The Audacity of Hope

I was sitting in the office of Warren Buffett, chairman of Berkshire Hathaway and the
second richest man in the world. I had heard about the famous simplicity of Buffett’s
tastes—how he still lived in the same modest home that he’d bought in 1967, and how
he had sent all his children to the Omaha public schools.
Still, I had been a little surprised when I walked into a nondescript office building in
Omaha and entered what looked like an insurance agent’s office, with mock wood
paneling, a few decorative pictures on the wall, and no one in sight. “Come on back,” a
woman’s voice had called out, and I’d turned the corner to find the Oracle of Omaha
himself, chuckling about something with his daughter, Susie, and his assistant, Debbie,
his suit a bit rumpled, his bushy eyebrows sticking out high over his glasses.
Buffett had invited me to Omaha to discuss tax policy. More specifically, he wanted to
know why Washington continued to cut taxes for people in his income bracket when the
country was broke.
“I did a calculation the other day,” he said as we sat down in his office. “Though I’ve
never used tax shelters or had a tax planner, after including the payroll taxes we each
pay, I’ll pay a lower effective tax rate this year than my receptionist. In fact, I’m pretty
sure I pay a lower rate than the average American. And if the President has his way, I’ll
be paying even less.”
Buffett’s low rates were a consequence of the fact that, like most wealthy Americans,
almost all his income came from dividends and capital gains, investment income that
since 2003 has been taxed at only 15 percent. The receptionist’s salary, on the other
hand, was taxed at almost twice that rate once FICA was included. From Buffett’s
perspective, the discrepancy was unconscionable.
“The free market’s the best mechanism ever devised to put resources to their most
efficient and productive use,” he told me. “The government isn’t particularly good at
that. But the market isn’t so good at making sure that the wealth that’s produced is
being distributed fairly or wisely. Some of that wealth has to be plowed back into
education, so that the next generation has a fair chance, and to maintain our
infrastructure, and provide some sort of safety net for those who lose out in a market
economy. And it just makes sense that those of us who’ve benefited most from the
market should pay a bigger share.”
We spent the next hour talking about globalization, executive compensation, the
worsening trade deficit, and the national debt. He was especially exercised over Bush’s
proposed elimination of the estate tax, a step he believed would encourage an
aristocracy of wealth rather than merit.
“When you get rid of the estate tax,” he said, “you’re basically handing over command
of the country’s resources to people who didn’t earn it. It’s like choosing the 2020
Olympic team by picking the children of all the winners at the 2000 Games.”
Before I left, I asked Buffett how many of his fellow billionaires shared his views. He
laughed.