The blogosphere is all a-twitter about the Buffett Rule, fact-checking this and that, accusing each other of hair-splitting while furiously splitting hairs themselves.
What they’re arguing about is whether millionaires and billionaires pay less in taxes as a proportion of their income than their secretaries. Leaving alone the point that millionaires have secretaries, which I suspect is what bothers some of the critics, there’s something about Mr. Buffett’s formulation that bugs me.
Mr. Buffett claims that he pays less as a proportion of his income than his secretary. He also, presumably, believes that is unjust, that he can afford to pay more. He also says that he doesn’t employ a tax accountant and is just following the rules that Congress has set out for paying his taxes.
To the best of my knowledge although Congress requires that wages be declared as wages (because W-2 wage income is subject to FICA) it does not require that some of Mr. Buffett’s income be declared as regular wage income while he takes other of his income in the form of dividends, capital gains, and so on. Most of us don’t have that alternative but Mr. Buffett does. He has structured his income to limit his tax liability. Were he simply to take all of his income in the form of ordinary wage income it would raise the proportion of his income taken as taxes without other voluntarism on his part.
Consequently, what Mr. Buffett is saying is that without the penalty of law to restrain him he is unable to resist his compulsion to minimize his tax liability. Two points. First, why would that be any different regardless of what laws Congress passed? Because it’s a compulsion he’d continue to minimize his tax liability and whatever Congress did he might continue to pay a lower proportion of his income than his secretary.
Second, isn’t that a sad commentary? He needs the threat of civil or criminal penalties to do what he thinks is right?
I have no idea whether he’s right or wrong in that assessment but I don’t think there’s any substitute for a conscience.
Then there’s the other other Buffett rule: Some people claim that there’s a woman to blame but you know it’s your own damn fault.