Kudos to Adam J. White at The Weekly Standard for hoisting Warren Buffett on his own petard. Buffett is out with a new New York Times op-ed agitating for — what else — higher taxes. His condescending opening reads as follows:
Suppose that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”
Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
An addendum: only in Grover Norquist’s imagination and Warren Buffett’s biography. White catches him thusly:
Early in his career, Buffett invested heavily—almost one third of his early fund’s capital—in Sanborn Map, a company that mapped utility lines and such. But he soon grew frustrated with the company’s leadership, which “operated more like a club than a business,” and which refused to return greater dividends to investors. So Buffett amassed more and more stock, and with control of the company finally in hand he pressed the board of directors to split the company in two (one for the mapping business, and one to hold the company’s other outsized investments).
Finally, the board capitulated. But with victory finally at hand, Buffett nearly scuttled the deal because of … taxes. As [Buffett biographer Alice] Schroeder recounts, quoting Buffett, one director proposed that the company just cleanly break the company, despite the tax consequences—”let’s just swallow the tax,” he suggested.
To which Buffett replied (as he recounted to Schroeder):
And I said, ‘Wait a minute. Let’s — “Let’s” is a contraction. It means “let us.” But who is this us? If everyone around the table wants to do it per capita, that’s fine, but if you want to do it in a ratio of shares owned, and you get ten shares’ worth of tax and I get twenty-four thousand shares’ worth, forget it.’
Buffett was willing to walk away from a deal because the taxes would have taken too much of a bite out of it. Fortunately for him, the board gave in and allowed him to structure the deal that he liked, saving him from his own Norquistian response.
So is Warren Buffett an irrational businessman or an irrational policy analyst? All the evidence points in one direction.