Cartoon: Warren Buffett and Tax Rates

Was Buffett Wrong?

Mark Perry writes:

We now have a proposal for a tax policy - the "Buffett Rule" - based on Warren Buffett's anecdotal "evidence" of his and his employees' tax burdens. But that "evidence" seems pretty far-fetched and not consistent with: a) average federal income tax rates available from the IRS, nor b) average tax rates for all federal taxes paid, from the CBO. Buffett's anecdote has to be an outlier or exception, because under the current federal tax system, the average "super-rich" taxpayer pays taxes at a rate 2-3 times the average secretary. Instead of raising tax rates, we should probably figure out what kind of loopholes allow Warren Buffet to pay taxes of only 17.4% on his $40 million income last year.

Update: Steve Moore on The Kudlow Report tonight said in reference to myth that secretaries pay taxes at higher rates than the "super-rich," (and citing some of the same tax data that appear above) "It's almost as if Barack Obama and Warren Buffett made those numbers up."

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What Kind of Freedom?

Obama to award Medal of Freedom to 15, including investor Buffett ... President Obama will award the Medal of Freedom to billionaire investor Warren Buffett, one of 15 recipients who will be given the country's highest civilian honor, the White House said ... Among the other Medal of Freedom recipients will be former president George H.W. Bush; German Chancellor Angela Merkel ... poet Maya Angelou ... and labor chief John Sweeney. – Washington Post

Dominant Social Theme: The US government is at again, honoring the VIPs that mean the most to the American people.

Free-Market Analysis: We are reminded of a certain book when we read who is getting freedom medals from Barack Obama; but more on that at the end of this article. Warren Buffet is a kind of Keynesian socialist in our humble view...

Start with Buffet. Here is a man who constantly campaigns for increased taxes to be placed on US citizens, identifies himself as a Democrat and is worth something like US$50 billion. He poses as an investor, but really he makes "investments" in businesses that have hidden economic advantages, usually via regulatory loopholes. Of course Buffet may seem free-market oriented in the sense that he has made a fabulous fortune in the "investment game" – but when one examines his criteria for picking companies, it becomes obvious that one of them is mercantilism.

This means that Buffet values companies that in some way have developed access to the US government at state or federal levels and can pull levers of power available to no one else. Buffet is thus not investing in companies that necessarily have a better widget. He is putting his money into companies that are interacting most efficiently with government. He is not in his investing making a principled stand for entrepreneurialism or free markets but seeks out firms that have best exploited the current socialist and leveling environment of the US. It is difficult to reconcile this investment philosophy with freedom...

Conclusion: We started out this article by writing that the distribution of freedom medals to people who, at least in some cases, do not seem interested in the slightest in encouraging freedom reminded us of a certain book. Here is a quote from it. It is very famous and you should be able to figure it out quickly. As follows:

It was as though the world had turned upside-down ... Benjamin felt a nose nuzzling at his shoulder. He looked round. It was Clover. Her old eyes looked dimmer than ever. Without saying anything, she tugged gently at his mane and led him round to the end of the big barn, where the Seven Commandments were written. For a minute or two they stood gazing at the tatted wall with its white lettering.

"My sight is failing," she said finally. "Even when I was young I could not have read what was written there. But it appears to me that that wall looks different. Are the Seven Commandments the same as they used to be, Benjamin?"

For once Benjamin consented to break his rule, and he read out to her what was written on the wall. There was nothing there now except a single Commandment. It ran:

ALL ANIMALS ARE EQUAL BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS.

read the essay

Gates-Buffett Giving Pledge

Bill Gates and Warren Buffett announced today that 40 signers, including at least 30 billionaires and other wealthy families, had officially made the Giving Pledge–a promise to give away more than half their fortunes...

The turnout is impressive, especially since the Gates-Buffett-sponsored pledge was just announced a month and a half ago.

Since some of the names already planned to give away half their fortune, the hard part will be persuading additional signers in the months to come. The Gates Foundation plans to hold small dinners in coming months in which signers will try to persuade potential givers to give their John Hancocks.

Some people may write off the pledge as a gimmick aimed at simply improving the PR of the super-rich, which could certainly use some improving. But the list could become a strong financial force for philanthropy, if for no other reason than peer pressure, publicity and the inspiring example of others.

America’s rich have been searching for new status symbols in the wake of the Great Recession. Yachts, private jets, seaside mansions are so 2007. But being wealthy enough and generous enough to get on the Giving Pledge list may quickly become the ultimate badge of status–both in the U.S. and abroad.

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Carlos Slim: THe World's Richest Man

Forbes magazine released its annual list of the world's richest people Wednesday, and for only the second time since 1995, Microsoft founder Bill Gates' name was not at the top.

This year, the title of "World's Richest" went to Mexican telecom mogul Carlos Slim, with a net worth of $53.5 billion.

Slim, whose holding company America Movil contains a sprawling collection of telecom assets, is the first non-American to be declared Forbes' richest person since 1994, when Japanese real estate kingpin Yoshiaki Tsutsumi held that honor. (He has since disappeared from the list entirely).

But Slim's financial edge over Gates is, well, slim, at least by billionaire standards -- just $500 million. A $1 increase in Microsoft shares, the compilers of the Forbes list noted at a press conference Wednesday, could send Gates' net worth ahead of Slim's.

Also, were it not for his extensive philanthropy, Gates would have a net worth in the ballpark of $80 billion, Forbes' Matthew Miller estimated.

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Buffett and the Stock Market

Is it time to buy U.S. stocks?

According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.

read the CNN story

Warren Buffett Gives Away $2 Billion

Billionaire Warren Buffett has given away 512,169 Class B shares of Berkshire Hathaway Inc. stock to three charitable foundations in keeping with his plan to give away the bulk of his fortune.

The gifts were revealed in paperwork filed Monday with the Securities and Exchange Commission. Those shares were worth $3,999 each, more than $2.05 billion total, at the close of trading July 1, the day Buffett transferred their ownership.

Most of the shares - 451,250 - went to the Bill & Melinda Gates Foundation.

Buffett said in 2006 that he planned to give 10 million B shares to the Gates Foundation over time, 1 million B shares for the Susan Thompson Buffett Foundation named in honor of his first wife, and 350,000 shares for each of the three foundations run by his three children.

read the CNN story

Warren Buffett: US in a Recession

Asked by Germany's Der Spiegel weekly whether he thinks the U.S. could still avoid a recession, he said that as far as the average person is concerned, it is already here.

"I believe that we are already in a recession," Buffet was quoted as saying. "Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession."

read the article