Entrepreneurs

Billionaire Warren Buffett on helping the poor: 'A rich family does not leave people behind' 

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

In the U.S., we live in a market economy, says Warren Buffett.

And in such an economy, thanks to his investing prowess, Buffett, CEO and Chairman of holding company Berkshire Hathaway, is currently the third richest person in the world, worth $86.6 billion according to Forbes. He has such a nose for investing he has earned the nickname, "Oracle of Omaha," after the town in Nebraska from which he hails.

But what if money were only awarded for some other measure – like sports ability, for example? Buffett says he would be in trouble.

"If this was a sports economy, I'd starve to death. You could give me six hours of training every day and I could practice at night… And I wouldn't be any good," Buffett told CNN's Poppy Harlow at a charity lunch hosted at Smith & Wollensky steakhouse in New York City on Thursday. Buffett uses the hypothetical to make a point: "Your skills fit a market economy," he told Harlow, "my skills fit a market economy. Not everybody's do."

For those whose skills don't fit, it can mean financial struggle — and it's the job of the most successful and the government in a market economy to do something about that, he said.

"We want a market economy, but a rich family does not leave people behind," Buffett explained.

He's made the point before. "Everything should be devoted initially to getting greater productivity," said Buffett at Columbia University in 2017. "But people who fall by the wayside, through no fault of their own, as the goose lays more golden eggs, should still get a chance to participate in that prosperity. And that is where government comes in."

For example, the evolving economy "doesn't benefit the steelworker maybe in Ohio," Buffett on PBS Newshour in 2017. "And that's the problem that has to be addressed, because when you have something that's good for society, but terribly harmful for given individuals, we have got to make sure those individuals are taken care of."

On Thursday, Buffett (again) recommended updating the earned income tax credit, which is a tax benefit that helps those who are working but not earning much.

"The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund," according to the Internal Revenue Service.

"I think we could reform and expand the Earned Income Tax Credit," Buffett said. "People don't need a minimum wage, they need a maximum amount of cash in their pocket and the earned income tax credit rewards those who work but they also help the person whose skills don't fit a market economy."

In addition to recommending the government play an active role in wealth redistribution, Buffett does his personal part via philanthropy.

Harlow interviewed Buffett on his 88th birthday, the same day he dined at Manhattan, New York steakhouse Smith & Wollensky with the winner of his annual charity lunch auction, which this year raised $3.3 million for the Glide foundation.

But the lunch is only a fragment of Buffett's charitable efforts.

Along with billionaire Bill Gates, Buffett co-founded The Giving Pledge, a public call for billionaires to give away more than half their wealth.

Even though many benefit from America's market economy, Buffett told Harlow "a disproportionately low number" of Wall Street billionaires have taken his pledge compared to other sectors.

Buffett says another group that is "generally are less inclined" to give away their money is what he calls "the inheritors."

"[T]hey feel they are breaking a covenant that their grandfather gave it to their father and their father gave it to them, so they don't feel like they should," said Buffett. "It's tough if it's all tied up in a family business, too."

Still, Buffett doesn't think they should keep it; instead, those who are lucky enough to have a fortune should help others who aren't.

"A lot of what was determined about us was the moment we were born…where we were born, who we were born to, I mean your zip code really is important in determining your future and … I've been lucky. You've been lucky. Most of our friends have been lucky...and a lot of people aren't lucky," said Buffett.

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