This week I tried -- and failed -- to listen to the State of the Union speech.
I started listening well after it began. That's my custom, actually. For my entire adult life, the first ten minutes or so of each SOTU has all been handshaking and baby-kissing. I don't need to be there for that. Somebody should run a stopwatch someday, and figure out how much of the taxpayers' money is eaten up by one hundred Senators and 435 members of Congress, just sitting there and applauding as the President walks in. Besides, I'm listening on the radio, and a room full of people clapping for minutes on end is even less compelling if you take away the visuals.
So I missed the part where the President took credit for the death of Osama bin Laden. Which is lucky, because I otherwise might have stopped listening right then and there.
(I mean think about it: the hunt for Osama bin Laden was an international effort that lasted a decade and required the talents of dozens, if not hundreds, of individuals. As the operation reached its climax, a team of highly trained soldiers closing in on Osama's hideout, they got the president on the phone and he said "Okay. Do it.")
(Am I leaving anything out? I don't think so. I don't have a single tear to shed over Osama bin Laden, but when I am one day asked to justify my career, I hope I will have more to say than "Well, a guy died, and it was all thanks to me.")
But anyway, I kept listening, through the self-congratulations, the endless applause, and the joke about spilt milk. (Mr. President? The usual advice here is "Don't quit your day job," but you're not very good at that, either.) Then he brought up Warren Buffett's secretary, whom I later found out was sitting in the audience as a political prop. Just like Elian Gonzalez, she's become a cultural sensation without uttering a word in public, and just like Elian Gonzalez I'm sick of hearing about her. When the president repeated the tired mantra about the tax rate she pays, I lost it, and turned off the radio in disgust.
Whether the president intended it as a jab at Mitt Romney, or if it was just a general attack on the wealthy and it will simply be used against Romney as the election draws near, it's inexcusable to demogogue the issue of tax rates. However you want to look at it, those paying the 15% rate are MORE THAN paying a fair share, and arguably doing more for the country than someone paying a more pedestrian 30%.
Can you do basic math? Romney paid 15% on $21 million, which comes to $3,000,000. That's three. MILLION. DOLLARS! I don't expect to HAVE three million dollars in my life, let alone pay that much in taxes. Mitt Romney paid that much in a single year. At a 30% tax rate, you would have to earn a $10 million dollar salary to pay that much. Unless Lady Gaga and Justin Bieber have taken a sudden interest in conservative politics, it's a fair bet that no one reading this article will pay anywhere near that amount. Who could possibly argue that he's not paying his fair share?
Look at it another way: If President Obama got his way and taxed Romney at 30%, that would mean almost four million extra dollars taken out of Romney's portfolio and sent to the IRS.
What would Romney have done with that money? Plow it back into the economy. Start up a new business, or expand an existing one. Create jobs, and in so doing provide the buying power for consumers to buy products from other companies. This is the perfect example of a "rising tide that lifts all boats." That's the way to stimulate an economy. Everyone -- EVERYONE -- is better off if investments are taxed at a lower rate.
Meanwhile, what would the government do with the extra money? Buy paperclips, maybe. Or pay the phone bill. The only thing that gets stimulated is more government.
It was Buffett himself who started this attack on successful people, with an editorial last year, in which he argued that his taxes were too low:
Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
It's presumptuous of me to suggest that I have insights into finance that elude the "Sage of Omaha", but did he even do the math?
29.2% of $16.9 billion equaled 4.93 billion dollars in tax revenue from those 400 individuals in 1992. But then in 2008, 21.5% of the $90.9 billion they earned equaled 19.11 billion dollars: some four times more for the IRS coffers! Is your goal to collect money to feed the appetite of Washington? Or is it simply to punish the wealthy?
Tip of the hat to Congressman Paul Ryan for this wonderful insight: even if we were to tax the wealthiest Americans at a ONE HUNDRED PERCENT tax rate, it wouldn't come close to filling the hole that Congress has dug for itself over the years. Our solution is twofold: 1) Stop digging, and 2) Grow our way out of the hole.
But Warren Buffett thought it was his fault. He continued:
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office.
I've got news for you, Mr. Buffett. That IS a lot of money. Your nation thanks you -- not only for paying this amount in taxes, but for earning the (by my estimate) $40 million dollars in the first place, thus stimulating the economy and putting people to work, and for putting the remaining 82.6 percent of your income to what I can only guess was a likewise good use.
Buffett, however, didn't see things that way. He actually thought he WASN'T DOING ENOUGH. His solution? He wants Congress to make him pay more.
Mr. Buffett, sir? Once again I take it upon myself to tell you what those twenty people in your office apparently failed to: YOU CAN PAY MORE TAXES IF YOU WANT. No one is stopping you. The amount the IRS tells you to pay is a minimum, not a maximum. If you want to pay a higher rate, be my guest. They'll take a check.
However, Mr. Buffett, I would also like to suggest that would not be the most effective use of your money. You, Bill Gates and others of the superwealthy set have created foundations that tackle serious issues head-on, and these are excellent tools for fighting the disease of poverty, rather than the symptoms. It's certainly preferable to the Washington way, which is simply throwing money at the problem.
I realize that Warren Buffett is no more likely to read this article than is Lady Gaga. It wouldn't have helped anyway. He doesn't merely want to pay more taxes himself: he wants all the other millionaires to pay more, too. Like most liberals, he's very generous with other people's money.
While I was typing this, I was listening to oldies radio. A song by Ten Years After just came on: "Tax the rich. Feed the poor/ 'Til there are no rich no more." What a perfect summary of the Robin Hood mentality of today.
"Yes, tax the rich. Then everybody can be poor."
You're free to think that 15% is too low a rate for capital gains. If so, by all means lobby Congress to change it. But in the meantime, don't blame Mitt Romney, or any other investor, for paying the correct amount he owes. He still pays more that you do.
(c) Kublai Khan Unlimited 2012.