Tax policy has taken the proverbial center stage in the broader debate over “deficit reduction” and what is best implemented to jumpstart the flagging American economy.
Warren Buffett (Stephanie Kuykenal/Bloomberg News/Landov)
Conservative lawmakers, most corporate leaders and many Democrats want to cut taxes for corporations and for the rich. Those in opposition to this agenda generally agree with the position taken by President Obama that while more tax breaks for the rich are unwise, the status quo of historically low tax rates is to be tolerated.
Some political figures take an even more extreme stance than either of the two listed above, defending tax cuts for the rich while admiring a revenue problem. They would solve such a revenue gap not by hiking taxes on the well-to-do, but rather “broaden the base,” as GOP presidential candidate Michele Bachmann says ; in other words, raise taxes on the poor, middle-class, and the other 50 percent of the country that currently do not pay federal income taxes because they simply do not make enough money.
Such clamoring for low or even lower taxes on the American elite is commonly viewed by both those doing the clamoring and the mainstream media as a “pro-business” position, a common-sense policy that would somehow lead to an economic revival that ten years of the Bush tax cuts have yet to foment.
But what happens to this debate when arguably America’s most successful businessman, virtual corporate royalty, takes the side of the populists and agitates against his own “extraordinary tax breaks”?
Warren Buffett, the CEO of Berkshire Hathaway with a net worth north of $62 billion and the most respected elder of Corporate America, rails against the current tax structure that awards low tax rates and generous tax breaks on America’s super-rich in a recent New York Times op-ed piece.
Buffett writes that a “billionaire-friendly” Congress must “stop coddling the super-rich” and that the “blessings…showered upon us by legislators in Washington” need to end.
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.
Instead of permanently enshrining an artificially low tax rate for the wealthiest taxpayers in the country and shifting the burden of “deficit reduction” onto the backs of the poor and middle-class, Buffett is openly advocating for a new tax structure that actually holds the nation’s “super-rich” accountable for their fair share. Taxes on those making more than $1 million annually would go up immediately.
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.
No matter your own personal feelings towards the grand sultan of American capitalism, know this; Warren Buffett is basically right. Tax data has long proven correct what Buffett has now shared in the esteemed pages of the New York Times.
Buffett relates in his op-ed how he paid a mere 17 percent tax rate on his princely annual income and investments, a rate well below both the advertised rate for the rich and even many other Americans that would never qualify as “wealthy.”
But that 17 percent tax rate enjoyed by the CEO of Berkshire Hathaway is not so unusual; the most recent tax numbers from the IRS show that in 2007, the 400 highest individuals incomes in the country paid an average of, you guessed it, 17 percent in federal income taxes. This startling rate for the “super-rich” was down nearly 10 percent from 1992.
And the overall rate for the highest income earners in America has slipped dramatically from the 1990′s. Those not in the “super-rich” category actually paid a higher rate than the likes of Warren Buffett, but their share paid out out to Uncle Same also has steadily dropped.
Effective tax rates for the top one percent of taxpayers in the US have fallen to 29 percent as of 2007, the most recent data available, from a high of over 36 percent in 1995. And since 2003, while rates for the rich and the poorest taxpayers have continued to fall, tax rates for the middle-class have actually increased up to 2007.
It begs the question; does Warren Buffett have a point?
Obama will just continue to draw lines in the sand about “revenue enhancements” and the Republicans will continue to rub out those lines, and Obama and the Congressional Democrats will meekly allow them to do so. Why? Only time will tell why this President is so conflict-averse and so eager to compromise away his principles, particularly when the public is on his side on issues such as tax increases for the rich.
We need a President and Democratic members of Congress who are not embarrassed or ashamed of basic Democratic party principles, who will enunciate them clearly to the public, and who will fight for them. Until we get that, it’ll just be more of the same government by, for and of the super rich.
I am always suspicious when those rentier parasites like Warren Buffett are calling for more taxes and to tax them more. If Buffett wants to pay more taxes, then he should take his annual payments as a salary and pay the highest rate of taxes. Or he wouldn’t have to claim the capital gains and dividend preferences on his tax return and could list them as ordinary income and pay the highest rate.
What is his angle?
Is there NO possible way the “super wealthy” can’t have their accountants withhold the amount of money people like Mr. Buffett would normally pay and send it to the US Treasury? Or can’t they write a big check followed by lots of zeroes and write it out of the goodness of their hearts and “sacrifice” willingly? Hypocrite…