{"id":826,"date":"2012-01-12T22:11:10","date_gmt":"2012-01-13T06:11:10","guid":{"rendered":"https:\/\/schoenblog.com\/?p=826"},"modified":"2016-03-20T22:11:55","modified_gmt":"2016-03-21T05:11:55","slug":"warren-buffetts-altruism-or-lack-thereof","status":"publish","type":"post","link":"https:\/\/schoenblog.com\/?p=826","title":{"rendered":"Warren Buffett\u2019s Altruism, Or Lack Thereof"},"content":{"rendered":"
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I am all in favor of raising taxes on the wealthy, as Warren Buffett recently proposed, even though this would certainly increase my tax burden.\u00a0 My motive is not only the zeal to \u201cdo for my country,\u201d but the knowledge that the greatest risk to my personal well-being is income inequality so great that it leads to revolution.\u00a0\u00a0 As most wealthy taxpayers realize, paying taxes is a small price to pay for preserving the status quo.<\/p>\n

But Buffett has an even more cynical motive for advocating more taxes from the super rich.\u00a0 Taxes are his best friend.\u00a0 Higher taxes act as a barrier to wealth creation.\u00a0\u00a0 The higher the taxes, the safer is Buffett \u2018s position on top of the wealth pyramid.<\/p>\n

To understand this, one needs to understand that for the mega-rich like Buffett, money has absolutely no utility.\u00a0 There is simply nothing they want that they cannot buy.\u00a0 One or five or ten billion more or less simply means nothing.\u00a0 All that matters is their relative position among the super-wealthy.\u00a0 The best case scenario for someone like Buffett is that no one ever challenges his position on the Forbes list.\u00a0 For Buffett, a 100% income and capital gain tax would be absolutely in his best interest.\u00a0 No wonder he now favors higher taxes.<\/p>\n

Another way to understand this is to consider the following: what if overnight the government doubled the amount of money you have?\u00a0 If everyone else stayed the same, this would really be a bonanza for you.\u00a0 But what if at the same time everyone else also doubled his money?\u00a0 Then you\u2019d expect prices to double and everything would end up the same as it was before.\u00a0 Your buying power would not increase at all even though you had twice as much money.\u00a0 The fact is that money is just a measure of your buying power.\u00a0 The only thing that matters is where you stand relative to everyone else<\/p>\n

Buffett\u2019s late call for higher taxes is therefore perfectly consistent with his own self-interest.\u00a0 Indeed, low taxes pose the greatest threat, as it would allow others to catch and overtake him on the wealth pyramid.\u00a0 Buffett\u2019s demand for higher taxes is merely a way to protect his buying power, just the latest manifestation of his relentless pursuit of his own self-interest.<\/p>\n

In his August 2011 op-ed in the Washington Post, Buffett claimed that his income taxes were just under $7m and that this figure was just 17% of his income.\u00a0 Probably the numbers seemed so large that most people didn\u2019t even bother to think twice about them.\u00a0 But the figures are grossly, almost criminally, misleading.\u00a0 Buffett implied that his income was $42 million, which sounds like a lot.\u00a0 It isn\u2019t, at least not for Buffett.\u00a0 That amount is just 0.1% of his net worth.\u00a0 If he put his assets in a CD at his local bank he\u2019d make more than four times that amount.\u00a0 Investing just 2% of his assets in US Treasury bonds would generate an equivalent amount of income.\u00a0 To keep his taxable income so low, Buffett has to invest nearly all of his assets in stock that pays no dividends (like Berkshire Hathaway) or in tax-free municipal bonds. \u00a0In other words, with a more \u201cnormal\u201d asset distribution, one not designed solely to avoid paying income taxes, Buffett\u2019s gross income would be far, far more than what he implies in his article.<\/p>\n

Buffett does not disclose how his charitable gifts affect his $42m in taxable income, whether the figure is before or after taking a deduction.\u00a0 But charitable gifts are another one of Buffett\u2019s misleading schemes.\u00a0 In 2006, Buffett announced with much fanfare that he would give $31 billion to the Bill & Melinda Gates Foundation.\u00a0 The present value was actually far less, since the gift was to be made over a period of 20 years, or at Buffett\u2019s death (when he has no option but to let go of his money).\u00a0 As it turns out, Buffett gives about $1.5 billion per year, or just 3% of his assets to the BMGF.\u00a0 In other words, even as Buffett announced one of the largest gifts in history, he made sure that he would still be getting richer every year until he died.\u00a0 Apparently, even in his eighties, Buffett still feels the need to hold on to and play with his money.\u00a0 And the BMGF, while generously distributing several billion dollars each year, has managed to grow from $29 billion in 2005 to $37.4 billion in 2010.\u00a0 While Buffett mandates that his annual contributions be spent by the BMGF, in fact that spending is merely used to help satisfy the minimum spending requirement for the foundation, allowing other money to remain in the foundation rather than increasing substantially the charitable dollars distributed to charities.\u00a0 In other words, the BMGF itself has become a type of holding company, much like Buffett\u2019s Berkshire Hathaway, investing its assets, growing (largely untaxed), and spending just enough each year to qualify as a charitable foundation.<\/p>\n

Most people who give to charity do so to support their personal charitable interests.\u00a0 Buffett apparently has none.\u00a0 Unlike billionaires George Soros or Eli Broad, Buffett has no desire to use his money for any particular cause.\u00a0 Nor does he wish to spend any time thinking about which charities he might support.\u00a0 Rather, he has abdicated the decision-making to the BMGF.<\/p>\n

As nice as Buffett\u2019s charitable contributions seem, they really are quite unimaginative and, in the context of his excessive wealth, hardly noticeable.\u00a0 He could double his contributions and still be the third richest man in the world until he dies.\u00a0 It is actually not hard to give away large sums of money.\u00a0 He could give $50 million to endow a university economics department in each of the fifty states and that would total $2.5 billion.\u00a0 Each year he could do the same for ballet or diabetes or solar power or you name it.\u00a0 He could even help the country by readjusting his portfolio to a more normal distribution among asset classes, which would hardly hurt his portfolio but would result in more income taxes.\u00a0 But to do these things he would have to have an interest in something other than his own wealth, and that, apparently, is the one thing Warren Buffett is lacking.<\/p>\n","protected":false},"excerpt":{"rendered":"

I am all in favor of raising taxes on the wealthy, as Warren Buffett recently proposed, even though this would certainly increase my tax burden.\u00a0 My motive is not only the zeal to \u201cdo for my country,\u201d but the knowledge … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-826","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/posts\/826","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/schoenblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=826"}],"version-history":[{"count":2,"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/posts\/826\/revisions"}],"predecessor-version":[{"id":828,"href":"https:\/\/schoenblog.com\/index.php?rest_route=\/wp\/v2\/posts\/826\/revisions\/828"}],"wp:attachment":[{"href":"https:\/\/schoenblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/schoenblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/schoenblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}