It is fair – excuse the pun – to say that the
tax morality and fairness debate, while still relevant, has not
quite ignited in the US in the same way it has in parts of
Europe. Just ask Starbucks' UK representatives. However, one
man that did not get this memo was Warren Buffett.
is a new entry this year
In the past two years, the
Sage of Omaha has been vocal on a number of tax issues,
notably campaigning for higher taxation of the wealthy. The
mainstream media in the US latched onto a statement Buffett
made regarding his tax rate being higher than that of his
secretary. This shunted the Sage into a politically-controlled
spotlight as a business figure pin-up for tax reform. Business
groups have been calling for a tax code overhaul for years, but
getting it to the top of the agenda requires a populist angle.
This angle came in the shape of Debbie Bosanek, Buffett's
secretary, who was used as an example of the "unfairness" of
the US tax system in President Obama's State of the Union
While the rate of capital gains tax went from 15% to 20% in
2013 (for those earning more than $400,000), a partial payroll
tax holiday also expired, meaning that while Buffett's tax rate
went up, so did his secretary's.
"I'll be a fair amount higher, eight or nine points higher,"
Buffett told CNBC in 2013. "But the differential between me and
the rest of the office, not just my secretary but the rest of
the office, was greater than that. It'll be closer, but I'll
probably be the lowest paying taxpayer in the office."
The proposal for a Buffett rule – a minimum tax on
high earners – found support from the President's
office, but was staunchly opposed by Republicans.
However, Buffett has also articulated a key point in any tax
fairness debate, showing why nebulous concepts cannot govern
"I will not pay a dime more of individual taxes than I owe,
and I won't pay a dime more of corporate taxes than we owe. And
that's very simple," Buffett told Fortune
And this year, the White House truly lost its pin-up when
Berkshire Hathaway helped to finance
Burger King's $11 billion acquisition of Canadian coffee and
doughnut chain Tim Hortons – an inversion
transaction that will see the Miami-based fast-food outlet move
its tax home to Canada.
With Obama describing inverting companies as "corporate
deserters" and figures such as
Ron Wyden, chairman of the Senate Finance Committee,
calling the inversion trend a "virus", the label of Buffett
as Democratic tax hero was no longer such an easy sell. The
billionaire investor was now being slapped with the "hypocrite"
label, and Democrats were left with egg on their faces for
polarising the issue for the purposes of an election campaign.
But they only have themselves to blame, peddling aggressive and
divisive rhetoric against a tax structuring method that is
within the boundaries of the tax code – the same
tax code Congress has repeatedly failed to reform.
As the Wall Street Journal noted in August,
"President Obama and Senate Democrats are going to need a new
business front man" after being "officially abandoned by their
erstwhile tax policy patron saint Warren Buffett".