Warren Buffett: ‘The Oracle of Omaha’ also “The Oracle of Obama’

September 27, 2011

Billionaire investor Buffett (According to Forbes, Buffett’s estimated wealth is $39 billion as second-richest American behind Microsoft’s Bill Gates.) is to be at the North Shore home of Byron Trott, an investment banker, on October 27, to headline President Obama’s blockbuster Chicago fundraiser.

Mr. Byron Trott as a former Goldman Sachs Group Inc. partner, isn’t know as an outspoken Obma supporter.  He has donated to candidates of both parties, with his most recent donation of $2,500 made to Mitt Romney in June of this year.  Even so Warren Buffet calls Byron Trott his favorite investment banker.

Although President Obama is not expected to attend, it will be co-hosted by the same local donors who lined up to fuel Obama’s first presidential campaign at $35,800 per ticket — James Crown, Penny Pritzker, and John Roger, Jr.

Warren Buffett was recently featured at a September fundraising event in New York by the Obama campaign and the Democratic National Committee.  For this event the Buffett name was used as the draw for a reception and dinner where tickets ranged from $10,000 to $35,800 each.

It was not surprising to learn that the Warren Buffett late September New York fundraiser and the upcoming one at the North Shore home of Byron Trotter both selected as moderator, Austin Goolsbee, a University of Chicago law professor and former chairman of the White House’s Council of Economic Advisers in the Obama administration

Warren Buffet, CEO of Berkshire Hathaway, recently become a household name and was linked to the Obama Administration through a recent “New York Times” op-ed he wrote which called on the rich to pay more taxes.

Taking a clue from Buffett’s “New York Times” op-ed piece, President Obama requested permission from Warren Buffet to allow his administration to use Buffett’s name in the title of a provision applicable to Obama’s $474 bilion jobs legislation.  As such Obama dubbed a proposal to raise taxes on the wealthy, the “Buffett Rule.”

Most controversial in Buffett’s “New York Times” op-ed was the claim that he was taxed at 17.7% on the $46 million he made without trying to avoid paying higher taxes, while his secretary was taxed at 30% for earnings amounting to $60,000.

Lately Warren Buffett has changed his tune.  In a later op-ed piece Buffet no longer is claiming that his tax rate was higher than that of his secretary, but instead that he is being taxed more than others in his office.  President Obama, nevertheless, continues to repeat Buffett’s “New York Times” op-ed claim that Buffet’s secretary is being taxed at 30% to Buffett’s tax rate of 17.7%.

It makes no sense for President Obama to advance a new tax policy based on what is happening to the top 0.0000006% earning individuals.  Such a proposal is both risky and foolish.

Warren Buffett is almost definitely lying about the tax rate of his secretary.  CBO data, with payroll taxes included, indicates that someone making about $64,000 pays a total effective tax rate of around 14.3 if single and 7.5% if married.

It seems apparent that Buffett is either confusing or purposely comparing two different rates of taxation.  Money earned through investments is taxed at a lower rate than income from wages.  In Buffett’s case, 90% of his earned income is taxed at the lower investment rate.  The typical person who earns more than $10 million per year usually earns only about 38% of his income from investments that qualify for the lower tax rate.

Anyone who makes 90% of their money, as does Warren Buffett, from investments could theoretically pay around 15% whether they earn $50,000 or $50,000.000.

Even though Warren Buffet stated in a “New York Times” op-ed piece that he wants people to pay more on money earned through investments, it is obvious that the “Buffet Rule” has nothing to do with wealthy individuals.  Rich individual already carry far more of the tax burden than do the poor or the middle class.  The top 10% of tax payers carry 73% of the income tax burden, while the bottom 51% of tax payers carry 0%.

In that President Obama continues to berate rich people for not paying their fair share of taxes is proof that Obama’s rhetoric is all about class warfare (a political ploy) and not sensible tax policy.  The problem described by Warren Buffet of how the tax rate is insufficient on income that is realized through investments — might apply to professional investors, but not to rich people.

There are reasons why the tax rate for income earned through investments should be lower rate than for wages.

First of all, lowering the capital gains tax does bring in more revenue.  Bill Clinton signed legislation which dropped the capital gains tax rate from 28% to 20% in 1997.  George W. Bush later dropped the rate to 15%.  In each instance the rate drops resulted in an increase of tax revenues.

Eric M. Jackson, formerly of PayPal and now CEO of CaptLinked, an on-line platform for private investing, explained in a “Washington Post” article on September 22,  how “increased taxation of capital gains would guarantee that investors would have a lower rate of return, would decrease the pool of capital available for early-stage investments, and would make the U.S. less competitive on the global stage.

Neither Warren Buffet or President Obama seem to realize that it is through capital gains that technology investors make money.  Willing to invest in high risk companies, knowing that many of their portfolio companies could fail, potential payoffs from winning companies justifies risk taking by investors.

So why raise capital gains rates at all?  A million or so people in this nation own stock and would be affected.  Many of them are senior citizens and retired people who depend on retirement income to supplement their Social Security checks.  They would be hurt by higher investment taxes.

The “Buffett Rule” is not working in CA where a Buffett-Rule-esque tax requires that all whose earned income exceeds $1 million must pay an extra 10.3% in taxes in addition to federal taxes.  Soaking the rich in CA has resulted in a precarious revenue roller coaster ride.  In Sacramento it’s either boom or bust time depending on how the wealthy are faring in the stock market and in their other investments.

Republicans must respond back in kind to President Obama when he uses unsophisticated fallacies to promote his illogical financial policies when on road trips, which includes spending  $447 billion more on a jobs stimulus bill.

One such response might go like this:

President Obama:  “Either we ask the wealthiest Americans to pay their fair share in taxes or we’re going to have to ask seniors to pay more for Medicare.”

Republican response:  “Either we stop Obama from giving our tax money to fat-cat labor union bosses and to others like Solyndra in “Pay for Play” handouts, or the money won’t be there for seniors to receive the medical treatment that they need and deserve.”

More and more of the American people are beginning to realize that under President Obama’s leadership America is headed in the wrong direction. Obama’s current idea of seeking to increase stimulus spending to fund bigger government by turning to millionaires and billionaires to pay for it, will only result in stiffing job creation by those who create jobs through capital to invest in new businesses.

Should voters in the 2012 elections elect a Republican president and a Republican-controlled House and Senate, of concern is whether Republican House and Senate members will really have the heart and the will to reduce the size of government so raising taxes to support and maintain a bloated government doesn’t rear its ugly head.

Will history repeat itself?  As has happened before, Republicans often speak of wanting less government and of lowering taxes, but what they really desire when in power is to control the purse strings.

In this way Republicans are little different from their Democrat counterparts.  When push comes to shove, members of both parties vote on issues and policies in ways that will please those whom they are counting on to return them to power, as money has become the mother’s milk of politics.

May Republican voters steer clear of a presidential candidate who is just an echo of what a Republican candidate should stand for.  We don’t need a Republican in the White House who promises to compromise with Democrats if what Democrats call for represents policies which are bad for this nation now and for future generations.

By any means, 2012 will not be an ordinary election.  It is my hope that Republicans of all stripes, Independents, and even some Democrats will recognize the severity of these time as it affects the very future of this nation when they vote in November of 2012.

If Republicans are successful in the 2012 elections, may they recognize the charge they have been given by voters to accomplish that which they were sent to Washington, D.C. to do:  1) Bringing spending under control; 2) reducing the size of government; 3) eliminating unnecessary regulations; 4) freeing America’s job creators to get back to business; and 5) setting a new moral tone to counter the depravity that has infected society at all levels.

A word to Republicans if elected in 2012, there will be no time left to fail.  The continuation of the status quo would amount to a rapid and irreversible crumbling of the very foundations upon which this nation was conceived.  The result would be a death sentence and the admission that all who fought and died in wars to defend liberty and freedom did so in vain.

It is said that at the close of the Constitutional Convention a woman approached Benjamin Franklin and asked him what type of government had been decided upon by the delegates. Franklin stated: “We have given you a Republic, if you can keep it.”  Franklin, of course, also believed that the Constitution could only last as long as the people themselves could sustain it.

Might the end be near?  I hope not, but it will be up to American voters and their elected representatives to decide the fate of this nation in 2012.  May both be up to the challenge that lies ahead.   May God continue to Bless America.

 

 

 

 

 

 

 

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