionaires and Billionaires aren’t making the sacrifices that the rest of America is being forced to make, blah, blah, blah. So here we are, in a point in our history where those who are having their incomes confiscated to pay for a party which we can not afford, after having protested that we can not afford that party, and after having been denigrated as cold hearted evil demons for having noted that the party was beyond our means to afford, those who are on the receiving end of bag of promised goodies are suddenly screeching about shared sacrifice and the wealthy not paying their fair share. Perfectly timed, as if it were a coincidence, with the President’s rust belt wealth redistribution tour, Warren Buffett has once again loaned his voice to the cause of Socialism. Warren’s intellectual dishonesty makes me want to vomit.
First of all, one of the dirty little secrets of our tax code is that wealth in this country is not taxed. Income is taxed. The wealthy, can avoid paying taxes entirely, by not having an income to tax. So when Warren, who’s salary for managing Berkshire Hathaway is $1, whines about paying an effective rate less than the secretary who assists him in running his company, he is not, in any possible manner, being honest. Let’s take a peek at the intellectual dishonesty of Mr. Warren Buffett.
The double tax oversight. The Berkshire Hathaway magnate makes much of the fact that he paid only 17.4% of his income in taxes, which he considers unfair when salaried workers often pay more. But Mr. Buffett makes most of his income from his investments, in particular from dividends and capital gains that are taxed at a rate of 15%.
What he doesn’t say is that much of his income was already taxed once as corporate income, which is assessed at a 35% rate (less deductions). The 15% levy on capital gains and dividends to individuals is thus a double tax that takes the overall tax rate on that corporate income closer to 45%.
The charity loophole. For billionaires like Mr. Buffett, the single most important deduction in the tax code is for charitable giving. Middle-class earners can’t give nearly as much money away to reduce their overall tax burden. Yet we don’t hear Mr. Buffett calling for the elimination of that deduction in the name of fairness.
Mr. Buffett has also already sheltered the bulk of his fortune from federal taxes by putting them into a foundation that will give the money away. That’s an act of generosity, but if the government’s purposes are so vital, why doesn’t he simply give the money to the IRS?
Rebecca Quick of CNBC put that question to Mr. Buffett in 2007. His answer: “Well, that’s a choice and it’s an option . . . If I had to give it to a single individual, or make some young Buffett a multibillionaire, or give it to the government, I’d absolutely give it to the government. I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government.”
Mr. Buffett is no doubt right about the relative efficiency of private donors, but should billionaire philanthropists get such a large tax preference? Another case of fairness?
Something else that the article missed entirely, but it should highlight the hypocritical nature of the Buffetts of the world quite nicely. Through an irrevocable trust coupled with life insurance, Warren would be able to lower his income to zero, while actually making a nice profit on the donation. It is a strategy for which real wealth is needed. Warren has something that most Americans do not have, and that is a huge asset base. Warren has a talented team of advisers, and I am willing to bet that they have told him of this strategy. If ownership of a permanent insurance policy is gifted to an irrevocable trust, with a charity being named as beneficiary, the donor is allowed to take a deduction for the face value of the policy in the year that such a donation is made. I am not privy to Warren’s tax information, (since he is out there advocating that I pay more, I feel comfortable in calling him Warren,) so this example is merely hypothetical. Let’s say Warren takes out a VUL for $1 Million. He gifts it to an irrevocable trust and names the national association to fight depression amongst Socialist politicians. Since he will not ever be spending the money himself, he is not worried about the rules of Modified Endowment Contracts, imposed because of a tax dodge utilized by Ted Kennedy. He funds the policy with a one time investment of $100,000. That cash value, even at Warren’s age would be sufficient to keep the policy alive while requiring no further payment. Warren would then be able to declare a $1 Million donation to the a fore mentioned worthy charity which would net him a $172,000 savings in his tax bill at the end of the year. Warren would have just made a $72,000 profit on the current tax code, something his asset base allows him to do. This strategy is only viable for a select few individuals in our society, all of whom are claiming that they want income taxation rates raised.
So, here is an open challenge to Warren Buffett. Open up your tax returns for public scrutiny, and let us see the advantages in your current taxation being employed by your team of specialists. Write a check to the federal government in the amount you believe you are under paying, which the IRS welcomes by the way, and then we will take you seriously. Otherwise, you are nothing more than a blow hard clown.
On another note, I agree that something is rotten in Denmark that GE has paid nothing in taxes. The reason is that the liberals designed the system and loopholes which allowed GE to get away with this. Those wonderful tax credits for selling the CFL bulbs, the tax credits for making the windmills, the waiver for the Obamacare law that the rest of us must pay for, etc., have made this possible. So when you liberals whine about how we should hate all corporations because GE gets to skip out on the bill, realize that it is entirely your fault that this happened. What did you think was going on when Jeffrey Immelt, the CEO of GE was making all of those appearances with and on behalf of Barack Obama anyhow? What would be the right thing to do, is to make a fair and equitable taxation system free from credits for certain government approved behaviors. We all should pay 15%, period. That would require a 1 sentence tax code.
Cross Posted at Musings of a Mad Conservative.
Tags: Tax Plan, Warren Buffett
