When your name is Warren E. Buffett, just about anything you say or do is going to draw attention.
When your name is Warren E. Buffett, just about anything you say or do is going to draw attention.
So when Mr. Buffett, one of the richest people in the world, this year started saying that his tax bill isn't high enough, it wasn't surprising when a new tax-the-rich proposal was named in his honor.
Whether it was his objective or not, the so-called Buffett Rule was born, and the world-renowned 81-year-old chairman and chief executive of Berkshire Hathaway Inc. almost instantly became a major part of the political debate on taxes.
The Buffett Rule, which would apply to individuals earning more than $1 million a year, became part of the tax plan proposed by President Barack Obama.
Suddenly, the folksy investor commonly known as the Oracle of Omaha is being seen as having a few sharper edges, particularly among critics of higher taxes on the rich.
“Personal political beliefs aside, there is nothing stopping Warren Buffett, or anyone else, from paying more taxes if they want to,” said Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management Inc., which has more than $250 million under management and supervision.
In August, Mr. Buffett wrote an opinion piece in The New York Times explaining his disgust with the current tax system, stating that the $6.9 million he paid in taxes in 2010 was only 17.4% of his taxable income.
Meanwhile, 20 other people working in the Berkshire offices were taxed at rates of between 33% and 41% last year, he stated.
By the time it was explained that such a mega-rich icon as Mr. Buffett was actually paying lower taxes, on a percentage basis, than his own secretary, the foundation for shared sacrifice and fairness arguments was firmly in place.
“Last year, 80% of [government revenue] came from personal income taxes and payroll taxes,” Mr. Buffett wrote. “The mega-rich pay income taxes at a rate of 15% on most of their [investment] earnings but pay practically nothing in payroll taxes. It's a different story for the middle class: Typically, they fall into the 15% and 25% income brackets, and then they are hit with heavy payroll taxes to boot.”
Of course, as Mr. Buffett has surely learned, there is nothing simple when it comes to combining taxes with politics, which is why some pundits anticipate more sizzle than steak in terms of actual change.
“President Obama kind of made [Mr. Buffett] the poster boy for what he is advancing, but if it wasn't [Mr. Buffett], it would have been some other poster boy,” said Dean Zerbe, managing director of alliantgroup, a tax services provider for small and midsize businesses.
“People might listen to Warren Buffett for investment advice, but I think it shows a certain naiveté to assume it will change much about how people on Capitol Hill are thinking about tax policy,” Mr. Verde added. “It certainly makes for a nice applause line in a speech, but I don't think there's a member of Congress who will slap his head and say: "My God, I didn't know what I was thinking until I heard Warren's perspective.'”
Whether actual tax law changes result from Mr. Buffett's assertions remains to be seen, but it already is making for good theater.
In October, Rep. Steve Scalise, R-La., proposed authorizing the Internal Revenue Service to add a box on tax returns that would give filers the option of paying more taxes.
Last month, Senate Democrats proposed a 5.6% surtax on millionaires to help pay for President Obama's $447 billion jobs bill, a proposal that was quickly ridiculed by Republicans.
jbenjamin@investmentnews.com
