Warren Buffett's High-Stakes Challenge to the GOP

Warren Buffett's High-Stakes Challenge to the GOP

Printer-friendly version
a a
Type Size: Small

Warren Buffett is using his sizable bankroll to call out Republicans on tax policy and the national debt. In the coming issue of Time magazine, the billionaire investor offers to match any voluntary contributions made by Republican members of Congress toward paying down the national debt – and to send triple the money sent in by Senate Minority Leader Mitch McConnell, who has a reported net worth of at least $10 million.

Buffett made a political splash in August when he wrote an op-ed piece for The New York Times noting that he paid a lower percentage in taxes, 17.4 percent of his 2010 taxable income, than anyone else in his office. “I know well many of the mega-rich and, by and large, they are very decent people,” Buffett wrote. “Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.”

President Obama picked up on the idea and proposed a “Buffett Rule” that would set a minimum tax rate for those making more than $1 million a year to ensure that they pay at least as much as those in the middle class.

Republicans like Rep. Paul Ryan of Wisconsin slammed both proposals as class warfare and bad economics. Many noted that Buffett pays that lower rate largely because so much of his income is derived from investment gains, which get taxed at a lower rate than wages. So changing the top tax rates on wages would have a limited effect. And others, including McConnell, pointed out that the “Oracle of Omaha” could put his money where his mouth is by simply sending a check to the Treasury Department. And while any taxpayer could already make a tax-deductible contribution to the Treasury’s "Gift to Reduce the Public Debt" program, South Dakota Sen. John Thune put forth a bill called the "Buffett Rule Act" to add the option of making voluntary donations to federal tax forms.

Buffett’s supporters, mostly on the left, dismissed that idea, noting that Buffett’s billions alone would barely make a dent in the debt – and to further their point, some have on occasion pointed to an idea termed the “tragedy of the commons.” In a 1968 article published in the journal Science, ecologist Garrett Hardin described how individuals, acting rationally by looking out for their own best interests, can deplete resources and ruin things for society as a whole. “Who enjoys taxes?” Hardin wrote. “We all grumble about them. But we accept compulsory taxes because we recognize that voluntary taxes would favor the conscienceless. We institute and (grumblingly) support taxes and other coercive devices to escape the horror or the commons.”

Buffett’s latest gambit essentially picks up on that theme – his challenge makes the point that individuals, well-intentioned as they may be, can’t be counted on to voluntarily step forward and donate to pay down our massive debt. “It restores my faith in human nature to think that there are people who have been around Washington all this time and are not yet so cynical as to think that [the deficit] can’t be solved by voluntary contributions,” Buffett jokingly tells Time.

McConnell’s camp countered that the senator is looking to shrink government, not raise taxes – and suggested that Buffett match donations from Democrats in Congress, and from the president too.

As editor in chief, Yuval Rosenberg oversees all aspects of The Fiscal Times' website and email newsletter. His writing has appeared in publications including BusinessWeek, CNBC.com, CNNMoney.com, Fast Company, Fortune, Newsweek, Money and Time.