A Case Against Government Involvement

8 March 2004

In his 2003 letter to shareholders, Mr. Warren Buffett related a story that began with his May 20, 2003 op-ed piece published in The Washington Post. Here’s part of the story:

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 2.5% of the total income tax paid by all U.S. corporations in fiscal 2003.

Warren Buffett
2003 Letter to Shareholders

This gave rise to this eloquent response (to Ms. Olson) on the Motley Fool discussion board for Berkshire Hathaway:

The idea seems to be that Corporations are not People. Instead, corporations represent no property rights of real life people, with real life financial needs, but some kind of independent money trough dedicated to the public use. With politicians bemoaning the outsourcing of jobs by Benedict Arnold corporations, we see the confusion, and the attempt for public confiscation.

Are we going to ask corporations to hold to jobs in the US even when their shareholders are better served to have those same operations performed elsewhere? This only makes any kind of sense if those corporate assets are not owned by people, but, instead by the public. Do non-owners, seeking jobs, have a greater right and higher call on corporate assets than those who have actually purchased those assets? If so, at what point are your assets no longer yours? As soon as they are placed into corporate form? Does this silly idea also apply to partnerships, joint ventures and sole proprietorships? And what happens when some hard working individual saves and invests his or her money into a public company? Are the assets so placed aside for retirement, medical or educational needs now forfeit, instead dedicated to vain attempts to protect the jobs of others?

This is all the same thing. If taxes paid by corporations are not, in the final analysis, paid by their shareholders, then they are paid by no one. And if no one bears any corporate cost, then no one is injured when corporations are limited in their ability to best order their financial affairs and business operations. Limit their outsourcing, limit their use of offshore corporations, force this and that. No one gets hurt, it is only a corporation.

Buffett understands that Corporate assets are actually owned by People, not the Public. He compared his then taxes paid as a thirteen-year-old Person to his now taxes paid for him by Berkshire, a Corporation.

Elias Fardo
Message #88332 – The Motley Fool
Discussion Board for Berkshire Hathaway

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