Taxes have long been the bane of many wage earners’ existences. No one enjoys handing over a share of the money they’ve worked hard to earn, and even the rich would rather pay lower taxes–That is, except for Warren Buffett.
Many of America’s super-wealthy know how to avoid paying a large portion of their income in taxes through loopholes. Unfortunately, middle-class workers often don’t have access to the same opportunities and Buffett doesn’t think that’s fair.
Recently, billionaire investor Warren Buffett published an op-ed piece in The New York Times stating that taxes should be raised on Americans who make at least $1 million per year because, as of now, they pay too little.
His opinion, as you might guess, isn’t very popular among other wealthy taxpayers who enjoy holding onto money they’ve earned just like anyone else. So what makes Buffett believe Congress should go ahead raise taxes on the wealthy?
Buffett Believes Tax Requirements Aren’t Fair
In his op-ed piece, Buffett explained millionaire and billionaire taxpayers get far too many tax breaks, especially in comparison to poor and middle-class wage earners.
In fact, while the middle and upper-middle class (those earning less than $400k) can pay anywhere from 25 percent to 35 percent of their income in taxes, Buffett said that his rich friends often pay the taxes equivalent to individuals earning poor and lower-middle class wages.
“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,” he said.
He explained that national leaders asked for “shared sacrifice,” from Americans, “But when they did the asking, they spared me,” said Buffett.
There is something to be said for what appears to be an imbalance in the tax system. Prior to the implementation of Bush tax cuts, the income tax brackets were set at 15, 28, 31, 36 and 39.6 percent. However, in 2003, they were dropped by Bush to 10, 15, 25, 28, 33 and 35 percent.
While the tax break is helpful for those on the lower end, it also makes life even easier for those on the higher end since the income cut-off point at the 35 percent market is just under $400k. Of course, the tax equation is actually a bit more complicated, but according to Buffett, the equations really don’t matter when loopholes exist that can reduce taxes owed to far below 35 percent.
Buffett shared in his piece that he’d paid $6,938,744 in 2010 federal taxes, including income and payroll taxes. “That sounds like a lot of money,” he said. “But what I paid was only 17.4% of my taxable income–and that’s actually a lower percentage than was paid by any of the other 20 people in our office.”
Lower Tax Rates Equal Lower Job Creation
In his piece, Buffett talked about the direct link between tax rates and job creation, explaining some have said raising taxes on high-paid individuals and businesses could have a negative effect on job creation because there wouldn’t be as much money available to finance growth.
He said, however, that the effect of higher taxes seems to be the exact opposite. “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 low job creation,” he said.
There’s no doubt that far fewer jobs have been created in recent times, especially in the wake of the financial crisis. Since 2008, not only have few jobs been created, but 7 million jobs have been lost forever, according to Economic Cycle Research Institute.
Also, according to the most recent jobs report released for August, while some thought that roughly 60,000 jobs were going to be created for the month, no net jobs were added. This dismal report revealed that unemployment is still sitting at 9.1 percent.
Buffett believes many of the United States’ economic problems could be resolved by adjusting the tax brackets. By allowing those with lower incomes to pay less and requiring wealthy earners to pay more, significant shifts will be seen that can bring balance to the economy.
Buffett’s Ideas on Righting Tax Wrongs
Buffett maintains the strong opinion that the tax system is imbalanced and must be corrected to see the economy improve.
His idea is to “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 provides a major benefit to poor and middle-class taxpayers who “need every break they can get.”
He went on to say that for those making more than $1 million (he says this equaled 236,883 households in 2009), “I would raise taxes immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains.” He said he would also recommend even higher taxes for individuals earning more than $10 million.
It should be noted that recent calculations from the Congressional Budget Office of U.S. tax rates shows that Buffett’s numbers may be off some, signaling his adjustments may not be necessary.
The office provided data that the poorest fifth of the population, with an average income of $15,400, only pays 4.5 percent of its income in federal taxes, the middle fifth paid 13.9 percent of their average $56,200, the top fifth paid 25.1 percent of their average $207,200 income and the richest 1 percent with an average income of $1.2 million paid 31.1 percent of their income.
Regardless of the numbers that have been released by Congress, President Barack Obama strongly agrees with Buffett’s ideas for placing a higher tax on wealthy individuals. He has been campaigning for a higher tax rate for some time and plans to make it a part of his campaign in 2012.
Buffett, while not a member of Congress, does have a certain amount of political pull–and he’s issued his final opinion in hopes that it will stick: “My friends and I have coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
Why this article and Warren Buffet is a full of crap. Mr. Buffet employs tax accountants and attorneys to know and utilize every available tax write off. Not only could he just stop utilizing all the loopholes he opposes thereby raising his tax rate, but he can send the government any size check he would like, out of the goodness of his heart anytime and as often as he likes. Also, with the money this guy has to invest he could open up any business anywhere anytime creating new jobs and expanding the tax base. But he doesn’t open businesses, he buys them:
Why does America’s second richest man support the estate tax? Doesn’t it hurt people like him?
Not really, considering it helped him become the second richest man in America.
What do these companies have in common?
Dairy Queen, Jordan’s, Justin Industries, Star Furniture, Borsheim, Ben Bridge Jewelers, U.S. Liability, NetJets, R.C. Wiley, Flight Safety and Nebraska Furniture Mart.
As Dick Patton reveals in an article in Human Events, these are all companies bought by Berkshire Hathaway when their family owners were forced to sell to settle their estate tax bill.
In addition, Buffett’s life insurance companies sell survivorship life insurance, which is primarily sold to pay estate taxes and transfer some wealth into a form that can be transferred to heirs without being subject to the tax.
Mr. Buffet, the great patriot.
Lillian:
Both of those points are silly.
1) It does not make me a hypocrite to support higher taxes for myself and not send a check to the government proactively. I recognize that my contributions, as significant to me as they may be, would be only a drop in the bucket without others in similar circumstances making similar contributions. I cannot cure or even dent the national debt myself. It will take Americans sucking it up together and accepting slightly higher taxes for 2-5 years to really put a dent in the debt.
2) The estate tax merely represents a reality that exists everywhere else in our society. Wealth transfers are taxed. My pay check each month is for work I’ve done. My dividends check from Exxon are from an investment I’ve made. Why should wealth transfers due to death be any different. Why should there be a special class of wealth transfer (particularly one that doesn’t involve work by the person receiving the funds) that doesn’t get taxed?
3) I made $115,000 last year. My effective federal tax rate was about 8%. I have no “loop holes” that I take advantage of particularly. I have a $200,000 home (with about a $170,000 mortgage) and 1 child. My wife had slightly elevated medical costs (and I do live in a state income tax state which pulls my taxes down a bit). I don’t think it’s out of line for me to suggest that people in my shoes could afford to pay a little bit more. I wouldn’t want to do it in perpetuity but if there was a credible budget that included reductions in the debt level I would happily eat $1 – 2k extra per year if it meant my daughter doesn’t live with debt of 100% of GDP.
To many of us small government people, it made us ill to hear people at the beginning part of the century say that taxes needed to be lowered to “give the money back”. Many of us were saying instead, “Use the surplus to pay down the debt”. The truth is, under the current Government Accounting Standards. It’s impossible to reduce the debt without running a surplus. Can’t be done. Mathematically impossible. But so help me, if I see a surplus recur and I hear Tea Partiers (or anyone else) suggesting that we “give the money back”, I’m gonna be pretty angrey.
At the end of the day, I think that’s Warren Buffet’s point too.
I don’t fault Mr. Buffett for taking advantage of a poorly designed and implemented tax system. If this wonderful free market society provides you an opportunity to make more than others. Then you should expect to pay more (fair share) into the system.
Mr. Buffett is very smart, he knows that you cannot continue to have an imbalance in the system without major consequences for us all.
While I agree tax adjustments are necessary, but I also think that we need honest reform in this country to reduce waste and overlap within the system. That includes forcing our leaders to operate within a balanced budget formula.
Many states have balanced budget laws to keep runaway spending in control. Shoot most of us average citizens have to do a balancing act each month; why is it the feds don’t?
Mr. Buffet see things as they are – and it is scary. Historically no economic plan that promotes the inequities we see between the incomes of rich and the poor lasts very long. When the minority rich or 2% of the population – owns 67% of the wealth you are in trouble. The 98% of the remaining population splits the 33% not going to the top meaning they have no discretionary income to purchase products or pay for services – there is no market to sell into. When you get to that tipping point – and we are very close – the economic system goes bust – at that time it does not matter how many dollars you have because those dollars have become worthless. Money in and of itself has no “real” value. Raise the taxes – put people to work – reduce the space between the haves and have not’s. Redistribution of wealth IS the function of any viable government.
Meanwhile, over in the real world, Warren Buffet’s company is still fighting it’s tax bill. Warren must have a lot of pants to wear, because they keep burning up.
All pay our fair share ? That is ridiculous when over 50% of Americans pay no tax at all and the majority of the “non-payers” seem to be the ones wanting more, more, more government free services.
If buffet.s co, would just settle tax suit that they have been fighting for 5 yrs & stop using his foundaytion to hide his income. I think you would see a diff.buffit.
The estate tax isn’t fair because it really is double jeopardy. (which if you recall, in the constitution amendment 5 is illegal). If my parents pay their taxes on the money, why should it be taxed again?? Also it is calculated on the value so (theoretically) if your great-grandparents bought bought of acres of valuable land (for lets say $100 per acre) and it was passed down generation after generation to your parents. Then they die and you get it right? But now the land value is much higher and (lets say the feds value it at 10k per acre). You don’t have the money to pay for that much land’s tax, so you have to sell that percentage of land. Great-Grandad never saw that kind of money, but too bad..? Now are you really telling me that society deserves your parents money more than you? (Or whoever they bequeath it to)
Cooper is confused. His Grand-dad and his parents are not paying the tax – they are deceased and no longer pay taxes. Cooper, the recipient of this windfall,will have to pay en estate tax.And he did nothing to earn it. That “gift” should be taxed like all other income, in fact more, because he did no work to earn it. The idiot Republicans call it a “death tax”; in fact, the dead pay no taxes, only the living. If I inherit $10M from some unkown relative, I will be happy tp pay the estate tax for this bonanza-its like winning the lottery, I suppose no taxes should be paid on those winnings, either?
Buffet is a phony and a hypocrite. As he pushes for higher taxes in his bracket, he pays teams of accountants to save him from paying more in taxes. He owes back taxes for not one but multiple years. And if you want to talk about shared sacrifice, let’s get those 48% of Americans who don’t pay a dime in federal taxes on the tax rolls. Where is their shared sacrifice. It’s disgusting how our country has evolved to coddle those who put the highest demand on government services yet, demonize those who actually pay for those services. Joseph Stalin would be proud.
Warren Buffet is a complete jackass. He is involved with crony capitalism, is completely beholden to Obama and he knows it. He is also a progressive who sees himself as part of the ruling class who doesn’t have to do what he asks others to do. He does what all progressives do, promise to give other peoples money to the poor while he keeps his own. He does everything he can to not pay taxes while pressing his buddies in the White House to screw everyone else. Nice guy!
I have only one comment: Who cares what Warren Buffet thinks….if he was so interested in this government, why didn’t he choose the public sector instead the private sector…. in all of his years…it never bothered him before, why now? President Obama should have made him his Chief of Staff….but then he would have had to give up his status.
Theop 3% of income tax payers pay as much as the next 97% combined. I guess that is simply not enough. Afer all, we must enforce the “From each according the their ability, to each according to their needs.” theory. If Buffet wants rich people to pay more, and thus make it harder to become as rich as him, he needs to step up and be an example. Until then he’s just a hypocrite.
Warren buffet supported obama for presidency. Now he sees his huge investment dwindling in value. In a bid to save his investments, he feels by increasing taxes on the wealthy, firstly obama will survive, secondly some how the economy will turn around and he and his investments will flourish. May be he is hoping for a hand out from his ally obama. Unfortunately he finds himself on the wrong side of the divide, and is inbetween the devil and the deep blue sea. buffet is experience and knows that his strategy does not hold any water. Good luck Warren.
Do any of you know the IRS claims Buffett owes them 10 billion dollars in back taxes and Buffett has spent millions in the last few years paying tax Attorneys to fight this?…Does that sound like he wants to pay higher taxes?
Buffett is only interested in Gov’t guarantees for some of his investments and insider info when he can get. Anyone heard of BofA?…His higher tax rambling is his contibution for these Gov’t benefits.
Frankly, I think he’s losing credibility among his peers and he’s getting the ole blabber mouth syndrome when one gets older..He was much wiser when he sat back and kept his mouth shut…Loose lips sink ships…:)
Superjuster, PLEASE get your tax facts straight instead of repeating a very distorted talking point. “50% of Americans pay no taxes at all” is an outright lie. ALL working Americans pay payroll taxes. This covers Social Security, Medicare etc. The 50% still pays these to cover their “entitlements” unless their employers illegally fail to withhold these. Income taxes are withholdings that go beyond these payroll taxes. What about employers that do not pay their employees enough to live without government “entitlements” but still pay executives salaries 100x that of their employees? (example $20,000/yr for an hourly employee vs. $2,000,000/yr for an executive). I am not saying that either side is right, but, please at least get the facts straight. There are always two sides to every story.
Does anyone think for a minute that Buffett is all of a sudden humble enough to worry about the little guy? He even stated he could live off of 6% of his wealth and give the rest to charity, so why not write a check to Uncel Sam? Same for Gates, the Waltons etc.
None of these guys are trained economists and should butt out. They surround themseleves with the best tax accountants, lawyers, etc and then pretend that what they espouse is their thinking.
Mr Buffet wants higher taxes on the rich for one reason……friendship. He wants the continued friendship and adulation from the left. The same reason Powell supported obummer he and his wife want a social life. Buffet knows that The Bush Tax cuts for tax payers increased revenues from 1.75 tril to 2.5 tril. Tax cuts increase govt revenues but increased revenues will never curb the left’s appetite for class warfare and their other sick beliefs. Vote every dem at every level to the ash heap of history where they belong.
Mr Buffet is not only right he is 300% right. Better late than never. I reckon the golden toilet crowd can share some money for food with the hungry . I cannot see how the GOP can stand for their ideology. Shame on the GOP. if you dont want to feed the hungry get them to stop having children but you stupid people dont believe in birth control so here we have it . Breed but die should be their mantra.I am a socialist but would like to see MANTRA of
no more babies if you cant feed, house ,clothe and educate for all of usa as well as other countries .Out with the contraceptives and the tube tying as the world is overpopulated.Then you can keep your golden toilets as there will be less disadvataged to cope with.You god fearing christians wil notl have to share your fish and bread .
Buffett is not a hypocrite. He pays the minimum because others like him do the same. He doesn’t pay in extra because he sees all the foolish waste of the government. What he is saying is straightforward. Tax all people at a fair rate. He isn’t opposed to paying more in taxes if EVERYONE pays a fair share.
I wish he would hire auditors to monitor the gov and eliminate the waste. But, he is probably concerned they would find some horrible violation of the law as a way to punish him for daring to insist they stop wasting money.
There are too many billions floating around.
Do you love america. Make sure the people in the congress know about it.
http://www.senate.gov/general/contact_information/senators_cfm.cfm
I think that it is about timt that the wealthy and the very wealthy have to taxes just like the middle income and the lower income families. Maybe we would have more jobs IN THIS COUNTRY rather the jobs going overseas.
Buffett pays a low rate because he reports mainly income from corporate investments that has already been earned in his name and taxed at some 35%. So he is actually responsible for rather high tax payments, 35% then his 17% of the cash that comes to him. But he doesn’t pay on the very large capital gains he enjoys because he doesn’t cash them. And he avoids the tax and eventual estate tax by giving to the Gates Foundation. Maybe he wants rates to increase so that more wealthies will avoid taxes by giving to foundations, i.e., do his thing which is taking poorly spent money (govt tax receipts) and using it more effectively.
Warren Buffet should pay his own taxes and not be late, leave the Real Americans who have worked all their lives to do with their money as they see fit, not so smuck lazy liberal trying to take it away. He’s screwed the american people as much as he could to get his wealth so now he’s up in age and doesn’t have a worry. He’s simply a idiot
Rich, you are distorting what was said. He said half the people pay no income tax, you said all working people pay income tax. His statement is true and yours is not only talking about two different sets of people but there are plenty of working people who pay no income tax. Notice I did not mention medicare or social security taxs. The first group pays neither and the second group pays both of these particular taxes.
In response to Paul Williamson, If you get actual money like in your example then an estate tax sounds slightly more manageable however Cooper was referring to land exchange. If my grandpa buys land at 100 an acre that is now worth 10k an acre and wants to leave it in the family then I now how to pay taxes I may not be able to afford. He is not handing me a pile of money, it’s property and if I dont have a sizeable amount of money I will lose it. If I sell the land I will pay taxes on the income and if I farm it I will pay taxes on the farming supplies then again on the income.
The only reason WArren BUffet pays a lower rate then his secretary is becuase his income is derived from capital gains and his secretary is a wage earner. The rate on capital gains is 15%, keep in mind that money if earned originally as wage then it was taxed at wage earning rates then again as a profit was enjoyed from the later investment. We have plenty of taxes folks, we just need to spend the money a little more smartly and with less zeal for hand outs. Plus others have made the point he has a team of folks to help him shelter that money from taxes at every chance.
Whatever happened to the Alternative Minimum Tax. I was not allowed to use all of my deductions last year because I hit the AMT. If Buffett somehow avoided the AMT and only paid 17% of his income in taxes, I think he should be audited and if he did not pay the rightful amount, he should be thrown in jail like all the other tax evaders.
Let’s say that the government raised the tax rate on capital gains to 35% and Buffett was taxed twice as much, would he pay his secretary the same salary? I believe if he were paying another $8 million dollars in taxes, he would cut salaries, cut benefits or cut workers.