What’s eating Warren Buffett?

Buffett: looking past taxes for signs of growth? (AP)

In a New York Times op-ed piece earlier this week, Warren Buffett declared that he and his mega-rich friends have been “coddled long enough by a billionaire-friendly Congress” and that it was time to raise taxes on wealthy people like him. Ironically, these sorts of declarations, which Buffett and other billionaires have made before, generally trigger a response from less-wealthy tax opponents who suggest that Buffett and his ilk donate as much as they want to the Internal Revenue Service and shut up.

Buffett’s latest plea for higher taxes draws attention because of its apparent irony, but there may be a deeper message. Could it be that the wealthy aren’t as concerned with taxes as they are with other troubling signs in the economy? Buffett said:

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. . . . Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

I don’t know if Buffett can speak for all his fellow billionaires, but even if he’s right that most of them are decent people, they didn’t get rich by being unconcerned with self-interest. I do think that a great many self-made billionaires recognize that their success stems in part from living in a society that gave them the opportunity to achieve success, and that many feel some debt for that.

Does that mean they’re willing to pay more in taxes? If you’re ultra-wealthy, taxes aren’t really the problem. Nobody likes paying them, but as Buffett himself notes, billionaires tend to have lower tax rates than, say, the upper middle class. Rather than being motivated by pure altruism, Buffett may be driven by something else: the concern that austerity measures now being discussed in Congress will actually cost him more than higher taxes.

James Surowiecki, writing in the latest issue of The New Yorker, points out that the nature of wealth has changed:

Decades ago, America’s rich were a true rentier class. They got most of their income from bonds and lived off their investments, and their main priority was keeping inflation low, regardless of anything else that happened. So austerity suited them nicely. The rich of today, by contrast, get much more of their income from their jobs and from the stock market, which means that they do better when growth is strong.

Corporate earnings have been strong since the recession ended, but they haven’t returned to pre-recession levels, and the stock market remains 25 percent below its 2007 highs. The Standard & Poor’s 500 Index has been essentially stagnant for a decade. Suroweicki again:

So, while corporate America has been doing well relative to everyone else, it would be doing much better, and investors would be much happier, if growth were stronger and unemployment were lower, even if inflation and government spending were higher. Austerity during an economic slowdown isn’t just bad for the unemployed. It’s also bad for business.
Buffett, in other words, might be far less concerned with taxes than he is with the lack of economic growth. He’d rather see the government spending money — even money it doesn’t have — to get the economy growing and get stock prices rising. The corresponding increase in his wealth would more than offset any higher taxes he might have to pay.
Update: I’ll be discussing Buffett’s comments on Fox 26’s 9 p.m. newscast tonight.
Loren Steffy