In response to the post composed by Peter the Menshevik, er, mensch, below, I have dusted off and updated an old column that languished unpublished in my files. JAB

When President Obama justifies raising taxes on “the rich” – billionaires, millionaires and anyone making more than $250,000 a year – he cites as a moral authority no less than the second richest man in America. “Warren Buffett doesn’t need another tax cut,” the president said earlier this year. “Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn’t be here without. … And I believe that most wealthy Americans would agree with me.”

Setting aside the fact that no one is talking about giving Warren Buffett a tax cut – it is a rhetorical tic of the president to equate not raising taxes with actually cutting them — let us focus a moment upon the idea of Buffett as moral exemplar.

In an interview with ABC last fall, Buffett said that rich people should pay more in taxes and that Bush-era tax cuts for top earners should be allowed to expire. “I think that people at the high end – people like myself – should be paying a lot more in taxes.”

The oracle of Omaha has been sounding the same theme for years. Speaking at a $4,600-a-seat fundraiser for Senator Hillary Clinton in 2007, he famously criticized the U.S. tax system for allowing him to pay a lower tax rate than his secretary. He was taxed 17.7% on the $46 million he made the previous year, he said, while his secretary, who earned $60,000, was taxed at a top rate of 30%. He also took a swipe at Republicans who wanted to reduce the inheritance tax.

Why Buffett has any more moral authority on the subject than anyone else is beyond me. Jacking up the top tax bracket for households earning $250,000 or more in salary, bonuses, tips, interest and dividends would have zero impact on him. A notorious tightwad, Buffett pockets a nominal salary of $100,000 from his company, Berkshire Hathaway. And he collects no dividend income from the company because Berkshire Hathaway doesn’t pay dividends. I admire him for his parsimony – it’s refreshing in this era of lavishly compensated CEOs – and I think he sets a positive example. But let’s be honest here. Reversing the Bush-era tax cuts would raise other peoples’ taxes, not his.

The reason Buffett is taxed so little is that he reports his income as capital gains. When he needs a few million dollars in pocket money, he sells some of his Berkshire Hathaway share — a totally discretionary act. According to an op-ed piece he ran in the New York Times last month, he paid $6.9 million last year on a sum that can be calculated to be $39 million. In other words, his taxable income constituted less than 1/1,000th of his $45 billion net worth. By holding onto the overwhelming majority of his Berkshire Hathaway stock, he incurred no taxable obligations he wasn’t willing to pay.

Buffet does go against his narrow self interest by saying the United States should tax capital gains at a higher rate. In the NYT column, he advocated raising the tax rate (he didn’t say how much), including for dividends and capital gains, on income exceeding $1 million, and an even higher rate for anyone making more than $10 million. If he still supported repealing the Bush tax cuts, he did not say. But President Obama please take note: His $1 million threshold would apply to only 237,000 households — far fewer than the 3.2 million that would be affected by your call to raise taxes on everyone making $250,000  ($200,000 for singles) or more.

If Mr. Obama’s aim is to strike empty poses against the rich, then by all means he should raise the capital gains tax. He just shouldn’t delude himself into thinking he will actually collect more taxes that way. Historically, raising the capital-gains tax rate has not raised the sum of money collected. For most people, the tax is entirely discretionary, just like it is for Mr. Buffett. If Uncle Sam raised the tax from 17% to, say, 35%, a lot of people would balk at paying the higher taxes and never execute taxable transactions.

While Buffett might not mind forking over tax dollars, some people do. For an extreme example, read the story in today’s Wall Street Journal about William H. Millard. The founder of the ComputerLand retail chain, who has been found living in Grand Cayman, dodged a$100 million tax bill for the past 20 years by means of 50 shell companies, trusts and bank accounts.

Buffett also supports a higher tax on inherited estates. But that wouldn’t affect him either. Opposing “dynasties of wealth,” he plans to give away 99% of his fortune to philanthropy. Very noble. What he doesn’t oppose is putting his wealth in tax-sheltered foundations that endow social causes that he believes in. Apparently, he thinks he can put those billions of dollars to better use than the government can. I don’t blame him. I’m just not impressed by his moral authority on the subject. If he really believes rich people ought to pay more, maybe he could stroke a check to Uncle Sam and set an example for others to follow. As President Obama might say, he can afford it.

In the meantime, Mr. Obama might query the sage of of the sagebrush why he would apply the higher taxes only on income over $1 million — four times the level he proposes. And he should stop invoking Buffett’s name in support of a tax policy that he apparently no longer advocates.