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Why Warren Buffett Is Dead Wrong
About the Estate Tax

[COMMENT:  Dan Ferris, an investment advisor, makes an important point here, that society (still less, civil government) does not own the money I make and has no claim on it other than for legitimate (limited-government) taxes. 

But he omits another point, far more important, that I do not own "my" money either, God does.  He has an eternal and total claim on all of it.  I am a steward, not owner, of "my" money, holding it in trust for God, to be used at His will.   With respect to civil government, I in effect own the money because I, not the government, am the steward.  I get to say how it will be used -- but only under God.  With respect to God, I am His steward.  The government has no business enforcing what it thinks God wants me to do with it, excepting (again) for legitimate, limited-government uses.

So Warren Buffett may be mistaking the voice of God to give his money to society for the voice of government or society.  It is important that we rightly identify the voice of authority.   

I am no economist, but I think Ferris aptly describes some of the mechanisms by which the free market corrects wrong imbalances.  But a free market will work well only in an honest and Godly society.  Without a moral commitment of the heart, things break down, and then we inevitably get more government control to make us behave again.  As (I think) a Speaker of the House in the 1850's said, "We will be ruled by the Bible or by the bayonet."     E. Fox]

By Dan Ferris

I saw the following recently in an article at CNNMoney.com:

"'Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit,' Warren Buffett told the New York Times in 2001. '[Repeal would be like] choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.'"

Warren Buffett, one of the world's richest men, is referring to the practice of leveling large taxes on your wealth after you die. Of course, the problem with Buffett's statement is that "the resources of the nation" don't belong to "the nation" at all. You own your wealth or, at least, you're supposed to own it. I guess if you have a billion dollars, you think you get to say how "the nation" ought to be run. 

The wrong-headed idea that permeates our culture and allows for Buffett to advocate estate taxes is the idea of "giving back to the community." This idea is a nonstarter because there was no taking in the first place. You get rich by offering value for value. You get rich by trading, not taking. "Taking" is what the government did to Suzette Kelo when it condemned her house so Pfizer could build a parking lot (a crime that was upheld by that bastion of justice, the U.S. Supreme Court, in Kelo v. City of New London). THAT is taking. 

But traders have no need to give back anything, unless for reasons of recission due to the use of fraud or force, unless they're guilty of a crime. Earning wealth is not a crime... at least, it's not supposed to be one. I heard Buffett once say that he always planned to give his money "back to society." Never mind that nothing was "taken" from any "society," only wealth that was created and trading that was done. Why does he feel so guilty?

If Buffett needs to imagine a future that doesn't rankle his idea of fairness, maybe he should remember that incapable allocators of wealth will lose their wealth to other more capable allocators. So if the inheritors aren't the Olympians he says we're making them out to be, the market will take care of that.

Like a man looking for a good time on a small budget, money goes where it's treated best. People who inherit wealth and don't treat it right will lose it. But to be quite accurate, that's off topic. Even if the inheritors of wealth don't lose it, it doesn't matter. The most important point, the one Buffett doesn't acknowledge, is that the wealth is theirs to lose or keep as they may. It absolutely, positively does not belong to "society."

It's also a mistake to suggest that, by honoring property rights and allowing people to keep their wealth, we are somehow choosing some sort of future "Olympic team." Not true at all. We are simply acknowledging a man's right to dispose of his property as he sees fit. There can be no such thing as the "aristocracy of wealth" Buffett fears.

The inheritable wealth Buffett wants to destroy through taxation (a euphemism for "theft") must be created and earned. An aristocracy, on the other hand, is the ruling class in a monarchy. All of the monarchy's wealth is seized, conquered, and redistributed wealth. The term, "aristocracy of wealth," is like "military intelligence." It's self-contradictory. That the aristocracy passes its wealth from generation to generation is a funny thing to worry about, too. The aristocracy eventually has to sell it all off to keep out of the poor house. You can't live on unproductive inherited wealth forever, anymore than you can live on borrowed money forever. To paraphrase Robert Louis Stevenson, those who attempt to live on unproductive inherited wealth, sooner or later, sit down to a banquet of consequences.

It's interesting to note that Buffett advocates the estate tax, and yet has deprived the government of its fair share of his own national resources by giving some $37 billion to the Bill & Melinda Gates Foundation. The shares are worth more now, too, so the taxman is further deprived as the market bids up Berkshire's stock. 

Isn't Buffett afraid that Bill and Melinda already have much more than their fair share of national resources to command? Isn't he committing the wrong he alleges will be righted by the estate tax? Who cares about the Gates' superior ability to command the resources? The playing field is decidedly other unlevel already, yet Buffett insists in unleveling it some more. Seems like Buffett thinks your estate ought to be taxed, because you don't know what you're doing.

According to Buffett, your children will be better people if we just steal your money before you can give it to them. They'll have to work harder.

Buffett thinks the estate tax creates a level playing field. Ah, the level playing field, the illusive goal of the society builders and master planners. The only trouble with the level playing field is that you can't ever have one, because it means penalizing people for their ability, for their success. It means cutting the tops off the maple trees so they don't block the sunlight for the oak trees (or are oaks taller than maples? I don't know).

And if we consistently chopped the tops off all the tall trees just for being tall, then the Buffetts of the world would never have the chance to amass so much to give back to society. At that point, he'd be society, waiting for someone to give him something back.

I wonder how he'd like that?

Good investing,

Dan Ferris

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