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August 21, 2011

How Warren Buffett Is Wrong

By Jim Babka, Perry Willis, and James Wilson

On Monday, August 15, billionaire Warren Buffett argued in an op-ed for the The New York Times that his taxes should be raised. He claimed that giving the Federal State more of his money would be a good thing.

We disagree. We think Mr. Buffett’s investments do more social good than his taxes do. Here’s why…

None of Mr. Buffett’s companies use force to compel people to do business with them, but everything The States does relies on coercion. This automatically makes Mr. Buffett’s investments better than his tax payments. In addition…

Mr. Buffett’s companies must serve their customers, or go bankrupt. By contrast, Statist programs almost always receive increased budgets when they fail. Thus, businesses have an incentive to use resources wisely, while The State has incentives to waste resources. This is why money spent by The Coercive Sector (The State) tends to have less social utility than money spent by The Voluntary Sector (businesses and charities).

In short, businesses tend to be pro-social because they serve society, while The State tends to be anti-social, because it’s wasteful and coercive.

When Mr. Buffett says that he should pay more taxes, he is really saying that he should have less money to invest. Looked at correctly, this is the same as saying that he wants to stop doing social good, and start doing social harm.

We also want to point out that Mr. Buffett is being a hypocrite. If he thinks The State should have more of his money, then he should write them a check.

But instead of putting his money where his mouth is, he asks Congress to take other people’s money. This suggests to us that Mr. Buffett is really pandering to the mob. He doesn’t REALLY believe the Federal State can use his money more wisely than he can. But he may believe that his op-ed will win applause from Left-Statists who have an unquenchable lust for other people’s money. This bit of brown-nosing may even be beneficial for Buffett’s business!

Mr. Buffett is also scamming us in another way. He wants us to believe that wealthy Americans have been doing less to fund the Leviathan State. He wrote in The New York Times

“Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2% on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion… but the rate paid had fallen to 21.5%”

We say that Mr. Buffett is using percentages in order to deceive. Here’s how those percentages work out in terms of dollars…

  • In 1992 the top 400 wealth generators paid $4.9 billion in taxes.
  • In 2008 the top 400 wealth generators paid $19.5 billion in taxes.

Can you see how Mr. Buffett’s scam works? The percentage of income paid in taxes went down, but the amount of taxes paid in dollars actually ROSE, by a multiple of 4 in 16 years! This is a staggering rate of return. It’s unlikely that Mr. Buffett’s investments grow that much. But then again, actually having to earn money is much harder than taking it from people at the point of a gun the way The State does.

When Mr. Buffet tries to make you think that society’s top wealth creators are paying less in taxes, he is simply being a con-man.

Mr. Buffett should stop trying to harm society by asking Congress to take other people’s money. Instead, Mr. Buffett should tend to his own knitting, because his investments do more social good than his taxes ever will.

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