Eideard

Stop coddling the Super-Rich!

with 10 comments

Here in its entirety is Warren Buffett’s Op-Ed piece in today’s NY TIMES:

Daylife/AP Photo used by permission

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.

Overdue. That is – overdue before the public in general. Warren Buffett has been making this point inside the finance and investing community for years.

Republican and the Kool Aid Party nutballs will lose their breakfast over this. He has challenged that portion of the ideology writ as religion and delivered from on high by Charlton Heston. Or someone equally vain – like Rick Perry or the Bachmann.

Traditional Republicans, traditional American conservatives, have all pretty much departed that party and certainly their place in the bowels of Congress. So, critical replies will be defined by gutter culture and gangster meanness.

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Written by Ed Campbell

August 15, 2011 at 10:00 am

10 Responses

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  1. Good for you, Warren.

    keaneo

    August 15, 2011 at 1:20 pm

  2. Agreed keaneo. Would that Buffett’s friends write similar suggestions. I wouldn’t at all mind if the American aristocracy carried its own baggage for a bit.

    Mary Lupin

    August 15, 2011 at 5:11 pm

  3. I cried reading this. how is it that one of the richest men in the world understands how we have been wronged by our congress..and yet the majority of middle america, on whose backs, the government is funded continue to believe in a congress that surely does not represent the average man.

    ivonne

    August 15, 2011 at 7:06 pm

    • People keep on believing there’s an easy way out – by voting, choosing between 2 parties that are not what they used to be. Personally, I think they’re both useless. The shitheels who now own the Republicans are those who profit from exporting jobs and take little or no responsibility for the diminishing life for most citizens in the country. Democrats are gutless – and now figure on the same scumbag jobs after they leave office that Republicans always reveled in. Consultants, tax lawyers, lobbyists – pimps for the worst of Wall Street.

      The process of building 3rd Party power in this country is almost impossible. Deliberately made so of course. Only choice left is to register and fight for someone worthwhile at primary time – if you find one you can trust.

      I got lucky and a dynasty hack who I didn’t support turned out to be brave enough to join the Progressive caucus in Congress and now looks halfway decent. I already called him and told him I’ll support him next year. Even though I didn’t last time.

      But, then, the guy I supported for sheriff was elected – and then arrested and convicted for stealing from the department. So, WTF.

      moss

      August 15, 2011 at 9:54 pm

  4. please stop!……increasing taxes on the rich cannot get us out of trouble……and when you get suckered into thinking that way, you imply that all the wasteful government spending is OK. We have to continue to elect representatives….Dems, Reps, Progs, Indies or otherwise……that are committed to REDUCING the size of government and its involvement in our lives….and turn programs over to the private sector where success or failure is determined by merit, not by someones ideology.
    The biggest revenue engine we have is business……allow business to thrive and America will thrive again!……nothing is really going to change until this happens!

    Bob

    August 16, 2011 at 2:25 am

    • I don’t think there’s anyone wandering through here on a regular basis who feels excessive, stupid, wasteful government spending is OK. That doesn’t counter spending in areas best accomplished on a federal level: healthcare, social security, infrastructure, schools construction, proper schooling…any number of areas of work which many countries have demonstrated are best done with federal leadership and standards.

      Because the United States does a cruddy job at many of these speaks to the corruption of our lockstep 2-party electoral politics – not a progressive income tax.

      Not so incidentally, damned few business are managed as efficiently as social security or medicare. They run with administrative costs less than 3%. The government side ain’t the problem. Getting folks to pay their fair share is. Eliminating the crooks and frauds is. And virtually all fraud in those systems comes from the business side of the equation.

      Again, there’s no reason to have a cap on FICA at $107K. Let that simple tex extend to all folks working for a living – and SSA is funded into the 22nd Century.

      god

      August 16, 2011 at 6:33 am

    • Regulars know I usually limit my commenting to the original post. Just giving you a heads up that today’s 10AM post adds to Warren Buffett’s Op-Ed, yesterday. Just watched Howard Schultz on CNBC being interviewed about his entry into the discussion – by calling for the CEOs of America to withhold donations to both political parties until they get off their ideological high horse and remember they represent America – not just an ideological clot in the national circulatory system.

      I’ll be looking around for his statement, his vow, if you will – and later, if CNBC puts the segment up online from SOTS, I’ll provide that link as well. Squawk On The Street put the question to a poll – should people withhold contributions until the politicians learn to play nice? So far: 89% Yes – 11% No.

      Completely off topic – Bob knows that as much as we diverge on economics and politics, I strongly recommend his company and workmanship. :)

      eideard

      August 16, 2011 at 8:11 am

  5. Berlusconi SUCKS !!! Berlusconi is about a thousand times richer and greedier than the other G8 leaders combined. He’s the Windows of spirit channeling with no Mac no Linux no blackberry no i pad etc. etc. Yes Berlusconi is the center piece of demented daemonic homo orgy monosyllabic fag/latin misogyny cannibals of freakish spiritual inbreeding. Get real, If you don’t believe that there is spiritual reality then spend a few hours watching mentalists on YouTube and the dreams adjacent sleep of your experience are from other. Spirituality could be similar and more than mechanical WiFi reliability, but Berlusconi and the chicken pig disease known as humanity prefers the habitual reoccurring death of more than 90% of 100,000,000 planets of biology and human, saving one planet (not earth) for he and his favorite denial cruelty and appetite human-ids as human-ids. That’s the competition to be one survivor in a 100,000,000,000 deaths. The majority response of Berlusim is the excitement that there is more to kill beyond the tradition 13 onion layers of universes currently under the “Berlu” label.
    The reason Warren Buffet got so rich is because Berlusim was shoo f*k’n him away from discovering the cure for world hunger, (a name thing). Berlusconi is a fuck head for appetite and over population much more than for death. For all his killing, death by disease and murder to be equivalent to his spiritual inbreeding and material overpopulation he would have to murder 3 billion and his government buddies would have to murder another billion in world war three and that doesn’t get into his former identity of Mussolini. The reason I bother with the previous comment is because so much of Berlusim is so freakishly proud of their death by disease and murder as if their a service to nature. This is a report. About all I am these days is a place for Berlusconi “split” (origin refuse) channels to rape for a couple of days before they get there next propriety of pregnancy. A report from the trail to escape from planet Earth, the capitol of the chicken pig disease of death. Honestly with an effort for pertinence. Cures

    Cures Riches

    August 16, 2011 at 10:09 am

    • Isn’t he amazing? He visits this planet about once a week. 8)

      keaneo

      August 16, 2011 at 11:43 am

  6. This just in…Mr. Texas should secede from the Union Republican Rick Perry now thinks Ben Bernanke is a traitor. This sort of humor is really really frightening. I wonder if the stock market or Europeans are laughing, dollars to donuts Al Qiada is (bin Laden strikes from the grave).

    E Trams

    August 16, 2011 at 12:09 pm


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