The world’s second-richest man, Warren Buffett, on Saturday issued his annual letter to the shareholders of his holding company, Berkshire Hathaway Inc. We have a great regard for Mr. Buffett as investor, but a healthy suspicion of some of his public policy positions on matters such as population control (he’s for it, we’re against) and estate-tax repeal (we’re for it, he’s against). For those interested in the public policy debates, this weekend’s letter from the so-called Sage of Omaha offered a fascinating read.

Privatization: One of Berkshire’s businesses is a British electric company. Mr. Buffett writes: “Here’s a tidbit for fans of free enterprise. On March 31, 1990, the day electric utility companies in the U.K. were denationalized, Northern and Yorkshire had 6,800 employees in functions these companies continue today to perform. Now they employ 2,539. Yet the companies are serving about the same number of customers as when they were government owned and are distributing more electricity.” He calls this “a victory” for “those who believe that profit-motivated managers, even though they recognize the benefits will largely flow to customers, will find efficiencies that government never will.”

Here’s hoping Mayor Bloomberg and Governor Pataki take the hint and move to privatize some government enterprises here in New York.

Independent Directors: Mr. Buffett criticizes the “new rules bearing down on corporate America” that are designed to emphasize “independent” directors. The Sage of Omaha notes that under these rules, “an individual who is receiving 100% of his income from director fees — and who may wish to enhance his income through election to other boards — is deemed independent.” Mr. Buffett notes that each of the 11 Berkshire Hathaway directors owns more than $4 million of Berkshire stock.

Mr. Buffett obviously knows something about how to run a company. Yet Senator Sarbanes and Congressman Oxley seem to think they know better. We’re in Mr. Buffett’s camp on this one.

Taxes: Mr. Buffett offers a fine implicit argument for tax simplification when he notes that his company’s 2002 tax return was 8,905 pages long. “As is required, we dutifully filed two copies of this return, creating a pile of paper seven feet tall.” Elsewhere on the tax front, Mr. Buffett overreaches when attempting to rebut the Bush administration’s assistant treasury secretary for tax policy, Pamela Olson, who accused him of having “played the tax code like a fiddle.” The context was Mr. Buffett’s opposition to a Bush administration plan to eliminate the tax on corporate dividends.

Mr. Buffett’s defense is that his company “will send the Treasury $3.3 billion for tax on its 2003 income.” He says that payment “will almost certainly place us among our country’s top ten taxpayers.” And he notes, “If only 540 taxpayers paid the amount Berkshire will pay, no other individual or corporation would have to pay anything to Uncle Sam. That’s right: 290 million Americans and all other businesses would not have to pay a dime in income, social security, excise, or estate taxes to the federal government. (Here’s the math: Federal tax receipts, including social security receipts, in fiscal 2003 totaled $1.782 trillion, and 540 ‘Berkshires,’ each paying $3.3 billion, would deliver the same $1.782 trillion.)”

It looks to us like Mr. Buffett is fiddling a little fast with this one. After all, the letter to shareholders begins, “Our gain in net worth during 2003 was $13.6 billion.” A $3.3 billion tax on a $13.6 billion gain works out to a 24.3% effective tax rate. Not bad for Mr. Buffett, considering that if he and the other Berkshire Hathaway shareholders had to pay personal income taxes on that gain — at the top personal income tax rate of 35% — the tax bill would have been $4.76 billion.

We’re not saying that Mr. Buffett has done anything wrong by keeping money in his company rather than paying it out to himself and to shareholders in dividends, which, until the latest Bush tax cut, were taxed as ordinary income. Still, all the Bush cut in dividend taxes did was give stockholders in other companies that do pay dividends a way to do what Mr. Buffett is doing — make sure that the tax rate they pay on their investment gains is something less than the 35% top personal income tax rate.