Warren Buffett on Carried Interest

The New Yorker has a Talk of the Town item by James Surowiecki that the magazine's Web site, at least, headlines "Private Equity's Egregious Tax Loophole." The article quotes the chairman of Berkshire Hathaway, Warren Buffett, in favor of changing the rules so that private equity and hedge fund managers pay higher taxes than they do now: "At a congressional hearing on the subject, Warren Buffett said, 'If you believe in taxing people who earn income on their occupation, I think you should tax people on carried interest.'" I'll have more to say about the overall carried interest issue at another time and place, but for starters, the New Yorker treats Mr. Buffett's opinion on this as if he's just a selfless citizen concerned for what's best for public tax policy. And that may be the source of Mr. Buffett's opinion. But the New Yorker totally ignores the fact that one of Mr. Buffett's businesses is competing with private equity firms and hedge funds for deals. So he has a financial interest in having taxes raised on his competitors. It would raise their cost of doing business and makes it harder for them to compete with Berkshire Hathaway when a family or firm decides it wants to sell a business. Nor does the article mention that while Mr. Buffett is testifying to Congress in favor of raising taxes on his competitors, he has structured his own affairs -- making money through long-term capital gains on Berkshire Hathaway stock that he rarely sells, creating charitable foundations for family members, giving away much of his fortune to avoid the death/estate tax -- so as to pay as little tax as possible. This is just another example of the press giving Mr. Buffett a free ride.