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August 25, 2011
News Analysis: Buffett and Carnegie: Pity the Plutocrats
Joseph J. Thorndike

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After Warren Buffett published his plan for taxing the rich, it didn't take long for someone to put the S-word in play. "Is he completely a socialist . . . playing into Mr. Obama's hands of 'Tax anybody who makes money and give it to people who don't work'?" asked Eric Bolling of the Fox Business Network.1

The guest on Bolling's show, Marc Lamont Hill of Columbia University, was incredulous. "So basically anybody who disagrees with you is a socialist?" Hill responded. "Now Warren Buffett, one of the greatest profit-makers in history, is a socialist? I mean, come on."

If the notion of Buffett-as-socialist seems far-fetched, it's not without precedent. Other economic titans have been maligned by their fellow plutocrats as left-wing radicals, including one of the richest men in American history: Andrew Carnegie.

Steely Socialist

Andrew Carnegie made his fortune in steel, establishing the Edgar Thomson Iron Works in the 1870s and Carnegie Steel Co. in 1892. As he neared retirement in 1901, Carnegie sold his company to the new U.S. Steel Co. for $480 million (about $12.7 billion in 2010 dollars).2

By most accounts, the U.S. Steel transaction made Carnegie the richest man in the world. But well before he assumed that title, he'd been tagged with another: millionaire socialist.

In 1885 while trying to lock disgruntled employees out of his iron mill, Carnegie made news by endorsing some surprising ideas. "I believe socialism is the grandest theory ever presented," he told a reporter for The New York Times, "and I am sure someday it will rule the world."

Intrigued, the Times reporter asked, "You hope that the lion and the lamb will lie down side by side, all things will be equal, and that profits will share and share alike?"

"That is the state we are drifting into," Carnegie replied. "Then men will be content to work for the general welfare and share their riches with their neighbors."3

To conservative ears, Carnegie's words were nothing more than unconscionable pandering. "His talk is like the excited rant of a man who, having 'made his pile,' now wants to make himself 'solid' with the workingmen," wrote the Chicago Daily Tribune. "And to gain their favor against a dimly-apprehended danger is willing to talk firebrands."4

To make matters worse, Carnegie soon got specific with his sacrilege. In an essay entitled "Wealth," the steel baron endorsed heavy estate taxes as a way to right economic wrongs. "Of all forms of taxation, this seems the wisest," he wrote in 1889. "Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire's unworthy life."5

Charity and Its Critics

Carnegie's critics pointed out that he was unwilling to forswear wealth during his lifetime.6 But in his defense, Carnegie stressed the virtues of philanthropy, insisting that rich men should divest themselves of their fortunes before they died. Indeed, charity was a moral necessity, he wrote:

    The day is not far distant when the man who dies, leaving behind him millions of available wealth, which was free for him to administer during life, will pass away "unwept, unhonored, and unsung," no matter to what use he leaves the dross which he cannot take with him. Of such as these, the public verdict will then be: the man who dies thus rich, dies disgraced.7

Not everyone was convinced by these sentiments. In 1910 Rep.-elect Victor L. Berger, a Wisconsin Socialist, was particularly scathing. "Carnegie stated somewhere that he considered it a disgrace for a man to die rich," Berger said. "But unless Andy gets a hustle on himself I am greatly afraid that he will die a very much disgraced man."8

Berger was not the only card-carrying socialist eager to banish Carnegie from the ranks. Upton Sinclair, among others, insisted that Carnegie-style socialism was unworthy of the name. "The great library giver and steel king has written himself down as a great socialist," but real socialists weren't content to tax away wealth at death, Sinclair said in 1907. Rather, they were determined to prevent the accumulation of large fortunes in the first place. "Men like Carnegie grow rich because they think of nothing but the dollar," Sinclair complained. "Nothing but the dollar and how it can be obtained -- no matter how."9

Carnegie's Insight

Carnegie might well have agreed with Sinclair, at least when it came to his status as a socialist. While embracing elements of the socialist agenda, he rejected the notion that socialism itself could replace capitalism.

Indeed, if the Socialist Party was determined to banish Carnegie from its ranks, he was equally determined to deny them ownership of some key issues, including progressive taxation. "It is sound Adam Smith doctrine that all should pay taxes only in proportion to their ability to do so, and revolutionary Socialism is successfully to be combated only by promptly conceding the just claims of moderate men," he wrote.10

Progressive taxation, in other words, could serve as a bulwark against more revolutionary ideologies. By co-opting socialist policies, capitalists might forestall radical movements.

In an era of surging labor unrest, that strategy was plausible. And in later years, during another era of labor unrest, similar thinking would prompt key business leaders to embrace the New Deal. They, like Carnegie, understood that moderate reform was the best defense against radical change.11

Today, Buffett's critics might do well to ponder that notion. As income and wealth inequality continue to worsen, moderate reforms -- of taxation in particular -- might go a long way in securing the future of America's plutocrats.


1 Clip available at

2 "Carnegie Started as a Bobbin Boy," The New York Times, Aug. 12, 1919, at 9.

3 "A Millionaire Socialist," The New York Times, Jan. 2, 1885, at 1.

4 "A Steel-Rail Socialist," Chicago Daily Tribune, Jan. 3, 1885, at 4.

5 Andrew Carnegie, "Wealth," N. Am. Rev. (June 1889), available at

6 See supra note 3.

7 Andrew Carnegie, "The Gospel of Wealth," available at

8 "Ridicules Gifts of Rich," The Washington Post, Dec. 27, 1910, at 1.

9 "Socialist, He Says," The Washington Post, Jan. 13, 1907, at 1.

10 Andrew Carnegie, The Problems of Today 11-12 (1907).

11 For a study of these pro-New Deal business leaders, see Thomas Ferguson, "From Normalcy to New Deal: Industrial Structure, Party Competition, and American Public Policy in the Great Depression," 38 Int'l Org. 41 (1984).