August 17, 2011 / 4:27 AM / 8 years ago

Insight: Will Buffett, Schultz debt plans be shunned?

NEW YORK/LOS ANGELES (Reuters) - Warren Buffett and Howard Schultz want to change the conversation about how to fix the United States’ economic woes. But their solutions - more taxes on the rich and a boycott on political donations - risk falling on deaf ears among fellow business leaders.

Berkshire Hathaway Chairman Warren Buffett wanders the company trade show before his company's annual meeting in Omaha, Nebraska April 30, 2011. REUTERS/Rick Wilking

Few high-profile decision makers have publicly supported their pleas so far, and most in their target audiences decline to even discuss it, lest they get dragged into the debate.

That isn’t the case outside the corporate elite.

More than 40,000 Twitter users shared billionaire investor Buffett’s op-ed column in Monday’s New York Times calling for the wealthy to shoulder a bigger tax burden.

CNBC’s largely corporate audience backed Starbucks Chief Executive Schultz’s call to fellow CEOs to stop sending political donations until Congress and the President come up with a long-term plan for a “fair, bipartisan” deal to curb U.S. debt, with 89 percent in favor in a poll.

But public outrage will not make their suggestions reality. That would require other tycoons and top executives to jump on board to tell the Republicans and the Democrats that they had also had enough of the rancor that brought the United States close to a debt default earlier this month and contributed to the loss of the nation’s triple-A debt rating.

“Getting Washington to do something about this, getting the GOP (Republican Party) to move off their ‘no new tax’ position, no funding of our deficit problem through raising tax revenue, I don’t see how that’s going to happen,” said Dal LaMagna, an entrepreneur and investor who has unsuccessfully run for national office.

LaMagna has a history of outspokenness, but few are joining him in debating this question.

While Schultz has managed to get NYSE Euronext Chief Executive Duncan Niederauer and Nasdaq OMX Group Chief Executive Robert Greifeld to pledge their support for his proposal, it isn’t easy to find many others.

Reuters contacted more than three dozen politicians, CEOs, investors and celebrities on Tuesday to get their views on the Buffett and Schultz positions and almost all of them either declined to comment or did not return calls.


Three of the few who did are John Allison, the former chairman and CEO of banking company BB&T, Cypress Semiconductor founder and CEO T.J. Rodgers and Eli Broad, the real estate magnate turned philanthropist.

Allison said Schultz’s call for a boycott on donating is misplaced and that people should commit themselves to giving to candidates they actually support instead of donating to both sides as insurance.

“I think it’s naive,” Allison said in an interview. “If businesses and executives stop donating, does that mean pensions and unions will stop too?”

He also disagrees with Buffett’s call to raise taxes on the wealthy. Allison’s argument is that higher taxes on the rich will merely push them to move their money elsewhere, or to find loopholes in the tax system.

Rodgers, who said that more than half of his income goes to the state of California and to federal taxes, is no fan of the Buffett plan.

The CEO, who invests his money in start-ups and other ventures, said the government would “invest” the extra tax money “in pork barrel projects of dubious merit, controlled by political rather than market forces” without added benefit.

“The fact is, the country will be less well off if they’re investing my money instead of me,” said Rodgers, who added that he has “been on the Schultz plan forever” because he doesn’t give money to political candidates.

Broad heartily agrees with the plan from the “Oracle of Omaha”.

“Those of us who have had great financial success, whether we are millionaires or billionaires, really have an obligation to pay more taxes,” Broad said.

“We’ve been coddled, as he said, long enough. We have all these tax breaks and other things that 99 percent of the public does not have and I think it’s unfair. I think we need to create a more level playing field on taxes.”

Broad said he suspects most of the people who signed Buffett’s “Giving Pledge” — his push for the wealthy to give most of their fortunes to charity — also would agree with his tax plan. (So far, most have been mum.)

“We’ve all said we’re willing to give 50 percent of our wealth away during our lifetimes. One way to do it is to pay more taxes and have that money go to create jobs, reduce the national debt, do a better job of educating our people and the like,” Broad said.


Even if Buffett and Schultz fail to get more than a handful on board with their proposals, the very fact they made them may tend to help Democrats on the campaign trail for the presidential and congressional elections in November 2012.

Republicans lawmakers have resisted Democrat proposals to raise any revenue through tax increases, insisting that the government’s budget deficit only be closed through spending cuts.

“It helps Obama to have other people making the argument on why rich people need to do their share. There are so few people in the political establishment making that argument that he needs outside allies,” said Darrell West, director of governance studies at The Brookings Institution.

West said Buffett has a certain credibility that will go far in Washington, particularly if Congress gets bogged down in a debate over the expiration of tax cuts brought in under former President George W. Bush. “Anything that makes the case for a balanced approach to deficit reduction is good for Obama,” he said.

Additional reporting by Joe Rauch in Charlotte, Tabasum Zakaria in Washington, Jen Saba, Megan Davies, Michael Erman and Phil Wahba in New York, Alexei Oreskovic and Alistair Barr in San Francisco, Bill Rigby in Seattle and Nichola Groom in Los Angeles, writing by Ben Berkowitz, editing by Martin Howell

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