Buffett also reiterated in the interview that people like him have not been paying their “fair share” of taxes for all these many years. This is where his illogic hits a crescendo. If Mr. Buffett (or anybody else) isn’t paying enough in taxes, then he’s only got himself to blame. He could easily choose to make an extra contribution to the I.R.S. He could also instruct his staff of lawyers and accountants who represent him to the I.R.S., to stop calculating all the legal, allowable tax deductions that are available to him. All of these methods, and others, would allow Mr. Buffett to pay more in taxes – if that’s really what he wants.
But then Buffett had to go and perpetuate the same myth that he and the President have been perpetuating for over two years, when he alleged (once again) that his secretary pays more in taxes than he does. This is not only a myth, it is a lie. Buffett, and wealthy Americans like him, don’t draw “income” like most working Americans do; they get paid with investment dividends. Dividend earnings are created when somebody takes money that they have already earned, and they invest that money. That it is to say, dividend earnings are produced with money that has already been taxed as income, and when dividend earnings are taxed, the original investment capital is, in essence, being taxed for the second time.
This is why our government taxes dividends at a lower rate than it taxes income. It is to create an incentive for people to put their capital at risk, and invest in business enterprises (rather than merely holding on to that money and enjoying it in less risky ways). When Buffett compares his secretary’s income tax to his own dividend tax, he’s comparing apples and oranges, and 18% of Buffett’s dividend earnings no doubt amounts to a lot more money than 30% of his secretary’s salary. Dividends and income are treated very differently, and for good reason – but his comparisons make for amusing soundbytes.
As for Buuffett’s assertion about an alleged “morale boost” – this, also, makes for amusing soundbytes and headlines, and allows Buffett to provide some political cover for the President (you know, the President who calls him). Yet the real disgrace is if he is right about this.
Are Americans really so petty and covetous that we are comforted when “rich” people have their money taken away from them? Or do sufficient numbers of us still understand America to be a meritocracy – a society where we all achieve in different measures, yet we are all blessed with the freedom to try and achieve all that we can?
Austin Hill is an Author, Consultant, and Host of "Austin Hill's Big World of Small Business," a syndicated talk show about small business ownership and entrepreneurship. He is Co-Author of the new release "The Virtues Of Capitalism: A Moral Case For Free Markets." , Author of "White House Confidential: The Little Book Of Weird Presidential History," and a frequent guest host for Washington, DC's 105.9 WMAL Talk Radio.