NYTIMES: Warren Buffett - 'Stop Coddling the Super-Rich'

[alexey]

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.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

Highlights include Warren Buffett saying that:

• Poor and middle class do the actual fighting in our wars
  
• Warren Buffett is yet to see anyone shy away from a sensible investment, not even when capital gains taxes were at 39.9%
  
• Income inequality is great and taxes on the rich are unfairly low
  

Warren Buffett fails or refuses to present a single argument for keeping taxes for super-rich at current levels.

Where do you stand?

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.

Do you disagree with Warren Buffett?

[DM72]

If Warren Buffet (one of the richest people on the planet) says that the gov needs to stop coddling the rich, you know there's a problem with the current system.

[TradeTheBeal!]

Thank you, Mr. Buffett.

[armstrong001]

He is free to send as much of his money to the Federal Government as he wants. Nobody at the IRS is going to stop him.

Please, Mr. Buffett, lead by example instead of words. Send in a check for 80% of your money if you feel the government is owed that much.

[Madison Redskin]

I absolutely agree, but the GOP has done a great job of convincing the American public (1) our government heaps unfair tax burdens on the wealthy and (2) higher capital gains rates hurt the economy. With respect to the latter point, I've asked in several threads why taxing capital gains as ordinary income would hurt the economy. No one ever answered that question. I also asked some of my smart friends in the financial services sector the same question, and none of them could come up with a solid response. One of my friends said, "higher capital gains rates would discourage investment." I responded, "It would discourage investment? What are people going to do with the money, bury it in their backyards?" He didn't have a response.

---------- Post added August-15th-2011 at 09:15 AM ----------

He is free to send as much of his money to the Federal Government as he wants. Nobody at the IRS is going to stop him.

Please, Mr. Buffett, lead by example instead of words. Send in a check for 80% of your money if you feel the government is owed that much.

Why would he? His wealth wouldn't put a dent in our debt. Only systemic change to our tax code and spending levels will.

[alexey]

There is one possible mental gymnastic around Warren Buffett's point... It starts with this:

Washington does not have an income problem, it has a spending problem

then goes something like this:

We should not be asking people to give more money to the government until we address the spending problem

[The 12th Commandment]

I don't understand how so many seemingly intelligent (more or less) middle and lower class people have been hoodwinked to think that taxing rich people and corporations at a higher rate than we do now would be punishing them. We, including most righties, are being punished today. For what? We didn't cause this mess but we're willing to pitch in, how come the rich don't feel that same sense of duty that I do?

[armstrong001]

I absolutely agree, but the GOP has done a great job of convincing the American public (1) our government heaps unfair tax burdens on the wealthy and (2) higher capital gains rates hurt the economy. With respect to the latter point, I've asked in several threads why taxing capital gains as ordinary income would hurt the economy. No one ever answered that question. I also asked some of my smart friends in the financial services sector the same question, and none of them could come up with a solid response. One of my friends said, "higher capital gains rates would discourage investment." I responded, "It would discourage investment? What are people going to do with the money, bury it in their backyards?" He didn't have a response.

---------- Post added August-15th-2011 at 09:15 AM ----------

Why would he? His wealth wouldn't put a dent in our debt. Only systemic change to our tax code and spending levels will.

He's complaining about the mega-rich (his words) not being taxed enough. If he thinks that people of his wealth aren't paying enough, then he should be willing to put his own money where his mouth is. He'd have a lot more credibility if he'd put the money out there up front instead of begging the government to coerce him to do what he says is right.

[alexey]

He is free to send as much of his money to the Federal Government as he wants. Nobody at the IRS is going to stop him.

Please, Mr. Buffett, lead by example instead of words. Send in a check for 80% of your money if you feel the government is owed that much.

What's your purpose for saying this? I'm sure you understand the difference.

[Bang]

He is free to send as much of his money to the Federal Government as he wants. Nobody at the IRS is going to stop him.

Please, Mr. Buffett, lead by example instead of words. Send in a check for 80% of your money if you feel the government is owed that much.

Such a cop out.

Here's a thought. Try not to be so ignorant of what he's actually saying, stop throwing out moronic over simplifications and dumbass solutions like this, and pay attention.

~Bang

[alexey]

He's complaining about the mega-rich (his words) not being taxed enough. If he thinks that people of his wealth aren't paying enough, then he should be willing to put his own money where his mouth is. He'd have a lot more credibility if he'd put the money out there up front instead of begging the government to coerce him to do what he says is right.

Are you just throwing things out there, or does this actually make sense in your head?

He is saying "tax me more". I think that that gives him some credibility.

[Bang]

Are you just throwing things out there, or does this actually make sense in your head?

He is saying "tax me more". I think that that gives him some credibility.

Whatever cents it makes, you can bet he'd pay more on it in taxes than if it were Buffet's, whether he wanted to volunteer it or not.

As far as sense.. I don't think he's using any.

~Bang

[alexey]

As far as sense.. I don't think he's using any.

~Bang

Maybe he used his own approach and ended up sending his sense to the government

[tdigle]

The problem with Buffet's argument is that the super-rich become so mainly not through a hard salary but through capital gains on investments or through stock options. For instance, it's extremely misleading when the media reports that a CEO made tens of millions of dollars this past year. What they fail to mention is that this CEO probably made less than 5% of his/her salary in cold, hard cash and the rest came from company stock that he/she received by meeting certain goals.

If the super-rich were receiving million dollar paychecks every two weeks (compared to the one to three grand paychecks that most of us feel blessed to receive), then I'd be all for taxing them at higher rates. However, this isn't the case, and I don't like the implications for making capital gains tax rates any more progressive than they already are. If the capital gains that I realize through the $10,000 I invested two years ago are only slightly less taxed than the appreciation of $10,000,000 that some CEO realized through the stock he was given two years ago, then so be it. I don't want the money that I'm investing for my future to be taxed anymore than it is right now.

[alexey]

The problem with Buffet's argument is that the super-rich become so mainly not through a hard salary but through capital gains on investments or through stock options. For instance, it's extremely misleading when the media reports that a CEO made tens of millions of dollars this past year. What they fail to mention is that this CEO probably made less than 5% of his/her salary in cold, hard cash and the rest came from company stock that he/she received by meeting certain goals.

If the super-rich were receiving million dollar paychecks every two weeks (compared to the one to three grand paychecks that most of us feel blessed to receive), then I'd be all for taxing them at higher rates. However, this isn't the case, and I don't like the implications for making capital gains tax rates any more progressive than they already are. If the capital gains that I realize through the $10,000 I invested two years ago are only slightly less taxed than the appreciation of $10,000,000 that some CEO realized through the stock he was given two years ago, then so be it. I don't want the money that I'm investing for my future to be taxed anymore than it is right now.

I think he focuses on capital gains and such because that's the main source of income for high eaners... but the main thrust of his point seems more about making higher income = higher taxes.

He also does a great job with the "punish success and discourage investment" silliness.

[Larry]

He's complaining about the mega-rich (his words) not being taxed enough. If he thinks that people of his wealth aren't paying enough, then he should be willing to put his own money where his mouth is. He'd have a lot more credibility if he'd put the money out there up front instead of begging the government to coerce him to do what he says is right.

I think you've got a great point. (Well, actually "talking point" would be more accurate, but who's counting).

I think we should extend this "logic" to the rest of the discussion.

Henceforth, I think that every time someone suggests cutting any federal spending, you should piously instruct him to simply not benefit from whatever program it is, and demand that he quit telling other people to tolerate any spending cuts whatsoever.

That way, they'll know that you actually think that that's a valid argument. Rather than some simple knee jerk reflex that's been programmed into you.

Sound like a good idea, to you?

[Madison Redskin]

He's complaining about the mega-rich (his words) not being taxed enough. If he thinks that people of his wealth aren't paying enough, then he should be willing to put his own money where his mouth is. He'd have a lot more credibility if he'd put the money out there up front instead of begging the government to coerce him to do what he says is right.

He's asked the government to take more of his money. That's putting his money where his mouth is. Me thinks you're trying to avoid disputing the merits of his opinion.

[armstrong001]

Who's being ignorant?

According to his numbers, there are approximtately 228,000 people with incomes between $1 million and $10 million. Raising their tax rate from 21.5 to 29.2 percent (the numbers he was using regarding the lowering of tax rates for the mega-rich), only gains another $88 billion (assuming an average of $5 million dollars per person). That's a lot of money, unless you are talking about government spending. If you raised their rates to 50%, you still would only net $325 billion. I'm sure the ones making over $10 million per year are would increase that amount as well, but there are only 8,274 of them in a country of 312 million people. Those numbers don't even come close to covering even the DEFICIT, let alone paying down the debt we already owe. This is not a problem of taking too little from those who make the most money. This is a problem of spending. Or maybe we should raise their rates up to 90%?

I am honestly staggered that so many people believe the government (who has no risk here) is owed 50% of what a person makes simply because they were sucessful. I'm not sure how it's idiotic to belive that if a man thinks he isn't paying enough to the government he should pay what he thinks he owes instead of complaining that the government isn't coercing citizens more than they already are.

[Mad Mike]

Such a cop out.

Here's a thought. Try not to be so ignorant of what he's actually saying, stop throwing out moronic over simplifications and dumbass solutions like this, and pay attention.

~Bang

Sadly he is only one of millions who have been brain washed to give this response. :doh:

[armstrong001]

No it is not. Sending a check in excess of what his tax lawyers says he owes every year would be putting his money where his mouth is.

[Henry]

Who's being ignorant?

According to his numbers, there are approximtately 228,000 people with incomes between $1 million and $10 million. Raising their tax rate from 21.5 to 29.2 percent (the numbers he was using regarding the lowering of tax rates for the mega-rich), only gains another $88 billion (assuming an average of $5 million dollars per person). That's a lot of money, unless you are talking about government spending. If you raised their rates to 50%, you still would only net $325 billion. I'm sure the ones making over $10 million per year are would increase that amount as well, but there are only 8,274 of them in a country of 312 million people. Those numbers don't even come close to covering even the DEFICIT, let alone paying down the debt we already owe. This is not a problem of taking too little from those who make the most money. This is a problem of spending. Or maybe we should raise their rates up to 90%?

You should write that to Warren Buffett and see what he says.

For my part, your point is only a point if you think Buffett is suggesting taxing the super-rich is the only thing we need to do to.

I am honestly staggered that so many people believe the government (who has no risk here) is owed 50% of what a person makes simply because they were sucessful.

That's how tax brackets work. I am honestly staggered that so many people believe it's some new concept that the Democrats invented in 2008.

[GibbsFactor]

He's said this before. Nothing changed.

[armstrong001]

I would have no problem with those of you in here that would like to see government programs continue on into eternity question whether a person takes advantage of government programs they claim to want to see removed. Of course, it's difficult to remove oneself from programs you are coerced to use. But voluntary programs are of course fair game. If I were to complain about crop subsidies and were benefiting from them, then yes I believe you would have every right and reason to question my "piety" in the matter.

Fair enough?

[alexey]

Who's being ignorant?

According to his numbers, there are approximtately 228,000 people with incomes between $1 million and $10 million. Raising their tax rate from 21.5 to 29.2 percent (the numbers he was using regarding the lowering of tax rates for the mega-rich), only gains another $88 billion (assuming an average of $5 million dollars per person). That's a lot of money, unless you are talking about government spending. If you raised their rates to 50%, you still would only net $325 billion. I'm sure the ones making over $10 million per year are would increase that amount as well, but there are only 8,274 of them in a country of 312 million people. Those numbers don't even come close to covering even the DEFICIT, let alone paying down the debt we already owe. This is not a problem of taking too little from those who make the most money. This is a problem of spending. Or maybe we should raise their rates up to 90%?

There is a problem of spending. There is a problem of deficits. There is a problem of taxation.

Which "this" problem are you talking about?

I am honestly staggered that so many people believe the government (who has no risk here) is owed 50% of what a person makes simply because they were sucessful.

Not because they were successful but in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.

I'm not sure how it's idiotic to belive that if a man thinks he isn't paying enough to the government he should pay what he thinks he owes instead of complaining that the government isn't coercing citizens more than they already are.

The idiotic part is thinking that somebody who advocates for a tax reform should go ahead and pay whatever he would be paying under his proposed tax reform.

[Mad Mike]

Who's being ignorant?

According to his numbers, there are approximtately 228,000 people with incomes between $1 million and $10 million. Raising their tax rate from 21.5 to 29.2 percent (the numbers he was using regarding the lowering of tax rates for the mega-rich), only gains another $88 billion (assuming an average of $5 million dollars per person). That's a lot of money, unless you are talking about government spending. If you raised their rates to 50%, you still would only net $325 billion. I'm sure the ones making over $10 million per year are would increase that amount as well, but there are only 8,274 of them in a country of 312 million people. Those numbers don't even come close to covering even the DEFICIT, let alone paying down the debt we already owe. This is not a problem of taking too little from those who make the most money. This is a problem of spending. Or maybe we should raise their rates up to 90%?

I am honestly staggered that so many people believe the government (who has no risk here) is owed 50% of what a person makes simply because they were sucessful. I'm not sure how it's idiotic to belive that if a man thinks he isn't paying enough to the government he should pay what he thinks he owes instead of complaining that the government isn't coercing citizens more than they already are.

And I'm honestly staggered that the poorest people in the country are asked to sacrifice while the richest are paying less than they did in the 80s and 90s. If as republicans claim, "everything should be on the table" in this time of crisis, why are the super rich given a complete pass?

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html

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.

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.

This is NOT just a problem of spending. And in a national financial crisis, the idea of ignoring the above data is absolutely MORONIC.