Warren Buffet - Why Is He Hiding the Truth?

Warren Buffet, in an op-ed piece for the New York Times, advocates higher tax rates for super rich people like him. But in his lecture to our politicians, he seems to have mastered the political art of parsing his words to shroud the truth. He identified loopholes like "carried interest" or for stock index futures, but he doesn't advocate closing the loopholes. Why not? He includes payroll taxes which fund social security, knowing that everybody's contributions are capped at $106,800 but so are their future benefits. The fact that he pays a lower overall percentage is a red herring (and he knows it and intentionally leaves that part out).

He also says that he never saw anyone shy away from a sensible investment because of the tax rate. Of course, what he doesn't tell you is that the impact of taxes is always a factor in a smart investor's investment decisions. I can't believe that he made a single acquisition of a company without knowing, in detail, what the tax consequences would be. To imply that tax rates don't play a part in investment decisions is really disingenuous on his part.

Then, he shows some amazing statistics but highlights only the one that supports his weak argument. He notes that in 1992, the top 400 taxpayers paid 29.2% of the $16.9 billion they earned. By 2008, the top 400 paid only 21.5% of the $90.9 billion they earned. Wow, the rich people's tax rate went from 29.2% to 21.5%. What he doesn't tell you is that their tax bill increased from $4.9 billion to $19.5 billion - almost 4 times as much!! That's almost $49 million each and it's still not enough. What should it be? $100 million? $500 million? Would that be fair? Maybe we should let the people who pay nothing decide what is fair?

But the real point he ignores, but his own numbers prove, is that when tax rates go down on investment income, tax revenues go up. The reason is no more obvious than is seen over and over again with capital gains rates. Capital gains occur when you sell an investment for a profit. When tax rates are high, people tend not to sell their investments which delays both their gains and the government's tax revenues. When rates are low, people are more likely to sell their investments which produces both capital gains, tax revenue, and has the added benefit of allocating capital more efficiently. Mr. Buffett absolutely knows this, but he conveniently left it out of his argument.

I don't know what the motivations are for his Obama-style love affair with higher tax rates, but when he leaves out important details - details that an Oracle of Omaha would know by heart - you have to wonder what else he is hiding from you.