Investing in government is a losing proposition

There's no questioning Warren Buffett's ability to invest. People who sink their money in dry oil wells and earthworm farms don't become billionaires. Buffett is one of those rare people who can spot a winner, act on it, and turn a tidy profit. Thus he's amassed a sizeable fortune. What's wrong with that? Ask Warren Buffett.

Buffett is one of the "super rich." He controls vast capital resources and he enjoys his wealth. But he doesn't believe he or his super rich friends pay enough federal income tax. The tax code, according to Buffett, includes too many loopholes through which the super rich can shelter their earnings. According to Buffett's own assessment, he pays a lower percentage of his income in taxes than do the people who work for him. To rectify that disparity he looks to the federal government -- under the leadership of Barack Obama, the man he endorsed for president -- to equalize the playing field.

Right on cue, one of America's wealthiest men echoes the White House's call for "shared sacrifice." However, Buffett's apparent love for taxation isn't new. The Oracle of Omaha is known for endorsing higher income taxes and the estate tax, as are many of his super rich friends. But there's something dangerously wrong with this mindset. If the super rich are indeed concerned with the fiscal struggles lower economic classes face, they have the means to singly address the issue. Why do they need government to do for them what is well within their individual power?

Buffett lamented his "low" tax bracket in a recent New York Times editorial. According to Buffet's numbers, America's 400 richest people reported a combined taxable income of $90.9 billion in 2008, an average of $227 million each. If the top 400 contributed half their incomes to people of lesser means, they could make instant millionaires out of 45,450 of their countrymen. Such charity would be private and voluntary, without a dime being filtered through the federal government, except for the gift taxes of course.

I'm not suggesting wealthy people actually surrender any portion of their fortunes to anyone for any reason, nor am I denying their authority to do so. Indeed wealthy people, including Warren Buffett, have entered a compact to contribute at least half their fortunes to charitable causes. That's fine; their wealth is theirs to disperse as they please. But no wealthy person need lobby government to tax their incomes and redistribute their wealth when they alone are perfectly capable of doing so.

On the other hand, let's suppose Buffett succeeds in raising taxes on America's top earners. What then? Well, for starters, even if the federal government had confiscated every nickel of the $90.9 billion the top 400 earned in 2008 it would barely dent the federal deficit and wouldn't scratch the national debt. In fact, $90.9 billion dollars will fund government spending, which exceeds $3.6 trillion annually, for only nine days. We can share the sacrifice until everyone sings Kum Ba Yah and still not solve our fiscal ills.

For Warren Buffett to scratch out an editorial about being under-taxed is utter nonsense. No one who pays a tax based on their earnings, whether great or meager, is under-taxed. Washington receives enormous revenues no matter the income tax rate. Buffett's own numbers prove that lower tax rates create more revenue for government. Decide for yourself if that's beneficial.

Citing IRS data, Buffett points out how the top 400 earners in 1992 produced $16.9 billion in taxable income and paid 29.2-percent in taxes. As mentioned earlier, the top 400 earned $90.9 billion in 2008, but paid only 21.5-percent in taxes. In using these numbers Mr. Buffett misled his readers, prompting them to believe the rich paid fewer taxes in 2008 than in 1992. Actually, only $4.93 billion in taxes were collected on the 1992 incomes while $19.54 billion were collected on the 2008 incomes.

The highest earners obviously netted more income and paid a lower percentage in taxes in 2008 than in 1992. But they paid more in real taxes, meaning Washington received more actual dollars. Furthermore, America's wealthiest people have for years shouldered the highest percentage of the tax burden.

There's nothing to be gained in demonizing wealthy Americans. As long as their wealth isn't the product of criminal endeavor, shady dealing, or government cronyism, it's no one's business how the rich became rich or how rich they became. Class envy dogma is as disingenuous as it is deceptive, and it's equally disingenuous for multi-billionaires like Warren Buffett to preen and crow about the need to pay more taxes. Such rhetoric seeks public admiration for offering a fraudulent solution that ignores our fundamental fiscal problems, government's profligate spending.

If Mr. Buffett harbors guilt over his vast wealth he can write a check to the U.S. Treasury anytime he wants for any amount he deems suitable. There are other options at his disposal, too. He can shun the tax loopholes and shelters he considers an unfair advantage. He can ignore the accountants and lawyers whose advice reduces his taxable income. Each action is unilateral and voluntary; each can be pursued without infringing on his neighbor's liberties. There's no need for Buffett, or anyone else, to invoke government's heavy hand to dispense private wealth.

The rich are too poor to satisfy Washington's spending appetite. Like a gluttonous eater, Washington gorges on the fruits of productive Americans from all income levels. The federal government could gobble up Warren Buffett's net worth in less than a week with room left for a hearty dessert.

Even if raising taxes on the rich increased government revenues there's no evidence to suggest Washington would properly manage those funds. Warren Buffett is a wise investor. But he's dead wrong if he truly believes higher taxes on the rich will improve life for the lower or middle income classes.