Buffett: Voodoo economics

[arcticpenguin]

http://money.cnn.com/2003/05/20/news/buffett_tax/index.htm

Rich person Warren Buffett wrote an opinion piece for the Washing post on the Bush administration's tax cut proposals:

Renewing his criticism of the dividend tax cut laid out by the Senate last week, Berkshire Hathaway's Warren Buffett called the proposal "voodoo economics" that uses "Enron-style accounting."
...
Buffett posed a hypothetical situation in which Berkshire Hathaway, which does not currently pay a dividend, paid $1 billion in dividends next year.

Through his 31 percent ownership of the company, Buffett said he would receive an additional $310 million in income that would reduce his tax rate from about 30 percent to 3 percent, while his office secretary would still have a tax rate of about 30 percent.

"The 3 percent overall federal tax rate I would pay -- if a Berkshire dividend were to be tax free -- seems a bit light," Buffett wrote.
...
nstead of the Senate's tax cut plan, Buffett proposed that it provide tax reductions to those who need and will spend the money in the form of a Social Security tax "holiday" or a tax rebate to lower-income people.

"Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets," Buffett added.

A rich person who cares about more than himself. How refreshing.

BTW, it's interesting to see a return of the term "voodoo economics".

 

[DavidJames]

There is a lot to like about Mr. Buffett.

"BTW, it's interesting to see a return of the term "voodoo economics"."

I would bet he used that term on purpose, recalling GB senior's comment regarding Reagon's economic policies.

 

[SFB]

I dunno about "Voodoo economics" but.......

In a sense this is a bump. I'm surprised there aren't more comments here on this. I just read the Yahoo article on it, and was about to post a new thread, but found this one already moved to the second page of threads with only one response.

From:

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030520/pl_nm/economy_taxes_rich_dc_2

"You would think two of the wealthiest Americans would have no problem with a tax cut that would put thousands, if not millions, of dollars in their pockets.

But billionaire investors Warren Buffett (news - web sites) and George Soros, Nos. 2 and 24 on Forbes Magazine's list of the 400 richest Americans, both railed on Tuesday against President Bush (news - web sites)'s plan to deepen income tax cuts and eliminate taxes on corporate dividends."

These are two of the wealthiest members of corporate America opposing a bill that will reduce their taxes from 31 per cent to three per cent a year!

Quite remarkable.

"Voodoo Economics" at work??? I'm beginning to wonder if GWB perhaps is pulling all the strings. Otherwise, who is pushing for this? Corporate America?

I would really like to hear comments on this.

BTW, BRKa closed today at $73,400.00 per share, down 90 dollars, from yesterday. The stock is one of the only (if not the only) stock to never undergo a split.

Oh, and I will bump this tomorrow if there are no comments, and the next day, and the next day, and the ..... you get the idea ..... well, I won't really, well maybe, once, or twice, or thrice......

 

[a_unique_person]

He would have to be my favourite Capitalist.

Whenever I think that something stinks in the stockmarket, he often confirms it. He is honest, yet still makes a fortune, and probably more than any of the deceitful scam artists on Wall St.

He calls a republican fraud a fraud, and knows that the people who most deserve the tax cuts will also do the most for the economy if they get it.

And he doesn't resort to any of the exploits that are tearing at the fabric of democratic society in the West, or act as if he is some genius that deserves to be paid such a fortune because he alone can run his company better than anyone else. All his 'secrets' are investment common sense.

 

[Tony]

Who are the "lower income people" he is talking about. My mom would be considered "rich" by a lot of people, but with all of the bills, she is forced to work hard to make ends meet. A tax cut would give her a break, why doesnt anyone seem to care about her? It's always the "low income people" (that dont even pay taxes) or the "rich", what about the working middle class?

 

[Roadtoad]

It has little to do with economics. It's about social structure and heirarchy. People who get to keep more of their money in the upper middle classes tend to start businesses, and they tend to be successful, from what I've observed. These are people who have the know-how and skills to start and run businesses, and they're less likely to tank within the first five years.

These people pose something of threat to Warren Buffett, Bill Gates, and their ilk. It strikes at a comfortable social order, and strengthens the civil order, which can erode some, (not all) of the upper crust's status and authority. A tax cut on dividends, and for that matter, on income, means the average person can enter the same waters with the big guns, and could become one of them. God forbid, they could have wound up marrying one of the Miller Sisters!

 

[arcticpenguin]

These people pose something of threat to Warren Buffett, Bill Gates, and their ilk. It strikes at a comfortable social order, and strengthens the civil order, which can erode some, (not all) of the upper crust's status and authority. A tax cut on dividends, and for that matter, on income, means the average person can enter the same waters with the big guns, and could become one of them. God forbid, they could have wound up marrying one of the Miller Sisters!

I really don't know what you're getting at here. Warren Buffett is not "old money", and neither is Bill Gates. Their daddies did not get them cushy jobs at an oil company. They made themselves rich by knowing how to make money and being in the right place.

I don't know wehre you get your statistics, and what you consider to be the "average person", but I'm sure people working minimum wage jobs are not raking in stock dividends.

Tony, so your mom has a lot of bills. I'm guessing it's because she buys lots of stuff. (duh!) How many TVs does she own?

 

[mjv]

I will never understand the mantra that giving the wealthy tax breaks will lead to increased investment in businesses.

The wealthy are no different than any one else, they will invest their money in a project when it will benefit them; if they do not see a return on investment they will not invest.

Its seems real simple to me: if I have several hundred million dollars to my name (lets not forget "rich" in this case means VERY rich), I can invest it at any time I want; giving me another hundred million will not, in and of itself, make me invest it in a new business. If I didn't want to invest in the next new restaurant chain, movie theater, or record store yesterday, why would I change my mind tomorrow?

Bottom line: If there is demand for a service or a need I can fill, I'll invest, adding more money to the pile makes very little difference in the decision making process.

Buffet recognises this when he indicates that if you really want to stimulate the economy you give tax breaks to the middle and lower classes. After all, a soccer mom can't buy a lear jet or a vacation home in Italy on a $1,000 tax break, but she can certainly spread that money in her local stores, generating demand for goods and services and creating incentive for investment in new businesses.

MJV

 

[Tony]

Tony, so your mom has a lot of bills. I'm guessing it's because she buys lots of stuff. (duh!) How many TVs does she own?

Its called a house bill, car bills, insurance bills, she has to pay for my brother and my sister's college bills and many more bills.

 

[Tony]

Buffet recognises this when he indicates that if you really want to stimulate the economy you give tax breaks to the middle and lower classes. After all, a soccer mom can't buy a lear jet or a vacation home in Italy on a $1,000 tax break, but she can certainly spread that money in her local stores, generating demand for goods and services and creating incentive for investment in new businesses.

Did you not just read what I wrote? The middle class is going to get a tax break, but the middle class is considered "rich" by the people who are try to paint the tax cuts as being a bad thing.

And you cant give a tax cut to lower income people because they dont pay taxes. (well they do, but they get it back in their tax return)

 

[DavidJames]

"middle class is considered "rich" by the people who are try to paint the tax cuts as being a bad thing."

Where do you see the middle class being considered rich?

It seems to me the term "rich" is usually the term used to describe people who have more money, or to much money or the amount of money the person making the comment wishes they had.

 

[Tony]

Where do you see the middle class being considered rich?

Everytime you hear the mantra, "tax cuts for the rich". Notice how they never specify who "rich" is? Im sure my mom would be considered "rich" by some of the people on the left (from the amount of money she makes), I got news for you, she ain't rich.

(To answer your question) Now that I think about it, I dont even see the middle class being considered at all, its always the "rich" the "poor", "working class families" or "lower income people".

As for buffet, that guy can f*ck off, he has 36 bill. If he is so concerned with the pathetic masses, let HIM take care of them. As it is now I am forced to give a ◊◊◊◊ by the nanny government.

 

[DavidJames]

All those terms, rich, working class families, middle class, etc. usually get definitions which suit the agenda of the writer.

As far as your rude comment about Buffett, I feel very comfortable he's talking about your mother, you, me and most everyone else on this board and most of the people. I'm not sure why you would feel otherwise, certainly it wouldn't come from his comments, check your personal bias for a possible source. He is concerned about (in your words, not his), the "pathetic masses", that's why he suggested what he did.

Finally, you used the term "pathetic masses", he used the term "families with urgent needs", interesting, yes?

 

[Tony]

All those terms, rich, working class families, middle class, etc. usually get definitions which suit the agenda of the writer.

DuH!!

That was my point when I said:

...but the middle class is considered "rich" by the people who are try to paint the tax cuts as being a bad thing.

As far as your rude comment about Buffett, I feel very comfortable he's talking about your mother, you, me and most everyone else on this board and most of the people.

I doubt it, if he was, he would be saying this tax cut is a good thing and is going to help people like my mom (which it will)


Finally, you used the term "pathetic masses", he used the term "families with urgent needs", interesting, yes?

Families with urgent needs? Like my family and my mom? If he is concerned with her, why is he against the tax cut?

 

[DavidJames]

"this tax cut is a good thing and is going to help people like my mom (which it will)"

Ok, so you are saying the tax cut will benefit your family more than the Buffet proposal. Pick a tax cut, either the Bush, Senate or House version. Do some research and let me know if it would give you're family more than the $1,000 Buffet proposed and report back.

 

[Underemployed]

If your mother has enough income from share dividends that the proposed tax cuts will provide a significant benefit to the household-
(By significant I mean it will boost her yearly income by at least 10% of her present salary/income)
-then her finances are extremely atypical for anyone claiming to be 'middle class'.

 

[Roadtoad]

I really don't know what you're getting at here. Warren Buffett is not "old money", and neither is Bill Gates. Their daddies did not get them cushy jobs at an oil company. They made themselves rich by knowing how to make money and being in the right place.

I don't know wehre you get your statistics, and what you consider to be the "average person", but I'm sure people working minimum wage jobs are not raking in stock dividends.

Tony, so your mom has a lot of bills. I'm guessing it's because she buys lots of stuff. (duh!) How many TVs does she own?

As I said, it's what I've observed. Once you've reached a certain social/economic plateau, your next goal is to make sure the rabble don't make it there. (Again, this is OBSERVATION. Not objective facts gathered from various sources.)

We don't have much in the way of bills, here. We don't buy much. We drive used cars, we do most of our own home repairs, and just paid off the last of the credit cards two years ago. Haven't gotten new ones, either. When you don't have much, you learn to live with what you got.

 

[EvilYeti]

I never understood the logic behind giving tax breaks to income earned without doing any work.

Why should some guy who sits around all day watching TV and living off the divedends of a trust fund not have to pay taxes? When single moms working two jobs do? It strikes me as grossly unfair. New jobs and helping the working class spurs the enconomy, not filling up the coffers of a priveledged minority.

There is also the question of what is going to be done with the untaxed income. At least some portion of it just going to sit in bank accounts, which isn't going to do anything for the economy. A larger portion of it is going to go overseas, the rich have a thing for French wine and German cars.

I really wonder if Bush believes this cut is going to help the enconomy. I can understand him doing it in the interest of himself and his cadre, but if the economy doesn't turn around before election time he is likely finished.

 

[DavidJames]

"but if the economy doesn't turn around before election time he is likely finished."

That was the legacy of GB Senior. Junior has learned that lesson I'm afraid, and I wouldn't be suprised if Iran, Syria or another country requires "liberating" around this time next year.

 

[Lazarus]

Posted by Roadtoad
As I said, it's what I've observed. Once you've reached a certain social/economic plateau, your next goal is to make sure the rabble don't make it there.

That's a good point, I think. In many ways the small business owner has more in common with the worker than with the large corporation. However, I fail to see why this would infer that Buffett took this stand to protect his interests. Buffett may be beyond the the age and the interest to be so competitive. Plus, it makes me happy to think that their is some benevolence left in the world of corporate intrigue.

Posted by DavidJames
"but if the economy doesn't turn around before election time he is likely finished."

Lessons from Daddy aside, this may be the case. Unfortunately, tax cuts are not exactly unwelcomed by the corporate media elite, especially the broadcast media. And, I think that we might find much of the moderate swing vote gets the bulk of their news from broadcast media. Those of us that follow news stories from alternative venues such as newspapers and the internet are not in the majority.