Friday, April 10, 2009

Even Buffett Isn't Perfect: Foreword By Steve Forbes

In the last few weeks we've had a chapter-by-chapter look at this book. Today we finish at the start, by examining the foreword by Steve Forbes.

Vahan Janjigian's book about Warren Buffett is advertised as neither a love-letter nor a put down of the world's greatest investor. But the foreword by Steve Forbes, perhaps best-known for running for US President on a "flat tax" platform, is critical of several of the national policies that Buffett advocates.

Forbes goes after Buffett on his tax policy, calling it "shortsighted". While Buffett believes the rich should have a higher tax burden since they can afford it, Forbes argues this is a disincentive for the most productive earners. While Forbes' conclusion is grounded in accepted economic theory, his arguments are unconvincing, as he makes weak links in history between tax cuts and economic growth, when in actuality there are many factors at play which determine economic growth.

Forbes also calls Buffett "obtuse" on the subject of death taxes. While Buffett argues for taxing rich, dead people over taxing the living, Forbes argues such people will find ways to setup trusts to avoid death taxes anyway. Forbes also argues that a death tax punishes frugality, since there's no point saving up if there's a big tax at the end; however, he then goes on to argue that the children of the rich end up spending their inheritance anyway, helping to recycle that money. This seems to be an incongruent argument since a death tax would encourage the rich to spend that money, thereby recycling it quicker than having to wait a generation for the children to do so.

Forbes argues that the information in this book is worth three books on investing, making this book an undervalued asset. However, the book is only 200 or so pages. Though one shouldn't judge a book by its number of pages, it was difficult not to negatively judge this book based on its foreword.

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