President Obama's former budget director, Peter Orszag, publishes his debut New York Times column today, calling for extending the Bush tax cuts for two years and then letting them expire. He writes:
Despite a dire fiscal outlook, many progressives want to make the tax cuts permanent for all but the very highest earners. Many conservatives are even worse: they'd make the tax cuts permanent for the likes of Warren Buffett, even though he'd prefer they didn't.
This is silly. Warren Buffett's tax rate shouldn't be based on what he prefers it is. If he wants to voluntarily pay more to the government, nothing is stopping him from writing an extra check to the Treasury. In fact he has structured his life in a highly tax efficient way, giving away lots of money to charity so that he will avoid the estate tax, and taking relatively little in salary (taxed at a relatively high rate) and lots in long-term capital gains (taxed at a relatively low rate, or not at all until the gains are realized).
What's more, when left-wingers like Mr. Orszag invoke Warren Buffett in connection with the "dire fiscal outlook," it's almost always in the context of raising taxes, not in the context of cutting spending. Why, just yesterday, President Obama announced a plan to "continue our strategy to build a national high-speed rail network that reduces congestion and travel times and reduces harmful emissions." What he is really talking about is a plan to shovel billions more federal dollars into the pockets of the Burlington, Northern, and Santa Fe Railroad, which is owned by Warren Buffett's Berkshire Hathaway.
What Mr. Buffett and Mr. Orszag want to do is raise Mr. Buffett's tax rate while still taking money from everyone else — lots of it — and using it to subsidize Mr. Buffett's railroad (or, for that matter, his financial industry investments via TARP and the FDIC). I'd settle for leaving Mr. Buffett's tax rate (and everyone else's) low, while reducing or eliminating his government subsidies. Mr. Buffett's bottom line and the federal government's bottom line may net out the same in each scenario. But in one scenario, the capital gets allocated by the politicians and their lobbyist influencers in Washington, while, in the other scenario, the capital gets allocated by the individuals who own it.