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Is Warren Buffett a Big Fat Liar, or Just Ignorant About Money?

By October 31, 2007No Comments
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I was watching the NBC Evening News last night when up pops Billionaire Warren Buffett telling viewers how he is under-taxed and therefore “the rich” should be paying higher taxes. Buffett claimed that all his employees- including secretaries- pay higher tax rates than him. Of course the liberal media never bothered to question him on his assertion. They never bothered to point out how misleading his comments were. They never bothered to present a fair and balanced, non-biased counterpoint. It seems that only fiscal conservatives who support smaller government and lower taxes are ever “fact-checked” and face hostile questions in the interest of “fairness” by the left-wing news media. I should know. I’ve been there many times before. I served in the media as anchorman and host of five shows on CNBC (then known as Financial News Network). And since my days ended as a member of the media, I’ve been a guest on hundreds of television and radio shows in that same national media spotlight. It’s so easy to spot the bias and hypocrisy- when liberals are interviewed by the media, they are treated with kid gloves. No hostile questions, no balancing of the story by reporting what others with a different point of view have to say. No objective for “fairness.” Just allow Warren Buffett to slam the rich and demand higher taxes on success (otherwise known as “income redistribution”). Afterall a Billionaire couldn’t be biased, could he? He couldn’t have an ulterior agenda, could he? Certainly not if he’s a LIBERAL Billionaire.

When conservatives are interviewed by the media, it’s a completely different story. Conservative guests must be aggressively questioned and debated to create a “sense of balance.” Suddenly a counter-point must be presented at all costs to avoid looking biased. But where’s the need for balance and a counter-point of view when the liberal media agrees with their liberal guests? The answer is- there is none. Warren Buffett’s interview on NBC was a great example of the disparity. Buffett’s assertions went unchallenged by NBC, or the reporter for the segment Tom Brokaw (yes the old NBC anchor who recently retired).

First of all, Buffett is either dead wrong or being purposely misleading. It’s a fact that facts lie all the time- anyone can twist facts to fit the point they are trying to make. Isn’t it the media’s job to point that out? Isn’t it the media’s job to present both sides of the argument? Buffett worded his claim in such a way that it appeared to viewers that he pays less taxes than his secretary. If I pay a 10% tax rate on $10,000,000 of income and you pay 20% tax rate on $30,000 of income, it is true that you’re paying a higher rate. But that’s completely misleading. My lower tax rate adds up to $1,000,000 in taxes paid. Your supposedly higher rate adds up to $6000 of taxes paid. Shouldn’t someone at NBC News have bothered to point this out? Wouldn’t you call that comparison of tax rates a bit misleading? Wouldn’t you say that the rich guy that pays $1,000,000 to the government is paying his “fair share” compared to his employee paying $6000?

Shouldn’t someone have pointed out that the employee paying $6000 per year in taxes will only pay about $240,000 (after working 40+ years) in his or her entire lifetime. That means that their rich boss pays 4 times more in taxes in one year than his or her employee will pay in a lifetime. Perhaps pointing that out might have made this story a bit more “fair and balanced.” But Tom Brokaw never bothered to question Warren Buffett’s contention. Not a peep. Not one objection. Not one word of protest to try to balance the story. Brokaw even went so far as to ask one of Buffett’s longtime employees about taxes and if this disparity favoring the rich is fair. He asked the question right in front of Buffett- his boss. Wow that’s pretty tough investigative journalism, huh? Gee, we’re guaranteed to get an honest answer from Buffett’s employee of 30 years, right in front of his ego-maniacal billionaire boss, aren’t we? That will really balance the story, huh? Of course, Buffett’s employee took the courageous route and responded with words something like this, “Aw sucks, I’d defer to Warren on anything about money or taxes. He’s a pretty smart guy. If Warren says so, it must be true.” Not too much bias there, huh? No obvious butt-kissing towards billionaire bosses allowed on the NBC Evening News, huh?

But wait. I’m only getting started. If you want to be objective and fair and present a balanced point of view, why not ask Warren Buffett exactly what kind of tax rates he’s referring to? Afterall, it’s a fact that rich people do pay higher tax rates than others on the lower end of the income scale. A secretary earning $50,000 or below probably pays tax rates of about 25% to 30%. Her boss that earns $150,000 a year (let alone a cool billion like Buffett) automatically (before legal tax deductions) pays a rate of close to 40%…plus higher sales taxes (because he quite naturally spends more)…plus higher property taxes (because he most certainly has a more expensive home)…plus higher state income taxes (on a higher income)…plus payroll taxes on all his employees. So what the heck is Buffett talking about? Is he ignorant or purposely being misleading? Buffett not only pays far more tax dollars than his employees, he also pays higher tax rates than his employees. Something doesn’t add up here.

It took me awhile to figure it out- but it finally dawned on me. Buffett is a Billionaire (with a capital B). He probably takes no salary. He probably earns 100% of his income from capital gains investments (interest, dividends, sale of businesses, stocks and real estate investments). Capital gains are taxed at 15% versus income from your job that is taxed at 25% to 40%. So Buffett was comparing completely different tax rates. He was comparing apples to oranges. Yet Brokaw never bothered to point out this misleading trickery. Buffett’s sleight of hand was never questioned or disclosed to viewers. The reason capital gains tax rates are lower is because that comes from money left over after you’ve already paid your taxes. To tax capital gains at all is DOUBLE TAXATION. That is why so many thriving countries all over the world offer capital gains tax rates of zero. To pay 15% capital gains tax rates is already paying 15 percentage points too high. To raise the rate higher is logic that only an ignorant fool…or an out-of-touch billionaire would advise. Or perhaps a deceptive liberal billionaire with an agenda.

The money I use to invest in homes, rental properties, stocks, bonds or to start businesses is the money that I have left after I’ve already paid my income taxes. Why should I be taxed again? Neither Buffett nor Brokaw bothered to mention that argument. Money I invest in those kind of capital gains deals is pure “risk money.” I could lose it all (and I have on numerous occasions). Those kind of investments are what power the entire booming American economy. We want Americans of all income levels to invest in homes, stocks, bonds, small businesses. That’s precisely how you create prosperity. And of course more wealth and prosperity creates more tax revenues. It’s not higher rates that create more taxes- it is lower tax rates that creates more prosperity and therefore more tax revenues! How could you encourage more Americans to take huge risks with their savings by raising the taxes on these kinds of investments? I would never buy a stock or rental property…risking my life savings…if I was taxed at 50% or higher on my profits. But motivate me by offering me low capital gains taxes- now I’ll risk everything I’ve got on the very investments that power the U.S. economy- stocks, bonds, real estate, small businesses.

That’s the reason that Warren Buffett’s argument is stupid, ignorant or just plain misleading. Billionaires are out of touch. He’s already got his $50 Billion (give or take a billion or two). But young, newly-minted, self-made millionaires like me are still struggling and risking it all every day so we can build our fortune. So we can create our own version of the American Dream. We need our capital gains taxes low enough to encourage us to risk big and invest in America. And we deserve lower tax rates on those investments simply because we’ve already paid our high tax rates on our incomes. Capital gains is our reward- our only chance to build true wealth. Our only chance to invest in something that earns money while we sleep. Buffett has it all backwards- capital gains shouldn’t be taxed at all. The tax rate should be zero.

Buffett is out of touch. He’s fat and happy. Taxes are meaningless to billionaire liberal fat cats like him. It wouldn’t affect him if rates were 79% or 99%. He wouldn’t even notice. He’s already got his $50 Billion salted away. Perhaps that’s why he wants taxes raised- money is meaningless to him. Or perhaps he isn’t the saint that the liberal media (and his publicists) portray him as. Perhaps he’s not the wonderful, benevolent philanthropist he portrays. Perhaps his goal (like most rich liberals) is greed- by raising tax rates he keeps you and me out of his Billionaire Boys Club. He can keep us begging for scraps. Buffett’s already got his $50 Billion. He knows we CANNOT possibly catch him unless tax rates are low enough to encourage risk and entrepreneurship. And of course the bonus in this equation is that low tax rates create a booming economy. That’s our best shot at accumulating our own fortune- low taxes and a booming economy that creates unlimited opportunities for upward mobility and wealth. But raise tax rates and the window of opportunity shuts closed on millions of ambitious, courageous, entrepreneurial risk-takers.

High tax rates will prevent the rest of us from achieving our American Dream. If tax rates are high enough, it’s virtually impossible to save enough to invest in real estate or stocks, or open a new business. The higher tax rates are, the lower your odds of ever attaining wealth. Prime example: France. High taxes mean fewer jobs, less investment, and far lower rates of entrepreneurship. Few Frenchmen invest in anything. They just want to work at a safe job (guaranteed for life), with a safe, steady weekly paycheck, with a 35 hour workweek and 6 weeks vacation. No wonder France’s economy is in shambles. High tax rates are proven to eliminate upward mobility and destroy ambition.

Warren Buffett made his billions during periods of low tax rates and booming economy (no coincidence there). We all know that he’s no dummy- he clearly understands that. Raise rates dramatically, ruin the economy, take away 50% or more of my profits, and it’s assured that I’ll never catch up to Buffett. By raising tax rates on investments, Buffett is killing the American dream. He’s trying to turn America into France. France is a land where fairness and equality rule the day. No question about that. Everyone is equally poor and miserable. Except for a few billionaires who dominate French business. That’s the kind of country (and economy) Buffett wants to create. One where he is the billionaire king- and the rest of us beg for scraps.

This “tax the rich” philosophy that Buffett espouses isn’t to help the little guys of the world- it’s to screw the little guys! High tax rates prevent the rest of us from ever becoming rich like Warren Buffett. He wants to be alone in the rarified air of his “Billionaire Boys Club.” He wants to put up big obstacles to keep the rest of us out. High tax rates are the single biggest roadblock to success for smart, ambitious, young, self-made Americans. Poor people and immigrants can’t move into the middle class because of high tax rates. The middle class cannot become millionaires because of high tax rates. And millionaires can’t become billionaires because of high tax rates. High tax rates screw everyone- except those who already have their billions. Liberal Billionaires like Buffett aren’t on your side. Warren Buffett is only interested in making sure he’s always the king. And he wants to make the rest of us his servants and serfs, begging for scraps. Funny how Brokaw and the liberal media never bother to point that out.