by Alex Rosati
Through a week and a half of being lambasted as a socialist and a hypocrite by the right-wing media, Warren Buffett refused to dignify their personal attacks with a response. Instead, he concentrated on doing what he does best: making money for Berkshire Hathaway’s shareholders. In this case, his purchase of $5 billion worth Bank of America preferred stock is also a move that will likely help the country far more than following Pat Buchanan’s exhortation to personally send that much money to the U.S. Treasury. Critics of Buffett’s “Stop Coddling the Super-Rich” op-ed in the NY Times have been urging him to “set an example” by putting his money where his mouth is, and that is exactly what he has done with this deal. People don’t try to mimic the Oracle of Omaha’s spending or donating habits; it is his investing that is followed with baited breath.
Pundits who have been labeling Buffett hypocritical for recommending higher taxation on the wealthiest Americans but not being willing to simply donate to the government are not only completely off base, they actually bolster the billionaire’s argument. Few people honestly yearn to pay more in taxes. True, Rebecca Tuhus-Dubrow reports in the Boston Globe that there has been a history of voluntary taxation in the United States (“Voluntary Taxes,” 6/27/10). However, she points out that a key to such behavior is having control over how one’s additional tax contribution is spent. That desire for control is a major reason why wealthy individuals typically prefer to support charities with tax deductible donations, rather than simply paying more to the government. Unfortunately, the U.S. needs money for much more than just a few high-profile causes, including unglamorous day-to-day operation, and can’t have a large proportion of its income restricted to certain uses. Possessing a similar problem, universities encourage alumni to give to the general fund rather than making earmarked donations.
Therein lies the necessity of taxation. None of the commentators criticizing Buffett’s op-ed took any issue with the crux of his argument, that raising taxes on the extremely affluent would have no impact investment decisions or job creation. Instead, they disputed his notions of fairness and branded him a hypocrite. But, the billionaire is anything but hypocritical, even if he makes full use of the loopholes and havens provided by current tax law. Buffett was implying not that he WANTS to pay more taxes, but that he and his extremely affluent brethren SHOULD pay more taxes. He then goes on to emphasize that it is the government’s job to increase revenues. Even if he did set the example for his peers by sending money to the government, how many would follow? Certainly not Harvey Golub, who, in the Wall Street Journal (“My Response To Buffett And Obama,” 8/22/10), vehemently protests any more money being taken from rich people such as him (Golub was the former Chairman of U.S. government-controlled AIG). The pundits harping on people’s ability to optionally pay additional taxes are completely missing the point. If meaningful revenue is to be gathered, EVERYONE who can afford it must contribute. The Oracle of Omaha attempted to influence tax policy so that his entire (if tiny) class will have to pay up, not just the generous ones or those who feel government still has an important role in the American way of life. Buffett would be shooting his own argument in the foot if he responded to Buchanan and the other pundits by writing the Treasury a $5 billion check.
Instead, Buffett used his own brand of very capitalistic patriotism to send a message to Americans, rich and not-so-affluent alike. In 2008, the Berkshire chief attempted to bolster investor confidence with his op-ed “Buy American, I Am,” paired with investments in Goldman Sachs and General Electric which arguably saved those two firms. Today, he injected new life into the financial sector with his B of A purchase, lauded by Steve Goldstein of MarketWatch as “the new TARP” (“Buffett’s BofA investment is the new TARP,” 8/25/11). Buffett’s latest op-ed warns that inaction by Congress in dealing with our fiscal problems is likely to turn public doubt into hopelessness. Mailing the government a check would not have impacted legislative decision making, the actions of his peers, or the national debt itself. However, Buffett COULD make a difference by putting $5 billion of Berkshire money into a bellwether company that has been beaten down by negative sentiment since January. Leveraging his status as the world’s greatest investor, the move demonstrates the Oracle’s ability to rise above partisan squabbling while both doing his job and helping his country.