If you had your choice of accepting a similar position with Eastman Kodak or Apple, Inc., which company would you choose to work for? (To help make your decision easier, after 130 years in business Eastman Kodak filed for bankruptcy a few days ago).
Eastman Kodak will soon release their remaining employees to join the mass of the unemployed already in the marketplace. The reason is that their management did not have the vision to adapt to the technological changes which have occurred in the world of photography. They were failures.
Apple on the other hand has innovated products that resonate with consumers and has experienced exceptional growth. They will no doubt hire more people from the ranks of the unemployed, thus reducing the stress on the economy. They are successes.
Well, Tuesday was the day we found out how successful one of the Republican presidential aspirants, Mitt Romney has been. According to his tax returns, Mr. Romney has done very well – having reported approximately twenty million dollars in income during each of the last two years. That puts him in an earnings class shared by a very few – including some Hollywood and professional sports celebrities.
Good for Mr. Romney. I love a success story. It leaves me with a warm and fuzzy feeling that if I only apply myself I too might one day be one of those stories. (Perhaps as a child I read too many books by Horatio Alger, Jr.).
But now the flak begins – and into the fray enters Warren Buffett – stage left. Although his attack was directed at Congress over the inequities in all sixty-two thousand pages of the Internal Revenue Code and not at candidate Romney, the casual observer – with the help of the media – will find this distinction minor.
Let’s be clear – when expressed in terms of the effective fourteen percent of his income that Mr. Romney paid, that number seems low (Mr. Buffett’s point being that millionaires should pay a higher percentage of their income for the common good). When expressed as a payment to the Internal Revenue Service of nearly six million dollars – that number takes on a different meaning.
We have talked about tax reform in this country for decades – the result being that we have merely added pages and chapters to the IRC and reformed or deleted very little. I enjoyed reading “War and Peace” – but it finally came to an end.
As we saw from the confirmation hearings for Treasury Secretary Timothy Geithner, when you have a code that is so complicated that the person who now heads up the Internal Revenue Service cannot understand it and “misfiles” his own return – how are the rest of us supposed to cope with it?
The tragedy is that the Congress will not do anything substantive – this being an election year and all. Which means we will kick the can of tax reform down the road for yet another year. Our elected officials have perfected this technique to the point that it is a science. (I refer you to the last thirty years during which we have failed to enact a real energy policy).
Given that likelihood, I would like to offer Mr. Buffett a suggestion that may, in the short term, help ease his conscience and angst. If he feels that he is being under-taxed – let him “donate” an amount that he believes is appropriate to bring his percentage of payment up to the level that he thinks is equitable. (There is no provision in the tax code to prevent him or anyone else from doing so).
If Mr. Buffett sets that example, I promise to throw in a few extra bucks myself this April 15th.
“The power to tax is the power to destroy.”
– Chief Justice John Marshall