Celebrate Redistribution With a Shotgun Wedding Between Berkshire Hathaway and General Motors
by Eric Englund
by Eric Englund
Two of America's highest-profile advocates of wealth redistribution are Barack Obama and Warren Buffett. Presently, President-elect Obama is pushing to redistribute $50 billion to Detroit's three failing automakers. He is particularly concerned about the possibility that GM may file for bankruptcy in a few months. As for Warren Buffett, you may not be aware that he is a strong proponent of the income tax, the estate tax, and double-taxation on dividends (for more on this matter, read this Forbes article: Warren Buffett's Tax Fetish). With these two gentlemen being kindred spirits, perhaps Mr. Obama should "invite" Mr. Buffett to "give a little more" as alluded to in Berkshire Hathaway's 2003 annual report (more below). Berkshire Hathaway, after all, has a lot of money and General Motors needs a good sum of it. So why not have the Obama White House broker a deal — under threat of sending Buffett to jail — to merge General Motors into Berkshire Hathaway? What is good for GM, as the saying goes, is good for the country…and Barack Obama will see to that.
It would be a smashing idea for President-elect Obama to read Warren Buffett's 2003 letter to shareholders. In this letter, Buffett takes umbrage to the allegation that he and his company are tax avoiders. Hence, Mr. Buffett brags about the fact that Berkshire Hathaway's 2002 tax return was 8,905 pages long and that Berkshire is amongst the top-ten taxpaying entities in the United States. He goes on to state that Berkshire Hathaway "…was surely pulling its share of our country's fiscal load" and that if outsiders see otherwise then "…that means Charlie and I need to try harder" and "…we are ready to do so."
The following excerpt was penned by Mr. Buffett, in the aforementioned letter to shareholders; and will surely warm the heart of his fellow redistributionist Barack Obama:
On May 20, 2003, the Washington Post ran an op-ed piece by me that was critical of the Bush tax proposals. Thirteen days later, Pamela Olson, Assistant Secretary for Tax Policy at the U.S. Treasury, delivered a speech about the new tax legislation saying, "That means a certain Midwestern oracle, who, it must be noted, has played the tax code like a fiddle, is still safe retaining all his earnings." I think she was talking about me.
Alas, my "fiddle playing" will not get me to Carnegie Hall — or even to a high school recital. Berkshire, on your behalf and mine, will send the Treasury $3.3 billion for tax on its 2003 income, a sum equaling 2½% of the total income tax paid by all U.S. corporations in fiscal 2003. (In contrast, Berkshire's market valuation is about 1% of the value of all American corporations.) Our payment will almost certainly place us among our country's top ten taxpayers. Indeed, if only 540 taxpayers paid the amount Berkshire will pay, no other individual or corporation would have to pay anything to Uncle Sam. That's right: 290 million Americans and all other businesses would not have to pay a dime in income, social security, excise or estate taxes to the federal government. (Here's the math: Federal tax receipts, including social security receipts, in fiscal 2003 totaled $1.782 trillion and 540 "Berkshires," each paying $3.3 billion, would deliver the same $1.782 trillion.)
Our federal tax return for 2002 (2003 is not finalized), when we paid $1.75 billion, covered a mere 8,905 pages. As is required, we dutifully filed two copies of this return, creating a pile of paper seven feet tall. At World Headquarters, our small band of 15.8, though exhausted, momentarily flushed with pride: Berkshire, we felt, was surely pulling its share of our country's fiscal load.
But Ms. Olson sees things otherwise. And if that means Charlie and I need to try harder, we are ready to do so.
I do wish, however, that Ms. Olson would give me some credit for the progress I've already made. In 1944, I filed my first 1040, reporting my income as a thirteen-year-old newspaper carrier. The return covered three pages. After I claimed the appropriate business deductions, such as $35 for a bicycle, my tax bill was $7. I sent my check to the Treasury and it — without comment — promptly cashed it. We lived in peace.
All of us, indeed, may live in peace as long as we pay our taxes. If you don't pay your taxes, well, then an expensive fight with the IRS and jail time may be in your future.
To be sure, I adhere to what Murray Rothbard stated in his magnificent book The Ethics of Liberty:
If, then, taxation is compulsory, and is therefore indistinguishable from theft, it follows that the State, which subsists on taxation, is a vast criminal organization far more formidable and successful than any "private" Mafia in history. Furthermore, it should be considered criminal not only according to the theory of crime and property rights as set forth in this book, but even according to the common apprehension of mankind, which always considers theft to be a crime.
Plain and simple, taxation is theft. Therefore, Barack Obama and Warren Buffett celebrate theft. But here is the rub, Barack Obama will soon have the full backing of Uncle Sam's police state while Buffett sits atop of Berkshire Hathaway's $120 billion net worth (as of September 30, 2008). If our 401(k)s and our IRAs are now fair targets for the redistributionists, in addition to our incomes, then why not Berkshire Hathaway's war-chest of a balance sheet?
So here is the deal President Obama should offer Warren Buffett: Merge Berkshire Hathaway with General Motors in order to save hundreds of thousands of jobs and in order to assure that tens-of-billions of dollars of GM's pension and retirement benefits continue to be honored. (Keep in mind that even after such a merger, Berkshire Hathaway will still have a net worth of approximately $60 billion and will remain one of the strongest companies in America — GM's net worth is presently close to negative $60 billion; so doing the math is pretty easy). Conversely, if Mr. Buffett doesn't accept the "offer," then the Federal government will simply take over Berkshire Hathaway, merge it with GM, while sending Buffett to prison — without trial — as a suspected terrorist. Gotta love the Patriot Act.
Buffett, to be sure, will take the deal so that he may continue to live in peace with his master. After all, it is difficult to say "no" to a nuclear-armed Commander-in-Thief.
And then the unwashed masses shall celebrate a highly successful redistribution at the expense of an ultra-wealthy man instead of at the expense of an abstraction Buffett and Obama call "the taxpayers." My guess is that Warren Buffett won't attend this celebration as he was given a raw deal that he couldn't refuse. At this point maybe Buffett's fetish, for redistributionist theft, will be cured.
Load the shotgun; I hear wedding bells for Microsoft and Ford.
November 18, 2008
Eric Englund [send him mail], who has an MBA from Boise State University, lives in the state of Oregon. He is the publisher of The Hyperinflation Survival Guide by Dr. Gerald Swanson. You are invited to visit his website.
Copyright © 2008 Eric Englund