A Proposal for Mr. Buffett

I have a proposal for Warren Buffett and his fellow billionaires like Bill Gates: Pool your tens of billions, and give that money to the U.S. government to reduce the federal deficit. Taken together, you may breach the $100 billion mark – a significant chunk of change, even when talking about the deficit.

Do it IMF-style, where there are conditions. I.e., if the government takes the money, it has to use it to pay down the debt rather than spend it. Like the IMF, disburse it in tranches, so that if the government isn’t living up to its commitment, then you can withhold the remaining funds.

Of course, you always could give your tens of billions without conditions, given that you seem to have a lot of faith in how the federal government spends its money, based on your campaign to raise taxes. But I would think that even you would realize that that’s like putting your money down a black hole (which should make you think twice about your eagerness to raise taxes).

Isn’t it obvious even to left-of-center people like yourself that the more money government takes in, the more it spends as opposed to pay down debt? That’s why I would think you would be reluctant to give your riches to the government without conditions. (And that reintroduces the irony of why you’re so eager to surrender your money to it through taxation.)

It’s telling that you are admirably giving so much of your wealth to charity, instead of to the federal government. You must think that charities are better stewards of money than the federal government. Why are you so willing to surrender your – and other folks’ – wealth to the government through taxation with no strings attached, but you don’t seem to be willing to give to it voluntarily? It must mean you don’t totally trust the government with your money – you have much more trust in private foundations and/or the private business sector. So why the campaign for higher taxes? It doesn’t make sense. Or if it does, please explain.

You should at least be demanding better accountability from the government in exchange for pledging your support for higher taxes. You have some great leverage – why don’t you use it? Or, are you satisfied with how the government is currently spending your money? If so, then why are you making your donations to private charitable foundations rather than to the government? It’s quite contradictory.

If I were a billionaire (keep dreaming, bub), I would try to set up a deal where I’d pledge my money to the federal government in exchange for it using that money to finance Social Security reform where the program is transformed from a spending program into a savings program via personal savings accounts (PSAs). But I understand that the likes of you and Mr. Gates, being left of center, probably aren’t too thrilled with government-sponsored PSAs. (Plus you’d get beaten up by your friends on the left, who’d accuse you of being handmaidens of Wall Street PSA money managers.)

But one thing you are in favor of is reducing the national debt, correct? So let me repeat: Pledge your billions to the federal government in exchange for it committing to using that money as seed money for paying down the debt, and committing to using its tax revenue (in addition to grants from you) to pay down the debt.

I doubt right-of-center billionaires would go for this idea because they don’t have as much trust in government being a good steward of money. But you seem to have more trust based on your willingness to raise taxes. So see what your left-of-center billionaire friends think of the idea. Who knows – it may even be the beginnings of the U.S. government getting its fiscal house in order.

If you’d be worried that imposing conditions would be perceived by the general public (especially the Left) as plutocratic, i.e. billionaires telling the federal government how to spend its money, then pledge the money with no conditions. Of course, in that case, two-thirds of the money would go toward redistribution, and most of the money redistributed wouldn’t be going to the poor.  (I.e., two-thirds of federal government spending now goes toward redistribution rather than toward traditional government services, and most of the recipients are middle class or rich.)

In that sense I could see why you’d rather give your money to charities rather than to the government.

And that should make you reconsider your desire to raise taxes on the wealthy.

Mr. Buffett, Come Clean On How Much Your Secretary Makes

Here’s an article of mine on rich guilt, positing that Warren Buffett perhaps (emphasis on perhaps) could harbor that emotion. He famously says that his tax rate is lower than that of his secretary. My instinct was to give him the benefit of the doubt on that, because based on what I’ve read about the man, he seems of high moral character.

But in researching the article, I looked into his claim. First there’s the well-known observation that if you take his corporate taxes into account, his tax rate is a lot higher than that of his secretary. Technically he’s referring to individual tax rates so we’ll put that aside for now.

But who is this secretary that he talks about so much? He doesn’t say. Is that her or his official title? Or is it “executive assistant” or something along those lines? If the latter, why doesn’t he refer to her or him as “my executive assistant”?

In any event, in order for her or him to have an effective tax rate higher than Mr. Buffett’s claimed 17.4 percent rate, the secretary must be one very highly paid secretary – much more highly paid than a typical secretary.

Mr. Buffett’s reportedly said that his secretary makes $60K a year. But as Chris Edwards at the Cato Institute points out, at that salary it’s difficult to see how she can be paying a higher tax rate than Mr. Buffett. Could it be that she’s married to a high-earning spouse?

A typical secretary in the U.S. makes on the order of $30K-$40K a  year. So when people hear Mr. Buffett and President Obama talk about Mr. Buffett’s “secretary”, they naturally think that her income is modest. The title “receptionist” also has been used in Mr. Buffett’s tax rate comparison, and people certainly associate receptionists as people with modest pay as well.

So Messrs. Buffett and Obama are leading Americans to believe that $35K-a-year secretaries and receptionists are paying a higher tax rate than billionaires.

But the effective tax rate on people making that salary is very low; near zero in many cases. Here’s what the left-leaning PolitiFact had to say:

Most secretaries don’t make that much. Salary.com put the average salary for an entry-level secretary at $33,249. The top marginal rate for the secretary would be 15 percent, and then typical deductions and exemptions would reduce the tax burden even more. If the secretary had children and no other income, the likely income tax burden would be zero.

In order for Mr. Buffett’s secretary to pay a higher effective tax rate than him, she would have to be earning on the order of at least $100K to $200K a year. And at that rate, she’s almost in Mr. Obama’s infamous “top 1 percent” – the folks who Obama wants to tax more based on Mr. Buffett’s secretary tale!

Mr. Buffett, you do realize, don’t you, that when you talk about secretaries, the vast majority of Americans think you’re talking about people making on the order of $30K-$40K? They are therefore being misled into believing that Americans of modest incomes are paying higher tax rates than the wealthy.

For example, MoveOn.org made an “I’m Warren Buffett’s Secretary” ad in which someone saying they have three kids and make $40K a year has a higher tax rate than millionaires and billionaires, which is clearly false. (That’s particularly false vis-a-vis millionaires, many of whom pay more income taxes than dividends or capital gains taxes.)

You’re a man of high moral character, and I can’t imagine that you deliberately would want to leave Americans with this misconception. So I recommend that you state exactly how much your secretary earns, his or her exact title, and whether his or her salary is vastly above what typical secretaries in America make.