The Buffett Rule, named after its impresario, billionaire investor Warren Buffett, is simply this: a guaranteed minimum tax for individuals who “make” over $1 million per year.
Warren likes it, Obama likes it — it’s a very popular rule. Forget, for a moment, that the rule doesn’t really specify what “make” means. Rich people tend to make a lot of money in a lot of different ways. Some of it is “income,” but a lot of it is other stuff, like capital gains. Investors and hedge fund dudes make it and call it “carried interest,” which (as far as I know) isn’t taxed as income. Okay, well, forget those troublesome details. Focus just on the “fairness” issue that the Buffett-Obama axis likes to use.
“It’s not fair,” they say, “that the richest among us pay such a small amount into the national kitty.”
President Barack Obama has criticized American companies that move to other nations in search of lower corporate tax bills. Between mid-June and late July, at least five large American companies announced plans to make such a shift — known as an inversion. That includes AbbVie Inc. and Medtronic Inc.
Buffett has supported Obama’s push to increase personal income taxes for the wealthiest individuals while striking deals that reduce Berkshire’s obligations to the government. This year, his company limited taxes on more than $1 billion of gains in Graham Holdings Co. stock by swapping the shares for assets owned by the former Washington Post publisher.
And now Buffett is helping finance the “inversion” deal joining Burger King and Canadian doughnut empire Tim Horton’s — a business move that makes sense only as a way to minimize the company’s (US) tax bill, again from Bloomberg:
Warren Buffett is helping to finance Burger King Worldwide Inc.’s planned takeover of Tim Hortons Inc., according to people familiar with the matter, backing a buyer that would move its headquarters to Canada where corporate taxes are lower.
You see, taxes are something that you should pay. Higher ones, especially. Tax avoidance, tax-related economic behavior, the basic conservative idea that low taxes create (and higher taxes destroy) incentives to build businesses and take financial risk — these are all things that, according to Buffett, only apply to gajillionaires. From Zero Hedge:
…the “Buffett Rule” appears to have one caveat… if you are making over a $1 billion, you’re good to go with tax-avoidance strategies. In one of his career’s most hypocritical moves Warren “tax-me-more” Buffett has decided that putting his money where his mouth is no longer makes sense.. and is funding $3 billion of Burger King’s “tax-inversion” takeover of Canada-based Tim Hortons. Somewhere on a golf course, a Presidential Putter is being snapped across a knee…
Look, this isn’t wrong: any company should be allowed to do whatever it wants to maximize its value. What’s wrong is the way pious and smug billionaires talk about “paying more” when they know that they’re not going to.
If Buffett thinks that corporate tax rates are too high (and they are), have him call his friend Barack Obama and get them lowered.
If Barack Obama thinks tax moves like this are “unpatriotic” — and he’s said that before — have him announce to the world that his friend Warren Buffett is un-American.
I won’t hold my breath. Both of these guys understand each other.