Warren Buffett: Raise My Taxes

Posted by: Ed Salden

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(I am posting Mr Buffett's complete op-ed piece from Sunday's New York Times.  I tried to edit it down some, but his writing is already concise. Buffett contradicts most everything that bloggers here believe about taxes and the economy.)

 

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

 While the poor and 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. 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. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. 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.

If you make money with money, as some of my super-rich friends do, 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.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And 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.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, 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.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

 

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Barthélemy Barbancourt
Tell Mr. Buffet to send in a check!
written by Barthélemy Barbancourt , August 16, 2011

And stay the fuck away from my money!

Taxing the millionaires makes liberals feel good. But note that Buffet doesn't mention how this extra tax money will create jobs. The tax income from the people making over $1 million won't even make a dent in the $1.5 trillion Obama deficit, let alone the $16 trillion debt. It's pure class warfare fueled by a man that makes money off of govt. intrustions.

It's a wonder he doesn't he mention that his company makes money selling estate tax insurance and he personally has gotten rich buying things like Dairy Queen when a sudden death leaves a family in need of quick cash for estate taxes. In short, Mr. Buffet is looking out for himself and not the country at large.

Taxing capital gains will just push more investments off-shore and slow job growth. Buffet is old and full of shit, his ego has gotten the better of him.



jk noreen
Let them eat cake
written by jokin , August 16, 2011

The proposals set forth would fund the governmental behemothic budget for about 15 minutes, but, with the enactment of this "proposal" we would succeed in assauging certain liberals' guilty consciences among the super-wealthy, and, make other certain unemployed ex-school bus drivers (among other "social-justice" seeking proles) droolingly giddy.

Buffet completely misses the point of "shared sacrifice". FWIW, a flat tax divorced from the current labyrinthine tax code would eliminate much of the problem of which he writes, and cause an explosion in economic output. The working middle class has already taken on the lion's share of the "sacrifice", those receiving the largesse (government and its client constituents) are the ones who should be doing the sacrificing now.



Ed Salden
...
written by Ed Salden , August 16, 2011

Bart, everything Buffett wrote is true.

Did he make money taking advantage of favorable situations? Well, duh.

He believes he and those like him should pay higher taxes. You do not, but you can't say he doesn't know what he's talking about.

Is it better to be young and full of shit?



jk noreen
...
written by jokin , August 16, 2011

Tell Mr. Buffet to send in a check!
written by Barthélemy Barbancourt , August 16, 2011


"It's pure class warfare fueled by a man that makes money off of govt. intrustions."

Warren Buffet is following in the proud parssitic American lineage of Armand Hammer, Al Gore and Ross Perot, all of whom made vast fortunes by intertwining their business ideas amongst the highest governmental potentates and their (ab)uses of power.




Ed Salden
...
written by Ed Salden , August 16, 2011

Al Gore never had a job in his life.


Ed Salden
...
written by Ed Salden , August 16, 2011

"make other certain unemployed ex-school bus drivers...droolingly giddy."

My cup! Where's my cup?



Barthélemy Barbancourt
He can pay higher taxes
written by Barthélemy Barbancourt , August 16, 2011

Why doesn't he write a $5 billion check to the treasury to show his sincerity?

Buffet may not be able allocate his wealth more efficiently than the government, but tons of other people can.

This whole discussion is a joke when we have a $1.5 trillion deficit.

"In 2009, the income earned by the 236,833 taxpayers with more than $1 million in adjusted gross income was about $727 billion. Imposing a 10% surcharge on this income would generate at most $73 billion in new revenue -- only about 2% of federal spending. And $73 billion is optimistic; the super-rich will avoid or evade much of the surcharge, significantly lowering its yield."

Let's say the new tax created $35 billion in new federal revenue. That means that the 2011 deficit is $1.465 Trillion instead of $1.5 Trillion. Wow, great work!

Now add in how many Millionaires would leave the US, or move money to less efficient allocations to save in taxes and how many jobs are lost and we'd have the equivalent of a net zero gain at best. If raising capital gains moves hedge funds to London, we'd actually lose money on the tax increase.

If our budget deficit was $100 billion and we had $75 billion in cuts, I might go for it. But with us being $1.5 trillion in the hole, this is all just a massive class warfare circle jerk.

Now, if you want to admit that SS and medicare are just another welfare program and all income should be taxed then we might be onto something, but Buffet isn't suggesting this. He used the FICA tax to create an out of balance percentage, but doesn't want to extend the FICA to all income.



jk noreen
...
written by jokin , August 16, 2011


written by Ed Salden , August 16, 2011

"Bart, everything Buffett wrote is true."


His facts? Yes. His opinions? Not so much.


"Did he make money taking advantage of favorable situations? Well, duh."


See, this is where the "guilt" part kicks in.


"He believes he and those like him should pay higher taxes."


Nobody is stopping him from sending in a check for what he deems is his "fair share". Regardless, it is only a self-serving propostion (keeps the proles from hating him and assauges his own guilt), not a substantive one(one which would actually help solve the fiscal and economic crises).


"You do not, but you can't say he doesn't know what he's talking about."


In this regard, being a good money manager and identifier of financial trends and opportunities microeconomically doesn't necessarily mean he knows what he's talking about on revenue and federal budgeting solutions macroeconomically (Buffet's tome is bereft of one meaningful proposal to tackle these issues).







Ed Salden
...
written by Ed Salden , August 16, 2011

It's not that taxing the rich more will solve the debt situation. It's a disagreement on what's fair.

Cut spending? Yes, please, but I think some extra revenue should come in, too, and taxing the people Buffett wrote about is a good idea.



jk noreen
...
written by jokin , August 16, 2011

...
written by Ed Salden , August 16, 2011

"Al Gore never had a job in his life."

You really don't get around that much, do you?

Al Gore learned well, from his father and his father's major benefactor, Armand Hammer, in how to make billions by intertwining ones business interests with the federal government's.

Algore has made yet another fortune with his current "job" of global warming scaremonger:
http://www.telegraph.co.uk/earth/energy/6491195/Al-Gore-could-become-worlds-first-carbon-billionaire.html

My guess is his effective tax rate on the nefarious gains from his latest enterprise is much less the Warren Buffet's 17%.



Ed Salden
...
written by Ed Salden , August 16, 2011

Armand Hammer? I use his baking soda.


jk noreen
...
written by jokin , August 16, 2011

...
written by Ed Salden , August 16, 2011

"It's not that taxing the rich more will solve the debt situation. It's a disagreement on what's fair."

Yes, I'm sure that would help you and Buffet sleep better at night. What would be "fair" is taxing EVERYONE, so that everyone would realize government benefit checks don't come from thin air but from the fruits of someone's labor.
Also, what could be fairer than taxing everyone equally?


"Cut spending? Yes, please, but I think some extra revenue should come in, too, and taxing the people Buffett wrote about is a good idea."

Yeah, and standing in your front yard and spitting into the wind will help get some extra moisture on your lawn. Just because you and Buffet think it's a good idea doesn't necessarily make it so, but you'll feel better about it, so that makes it all right. (/sarc off) Extra revenue comes in most efficiently and most beneficial to all when you get the economy moving. This done by freeing capital- not chaining it down- with over-taxation and excessive regualtion.




jk noreen
...
written by jokin , August 16, 2011

...
written by Ed Salden , August 16, 2011

"Armand Hammer? I use his baking soda."

Your predictable debating technique of deliberate obtuseness, while amusing, still represents FAIL. Remember, this is YOUR posted topic, engage substantively, or accept defeat (yet again).






Barthélemy Barbancourt
Beware of the unintended consequence
written by Barthélemy Barbancourt , August 16, 2011

taxing boats over $200K sounded fair too, until we wiped out the domestic boating industry. That "fair" proposal cost more that it ever took in in taxes.

The Jones Act sounded fair, until we wiped out US Shipping.

A part of being conservative is a healthy fear of change and the unintended consequences (See Barry O'dumbfuck and 9% unemployment to see what bad change looks like)

Buffet makes a ton of assumptions that I fear will be proven wrong. The rich will find ways to avoid tax hikes, by either moving, tax games or lower incomes. The effects of this law could actually make our economy worse if investment leaves the US for more tax friendly environments. People making over $1 million a year are usually smart or have smart people managing their money (See Mark Dayton and his South Dakota based trust fund)

Do you know how easy it is to move cash from the USA? Click! There it's gone.

Finally, this is the exact wrong signal to send in a bad economy. We should tell people if they top $1 million income they get a badge that allows them to get out of speeding tickets for a year. That would probably raise more revenue than a tax hike.



Elmer
Hi, Ed
written by Elmer , August 16, 2011

It's been a while. Your ass must be sore by now. I think these guys have gotten the better of you. Condolences. How's the family?


Nobody
...
written by Nobody , August 16, 2011

A higher tax on capital gains would kill investment. I'm so tired of "fair". Life isn't fair and cannot be made so by any means.

Al Gore Sr. bought Conoco stock and then pushed the petro reserve in thier direction. And Jr is the CCX major stock holder.



Ed Salden
...
written by Ed Salden , August 16, 2011

You guys are so competitive.

I posted the opinion of a well known investor, and you disagree with him.

That does not necessarily make him, or me, wrong.

Unlike some writers, I don't have all the answers.



Ed Salden
That's a knee-slapper.
written by Ed Salden , August 16, 2011

You have every right to call him that, Bart, but Barry O'Dumbfuck?


jk noreen
...
written by jokin , August 16, 2011

Passive Ed, meet Agressive Salden


Barthélemy Barbancourt
Show me any evidence of Barry's intelligence
written by Barthélemy Barbancourt , August 16, 2011

I'd be happy to be proven wrong by college transcripts, High School Grades, scholarly articles written or even successful legislation written.

Absent that, I only have Obama's job performance to judge by and he is an abject failure as a President. I think Barry has a huge ego that far exceeds any real abilities. He is definitely our affirmative action President.

Don't believe me, take his name and race off of his resume and see if he is qualified to teach, be a lawyer or even be President. I can answer no to lawyer and University Prof and I think we all know that he isn't up to the job of President of the United States.

Barry Hussein O'Dumbfuck is an Egotistical, Socialist, arrogant Jackass. I have seen all of this and so has the American public.



Woody
Barry Hussein O'Dumbfuck
written by Woody , August 16, 2011

Fuck you Bart!!

Hello Ed!



Ed Salden
...
written by Ed Salden , August 16, 2011

Hey there, Wood-man.


Woody
...
written by Woody , August 16, 2011

Hey Ed, How's it goin? I liked Buffets editorial piece yesterday as well and I didn't expect it to go over well with our greatest generation here. Oh well, what else would you expect. Have a great day!


jk noreen
Welcome to Ed/Wood's
written by jokin , August 16, 2011

lefty echo chamber.


Barthélemy Barbancourt
Thanks Woody!
written by Barthélemy Barbancourt , August 16, 2011

"Fuck you Bart!!"

You not only proved my point about Barry O'dipshit, but you also threw yourself in the mix.

Show see some proof that Barry isn't a fucking moron or get used to hearing the obvious. Jimmy Carter and Herbert Hoover both had long histories of successes prior to the White House and both failed as President. Barry O has no history at all and you think he should succeed?

Come on boys, try to convince me that Barry isn't a post-modernist puke that has never had an original idea in his life. Hell Bill Ayers wrote his fucking book for him!



Woody
...
written by Woody , August 16, 2011

To borrow a line from John McCain. That would be like trying to nail jello to the wall Bart. Your mind is made up on this subject as indicated by your childish names for the President of the United States and there is no changing it. I'd love to keep this going but deadlines and commitments take precedent right now.


TomC
...
written by TomC , August 17, 2011

I look at this differently. Warren Buffet paid 17% and $6M in taxes. That means that "brilliant" individual managed creating $100M in income/profits. While doing so he probably managed $1-10B in funds to get that profit. That, in turn, probably employed 100000 people who paid at the higher tax rate he talked about.

Most of his income was probably capital gains. I think he should have to pay even less in capital gains, continue to make decisions that grow stuff and employ others, and get us out of these economic doldrums. Capital gains of 0-10%, WB pays $1-2M taxes and revenues flow into the treasury



Woody
...
written by Woody , August 17, 2011

I would be in favor of the 0-10% tax rate on capital gains as a tax incentive to grow stuff and employ others. If not invested in job creation or other investments that grow the economy, then capital gains would fall into the 15-25% range. I believe this will be part of President Obamas jobs plan to be unveiled in September.


JW of Minnesota
...
written by JW of Minnesota , August 17, 2011

Woody, was your thinking to maintain a large spread between short-term and long-term gains rates? Or to differentiate between job creating gains and non-creating gains?

The latter would be very difficult to implement and monitor.




Woody
...
written by Woody , August 17, 2011

Agreed, it would be very difficult to monitor but if tax incentives for job creation are to be implemented, something will need to be figured out to make this work fairly. I have confidence that BHOD will come up with a plan that will work for America.


Barthélemy Barbancourt
I doubt he has a plan
written by Barthélemy Barbancourt , August 17, 2011

He has been in office for over 800 days and we have yet to see a plan from Barry. He's generally as planless as he is clueless.


TomC
...
written by TomC , August 17, 2011

I think investing of all kinds, short, long, bank, stocks, gold should not be taxed--or be taxed a 0-10% at most. Salary income has already been taxed. Investing should be encouraged for many reasons. Investing--real investing not government spending, regardless of where, creates jobs.


Woody
I doubt he has a plan.
written by Woody , August 17, 2011

And I'm not surprised by that at all.


Jim ross
Here are the facts.....
written by Jim ross , August 18, 2011

.....on taxes and spending in the modern era:

*Regan cut taxes big time in 1981, then started raising them starting in 1982.
*Regan's initial tax cut did nothing to generate growth. The economy started growing after Regan began raising taxes again.
*In the end, the net result w/ Regan was a tax cut (even though not as big as it originally started) and the economy grew.
*Bush I and Clinton also raised taxes. The economy reached a level of success we may not again see in our lifetime while Clinton was in office.
*Bush II cut taxes and the economy tanked. Even before the recession hit in 2008, there was little growth and things were bad.
*The big drains on the budget are medicare, social security and the military.
*Most polls show that people do not want to reduce our investment or significantly alter how we fund medicare, social security and the military.
*Most polls also show that people do not want their taxes raised and gov't spending should be cut.
*What does all of this mean? It means everybody wants something for nothing. That's just the way people are and have been for most of eternity. Some cultures are worse than others.
*It also shows that the predictions of economic collapse and the end of the world if taxes are raised are simply untrue. And it shows that if taxes are cut, it's not an automatic cure to all of our ills. As far as I can tell, all the millionaires did not flee to another country when Clinton raised taxes and Regan rolled back his tax cuts a bit.
*I am not arguing that we should raise taxes. I doubt raising taxes would bring an immediate fix to our current situation.
*I wish we would focus more on closing tax loopholes instead of raising taxes. There is no reason Buffet should be taxed at half the rate I am. There is no reason GE should pay no taxes in the U.S. There is no reason a number of the top companies in the U.S. actually have a negative tax rate and are essentially subsidized by people like me.
*What is going to happen? I'm sure taxes will get raised on the middle class and the upper middle class like usual. This is America. That's usually how we do things. *I don't think we have gotten any smarter over the years, even with incrased access to credible sources of information through the Internet and social media. Cable news has offset all of that by building a culture that focuses more on soundbites instead of good public policy (and by giving airtime to complete crackpots).
*What's going to happen in the long run? Americans will continue to have views that contradict each other and elect politians that are as clueless about public policy as they are.
*This fight will continue for the forseeable future.



Ed Salden
...
written by Ed Salden , August 18, 2011

Fine summary, Jim.


TomC
...
written by TomC , August 18, 2011

Funny way to play with the facts. Reagan was responsible for the largest tax rate cuts in history. Between the two tax laws of 1981 & 1986 the top tax rate went from 70% to 28%. The 70% rate (which had been 90% before Kennedy pushed to have it reduced) was full of holes so few, if any, paid that rate. Reagan also raised taxes more than anyone by closing loopholes and significantly raising payroll taxes.

Similarly, Simpson-Bowles, Paul Ryan, and several other Republican plans want to significantly lower tax rates and eliminate loopholes.

If it were me making the income tax decisions, I think either eliminating or 0-10% corporate, capital, death/estate and other non-wage income taxes and a 20% no-deduction individual flat rate.

Warren Buffet will still be paying at less than 1/2 rate of his secretary, as it should be. He is risking his money in investments.



Nobody
Jim
written by Nobody , August 18, 2011

Reagan got screwed by Tip O'Niel, TEFRA was to be 3 dollars of cuts for every dollar of increase. It worked out to about 27 cents. You can go back to any point in time you want, about 20% is all you can get.



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