The Mysterious Reaction to Warren Buffett
August 30, 2011 in Daily Bulletin
Warren Buffett recently said that the U.S. government should raise the taxes of the wealthiest Americans. Obviously, Warren Buffett is one of the more famous members of this group as he often appears near the top of world’s richest people lists. One may expect that the reaction by others to this remark would be positive as he is offering to give up more of his own money. However, the reaction by many members of the media has been to criticize him. This response seems curious as it appears that Warren Buffett is acting unselfishly. So what do you think of Warren Buffett’s suggestion? Is he acting unselfishly or is there some hidden motive?
Source: Freakonomics Blog
Some have said that the average citizen at every wealth level tends to act in their own self-interest…but what is their interest? Well the poor and lower-middle class want more social goods (that they use) paid for by others (the rich). The upper-middle and upper classes prefer not to see themselves taxed heavily. They look for lower taxes for them and smaller government. The last category is the super-rich. What are their incentives or how do they maximize utility? They have escaped from the rat-race and might not receive much utility from another million dollars. Their personal security is generally intact…..with one exception. Their livelihood can withstand things like being unemployed, seeing a dip in the stock market, or being heavily taxed. The only thing they cannot withstand is a dramatic and radical shift in the system. Say inequality in the United States became so severe that the poor rose up, overthrew the government, and created a Communist regime. This would destroy Warren Buffet, and is the biggest risk to his wealth. Therefore you could argue that he is acting in his best interest by keeping the poor and middle class happy with the system
I don’t find the reaction surprising at all, considering the fact that all of the major media outlets are owned by rich corporations who do not want to pay more taxes. Some outlets are shameless in their coverage (i.e. Fox News claiming, of all things, that Warren Buffet is a socialist for having the audacity to suggest that the rich even pay as much as they did under other administrations) while other outlets are simply obtuse. The ineffectiveness of the Bush tax cuts for the wealthy demonstrate that certain economic axioms accepted in your standard economics textbooks do not hold in reality (i.e. that a tax cut has the same effect on GDP as fiscal stimulus) and it is pretty obvious to see why (the rich’s propensity to consume comes nowhere close to that of the middle class). Anyone reasonable who looks at the obscene numbers Buffett posted can see that a tax increase will not hurt him at all.