published Friday, August 19th, 2011

Buffett, tax increase for rich

Warren Buffett, the mega-billionaire American investor who teamed up with Microsoft's Bill Gates to create an epic philanthropic endowment, may have performed his greatest public service this week with an op-ed piece in The New York Times. He bluntly told Congress in that essay to quit coddling the mega-rich, whose fortunes have soared in the past 20 years at rates far above the imperceptible gains of ordinary wage-earners, and to levy an income tax on this ultra-rich elite like they paid in "back in the 1980s and 1990s, (when) tax rates for the rich were far higher."

"While the poor and the middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks," he wrote. With the nation struggling to reduce deficit spending, he argued, those breaks should be eliminated so the rich can participate in the "shared sacrifice" that budget hawks say they seek.

"Some of us are investment managers who earn billions from our daily labors, but are allowed to classify our income as 'carried interest,' thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they'd been long-term investors."

"These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls, or some other endangered species," he said. "It's nice to have friends in high places."

Buffett, the chairman and CEO of an investment firm whose personal fortune is estimated at $47 billion, explained that all his federal income and payroll taxes last year amounted to $6,938,744. "That sounds like a lot of money," he wrote, "but what I paid was only 17.4 percent of my taxable income -- and that's actually a lower percentage than was paid by any of the other 20 people in our office."

Their tax burdens "ranged from 33 percent to 41 percent, and averaged 36 percent," he said, citing rates which apply to typical high-earning wage-earners. By contrast, he said, his federal income tax rate represents the "carried interest" rate of 15 percent on investments that mainly benefits the nation's ultra-wealthy investing class.

"If you make money with money, as some of my super-rich friends do," he wrote, "your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine, most likely by a lot."

That percentage gap is the key to his argument that the mega-rich simply aren't being taxed nearly enough. He classified that group as the top three-tenths of the top one percent -- the "236,883 households in 2009" whose annual earnings were above $1 million -- as those whose taxable income rates should be raised. He recommended even higher investment taxes, especially on dividends and capital gains, for the richest subgroup of that number, the 8,274 households counted by the IRS in 2009 whose annual income rises from more than $10 million a year into the billionaire super-strata.

His argument makes sense. He noted IRS figures which showed that in 1992, the nation's 400 richest households had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. By 2008, he wrote, "the aggregate income of the highest 400 had soared to $90.9 billion -- a staggering $227.4 million on average -- but the rate paid had fallen to 21.5 percent."

That discrepancy, to be sure, has been pointed out by other economists and political leaders. But Republicans have ardently protected the rich from fair tax rates relative to what ordinary, struggling Americans pay.

Buffett's argument is less a scold than a patriotic offer. He sees his wealthy friends, by and large, as "very decent people" who would willingly pay a fairer share if asked, "particularly when so many of their fellow citizens are truly suffering." He also emphasizes that paying higher taxes would not inhibit investments. "People invest to make money, and potential taxes have never scared them off."

"To those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation."

Buffett's argument is compelling, sensible and just. If Republicans would embrace it, the harmful effects of the wealth gap and the tax breaks that perpetuate it could be reasonably resolved.

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lumpy said...

Get rid of the income tax, reduce the size of the federal government and stop telling people what to do with the fruits of their labor. Buffett's continued backing of Obama makes me question his motives and his sanity. Class envy is class envy is class envy. Even if it comes from a billionare.

August 19, 2011 at 4:16 a.m.
328Kwebsite said...

"Fruits of their labor"? Are we now on talking points from Michelle Bachmnann? Please.

As if the Tea Party tax evaders would construct the road with their own bare hands. If we listened to these extremist advocates of greed, we'd all have to ride a mule to work in medieval fields.

Of course we need a balanced approach to taxation. That includes repealing the Bush Tax Cuts for the Wealthy.

That also includes prosecuting financial crimes related to the housing bubble. During the S&L scandal: 10,000 arrests. Housing crisis: 10 arrests. Thanks to Republicans' influence in direct favor of not enforcing laws on the rich.

A direct collusion with crime, it's what the Republican party and the Tea Party observably stand for. They are shortsighted and wrong in their failed approach to finance.

Excusing and tolerating crimes of the rich to make the poor pay for the benefits enjoyed by everyone is not an acceptable fiscal policy.

Require a repeal of the Bush Tax Cuts for the Wealthy. Expect and require fair enforcement of extortion and fraud laws, regardless of the high income level of the perpetrators in white collar crimes.

We continue to support Barrack Obama, and applaud the comments of Warren Buffet and other ethical businessmen in our country.

August 19, 2011 at 7:28 a.m.
fairmon said...

For a balanced tax approach go to

fairtax.org

August 19, 2011 at 8:21 a.m.
nucanuck said...

Extreme disparity is socio-economic dynamite. The fuse has been lit by policies that enabled the aggregation of wealth in the hands of the few.

Wealth disparity in the US is now on a par with China and disparate African countries.

To continue on the same path guarantees a bad ending.

August 19, 2011 at 11:43 a.m.
amnestiUSAF84 said...

The wealthy actually pay very little to no taxes. Especially, corporate America. Whatever they even remotely seemingly pay out, they get a larger return via tax breaks and other goodies the average American doesn't qualify for.

August 19, 2011 at 4:14 p.m.
timbo said...

All you libs have to do if money makes you feel guilty is write a check on your own. Send the government your money not mine. Some of this "disparity" is self-inflicted by girls becoming pregnant when your 14 years, or going on unemployment and not looking for a job to a month before it runs out,(I know some people personally who do this) etc., etc. etc. Harry Austin, put your money where you pen is and write a check.

Why will paying more taxes change their behavior. Get out and start a business, pay your employees more than you make, pay for cadillac insurance while you eat Romaine noodles every night and show us all how much you care.

Warren Buffet could give 90% of his money tommorrow if he feels so guilty and still be in the top .1% in the world. Ain't going to happen.

It is an insult that he has the gall to actually suggest something like that. It is sort of like the Pope, while living in luxury, with billions of dollars in assets, sitting around telling me to give to the poor.

Why don't you libs show us the way and give up your cash? I won't hold my breath.

August 19, 2011 at 5:28 p.m.
s36spec said...

Wow, I'm seeing some "Right Wing Anger" at perhaps the most successful American investor. "Class Envy" from Warren Buffet? What is "Class" around here? Born on third base? Married the Umpire's daughter?

August 20, 2011 at 4:19 p.m.
timbo said...

There is no anger about what he has made, there is anger that he wants to not just give his money but also mine. You obviously can't tell the difference

August 20, 2011 at 6:43 p.m.
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