Tuesday, April 26, 2011

Obama Demagogues the Tax Issue by Invoking Warren Buffett

Obama recently said that he needs to raise taxes on the "rich" so that people like Warren Buffett will pay higher taxes. However, Mr. Buffett as CEO of Berkshire Hathaway, has control over his salary, and has kept it so low that none of Obama's new taxes will inflict him. His salary is currently $100,000. In the Wall Street Journal, Obama has been quoted as saying:

“The point is, for the vast majority of Americans," Mr. Obama said, "every dime you earn, you're paying some in Social Security. But for Warren Buffett, he stops paying at a little bit over $100,000 and then the next $50 billion he's not paying a dime in Social Security taxes. So if we just made a little bit of an adjustment in terms of the cap on Social Security, that would do a significant amount to stabilize the system."

Warren Buffett only makes $100,000, so Mr. Obama could increase payroll taxes enormously, and Mr. Warren Buffett would not owe a single dime more in tax. What is even more outrageous is Obama’s contention that Warren Buffett makes $50 billion in a single year. How could that be possible? Berkshire Hathaway’s market cap is $203 billion, so a salary of $50 billion would mean that 24% of the assets of Berkshire Hathaway would be transferred to Mr. Buffett in the form of salary each and every year. Meanwhile, in the process, the market cap would inevitably decline as a result of such a high salary. But Obama doesn’t really care about facts. If it helps him argue for higher taxes, he is more than happy to provide such an argument. Meanwhile, if the public agrees with Obama’s gross distortion of the issue, with the expectation that a higher tax would "punish" Buffett then they are in for a surprise as these higher taxes only hurt those who aspire to become wealthy.

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