The two richest people in America think they are under-taxed. Do they know what they are talking about?
I noticed on the latest list of the country’s wealthiest that Bill Gates and Warren Buffett are #1 and #2. They both have been publicly arguing in favor of increased taxes for themselves and their very rich colleagues. Whether this is good policy is a matter of intense political debate. It’s a particularly important one considering what the country just went through a couple of weeks ago with the exhausting debt-ceiling battle. A central part of its last-minute compromise was to hand over responsibility for finding $1.5 trillion cuts in federal spending to a 12-person super-committee of U.S. Senators and Representatives. And to do so by the day before Thanksgiving.
With this timing clearly in mind, Warren Buffett wrote an op-ed column in last Sunday’s New York Times titled “Stop Coddling the Super-Rich.”
He makes two primary arguments:
1. The rich currently pay less in taxes as a percent of their income than the middle class:
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.
… . It’s nice to have friends in high places.
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.
2. Refuting the “job-killing” argument of fiscal conservatives, Buffett says that he and his fellow investors aren’t affected by higher tax rates :
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.
Buffett closes his piece by asking for an immediate higher income tax rate for those making more than $1 million, and an even higher rate for those making more than $10 million. He concludes:
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.