Ira Stoll raises questions that conservatives should insist be explored when we start talking about raising taxes on the rich.
...by framing the fiscal-policy discussion this way, as a debate over whether the “super-rich” should pay more, Buffett and his allies in politics and the press avoid certain other questions. And those questions are more important ones. Questions like:
• Who should allocate capital, the people who earned it and own it, or the politicians in Washington as influenced by their lobbyists and campaign contributor cronies?
• How did we accumulate $14 trillion in debt so rapidly, and what are the consequences of that?
• How and why has federal spending grown to $3.8 trillion in 2011 from $1.8 trillion in 2000?
It is implied, in the tax fairness argument, that this monstrous boost in federal spending is both fair and necessary. Is it?
But I was struck by this bit of wording that seems to have skipped by unchallenged for quite some time. Now, I don't want to put myself in the same league as Warren Buffett on investments, but I take issue with what Buffett said on capital gains. Here's what he said:
“I have worked with investors for 60 years and I have yet to see anyone—not even when capital gains rates were 39.9 percent in 1976–77—shy away from a sensible investment because of the tax rate on the potential gain.”
One thing that nobody seems to have picked up on, is that Buffett is talking about investing — buying an asset. What about the other side of the deal? Though Buffett says he's "never seen anyone shy away from a sensible investment," can he also say he has never seen anyone shy away from the sale of an asset because of the potential capital gains hit? I'm skeptical.
And another question. Rube that I am, it's hard for me to imagine a serious investor not considering the tax consequences of a deal. But what do I know? I'm not Warren Buffett.
Still, I have to ask the question, what is a "sensible investment?" I have this picture of an investor who has a particular target for return on investment. He knows all the costs, but has to guess at the return. If his guess hits the target the deal's a go. If not, then in the investor's view it's not an acceptable, or sensible, investment. So, Buffett is trying to tell us that taxes aren't part of the calculation of return? I'm skeptical.