The Richer You Are, The More Generous You Can Be

by | Nov 30, 2006

New York Times reporter Ben Stein recently had the pleasure of visiting my hometown and meeting its most famous person–Warren Buffett, chief executive of Berkshire Hathaway. Buffett told Stein (who also happens to be an economist and lawyer) he’s not pleased with the current tax system in this country. But not for reasons typically associated with the wealthy.

Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

Many of the richest people in the nation look to Buffet for answers on how to increase their holdings. But Buffet’s philosophy by example goes far beyond mere numbers and business analysis. Maybe the rich could begin to ask deeper questions. Like how shall we best reform ourselves and the nation in the process?