It was bizarre to listen to unironic praise for the wealthy after Warren Buffett made headlines by pledging more than $30 billion to the Bill and Melinda Gates foundation. Buffett stated that he always wanted to donate his wealth to charity instead of willing it to his children. The kids, having learned the value of bootstrapping at their father's knee, have soared to lofty heights as, respectively, a college dropout, a "New-Age musician," and a disgraced former flack for the Archer Daniels Midland Corporation. Meanwhile, the billionaire is getting royal treatment from commentators as being the right kind of billionaire—the kind who uses his position to criticize anyone who doesn't share his belief that money is the root of all evil.
Perhaps the best example of this is Jacob Weisberg's fawning article in Slate, daringly titled "Wealthy and Wise." For Weisberg and others reporting the story, Buffett's $30-billion giveaway is peripheral to the main story: that Buffett believes there is something immoral about having so much money, and something worse in leaving it all to one's children. "At the moral level," Weisberg writes, "Buffett does not believe anyone has the right to be as rich as he is." Weisberg sums up the problem:
Great wealth brings a special set of problems—moral, political, and emotional. Ethically, there is the question of how to justify having more money than can be consumed in a profligate lifetime while children in the developing world die of preventable diseases… It can affect one's perception of reality, undermine relationships, and screw up one's children.
And so, in a classic Marxist twist, because money isn't everything, it is everything. In that vein, why should anyone enjoy wealth at all, especially as it can only bring misery and pain? Is your son getting bad grades in college? That spoiled brat! Wife running up the credit card bill? She's a gold-digger! Considering an affair? Why not two, you rich twit! What did you expect when you traded your virtue for bundles of cold, hard cash? Oh, heavy is the head that wears the crown!
No available data seem to support the argument that the wealthy, or even the super wealthy, have more problems than any other class. For every Paris Hilton or Nicole Richie, there's an abusive spouse on COPS or a machete fight in Zimbabwe. The problem might not be the paycheck, but the parents; the opportunities for misbehavior are more exciting at $200,000 a year than they are at $20,000, but they're no more numerous.
But it's not just a question of what Buffett thinks of other wealthy people, it's how he would like to regulate them. Part of Buffett's irresistible apparatchik charm is his support for the estate tax, which he believes provides a strong incentive for the wealthy to take an interest in philanthropy. There is little to no evidence in support of this claim, either. Studies from the Congressional Joint Economic Committee found that as inheritance taxes decrease, charitable giving increases. In fact, the one way to make sure that charitable giving increases is to improve the economy.
So why would Buffett argue on behalf of the estate tax if it doesn't do what he says it does?
Maybe because the estate tax is a cash cow for predatory super-wealthy business buyers. In the new book, The Big Ripoff: How Big Business and Big Government Steal Your Money, Tim Carney explains how Buffett expanded his fortune:
Anyone who has ever seen a going-out-of-business sale knows that one of the best ways to get a bargain is to deal with a motivated seller—a person or business that needs to sell in a hurry.
The estate tax weighs heavily on those who have asset-rich businesses, typically family businesses that have taken years to break even and accumulate value. When the owner dies and the children take up the reins, the estate tax comes into play, sometimes costing as much as the business itself. The heirs are then forced to sell the business before losing any more money. This is how Buffett came to own Dairy Queen and the Buffalo News, among other businesses, as they were being sold at lower prices than their actual value. In the latter case, Buffett bought the paper for less than what it would wind up making him each year.
Beyond providing Buffett with a bumper crop of businesses to purchase, the estate tax also provides him with customers. Any financial advisor will tell you that the major component of a sound financial plan is composed of asset allocation, not blue chip trades on the stock market. And that is why they recommend you purchase some life insurance to shelter your money from large taxes such as the estate tax. And why not purchase that life insurance from Buffett's very own insurance company, GEICO?
Our great philanthropist doesn't benefit if the estate tax is repealed—he loses on cheap deals, affluent customers, and spread his own "common man" mythology. Unfortunately, too few realize that Buffett is so self-interested. As he talks about how much he dislikes inordinate wealth, he has done his damnedest to make sure no one else achieves it.