Warren Buffett has drawn a lot of fire for his argument that America's richest investors should be required to pay more taxes. For example, in this Motley Fool article published yesterday, complete with the sensationalist headline "Should Buffett Just Shut Up?," New Jersey governor Chris Christie was reported to have said that if Buffett loves the US government so much, he should just write a check to the Treasury.
I've heard this line thrown around so much that by this point, it's a completely played-out cliche. Sorry, guys, but if you think Buffett can don his superhero tights and solve America's debt problem on his own by using his super investing powers and cutting a check, or that he should even try, you're completely missing the point. That means you, Mr. Christie.
Buffett has been criticized for being a hypocrite because, despite his controversial tax proposal, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) owes $37 billion in deferred taxes as of fiscal year 2011. On the surface, this criticism seems to make sense, but it doesn't stand up to more rigorous scrutiny. Buffett's job as chief executive of Berkshire is to make money for shareholders, and sometimes that means delaying tax payments as long as possible. He has no right to take money that belongs to shareholders and send it to the US government, regardless of his own beliefs, that's a decision each shareholder has to make for himself.
So why isn't Buffett selling part of his massive stake in Berkshire and writing a check to the Treasury from his personal account? Because he already has something else he plans on doing with his wealth: donating it to charity. Buffett has already donated more than 20% of his Berkshire ownership stake to the Bill & Melinda Gates Foundation, continues to donate at a rate of 4% a year, and plans on unloading 99% of his entire fortune on the foundation when he dies.
In an interview where Buffett was asked to comment on why he isn't personally paying any more taxes than he has to, he said that he believes that the money can be better utilized by charitable foundations, where it'll go to those who need it most. Given a choice, I'm sure Buffett would prefer the wealthy to donate to charity rather than pay more taxes to Uncle Sam. But it would be absolutely asinine to try to pass a law to force the top 1% to donate their money. So we need to settle for the next best thing: higher taxes, which actually is something that can be done within the boundaries of the law.
Even if Buffett thought that the US government can better deploy his donations than charity, and chose to do as Christie said and sent Uncle Sam a check, it wouldn't make much of a difference. According to Forbes, Buffett's net worth as of November 2011 is $39 billion. The US national debt is $15 trillion and rising by the second. Even if he donated his entire fortune to the Treasury, it wouldn't make a dent in the public debt.
The only way the government can climb out of this hole is through long-term structural and policy changes. The millionaire tax is one such change. It isn't the only one, and there may be many superior options, but saying that Buffett can solve the problem all by himself sure isn't one of them. Come on, the old guy may be filthy, stinking rich, but he's not that rich.
Disclosure: I am long BRK.B.