Warren Buffett Starts a Fire
Categories: Business, Economy, Featured, Politics, Tax Policy
Warren Buffett Urges Congress to Stop Coddling the Super-rich
Not days after the Rascal’s better than evens prediction that the debate on taxation would burn brightly through next year’s November elections, here is Warren Buffett with fresh fuel for the flame. Mr. Buffett, lest you forgot, is currently the world’s third richest man, with an Everest high fortune assessed at $50 billion.
In his most recent op-ed in this past Sunday’s New York Times, Buffett once again urges Congress to tax the mega-rich, including of course himself. The Sage of Omaha, as the Berkshire Hathaway investor is known, has made that same pitch on numerous occasions in the last few years. But his loud calls for higher taxes on the very wealthy have usually been received with little more than the indulgence you would reserve for the ravings of a rich but rusty old coot.
Not this time though. Bruised from a gruesome debt ceiling debate where whether to tax or not to tax featured mightily, the country now seems prepared and even eager to grapple with Mr. Buffet’s periodic counsel. In fact, gauged just by the speed and size of the reaction to it from both ends of the political spectrum, from the sitting president as much as from the bevy of Republicans vying for his job, it’s manifest that Warren Buffet has at last ignited the fire he long wished to start in the tax debate.
Clearly, the kindling had been stacking up over a span of months, at least since the Tea Party came thundering into the 112th Congress last November with its cry for deficit reduction. In this combustible atmosphere, all Buffett needed was a spark to get a flare up going. The gargantuan, ballooning budget deficit, made worse by a recession that fails to abate, is indeed the giant lump of coal in the middle of it all. A forceful Tea Party has successfully set it on the agenda for both parties and gotten everyone, from penthouse to pavement, vainly hacking at it.
On one side sits an emboldened GOP staunchly united against using any new taxes to address the deficit, and three handfuls of presidential aspirants all of whom have pledged not to raise taxes of any size, on anyone, at any cost, and under any conditions. On the other, dragged willy-nilly into the storm, stands a weakened president who, even if committed to some form of tax increase, has too often dithered on the subject, choosing for one to extend for another year and to all income groups the Bush tax cuts he has vowed to squelch for those earning above $250,000.
The two sides represent radically opposing views, not just on taxation but also on how or even whether to raise revenue from taxes at all. At bottom are strongly differing views on how wealth and fairness are defined. For instance, is it fair to ask of the rich that they pay more in taxes? What indeed is their “fair share” of the tax burden? Should the rich’s holdings be taxed at the same percentage as the income of the less well off even if it means the amount they will have paid will be enormously more? Are those who’ve “made it” duty bound to help those who haven’t? Conversely, should the poor avoid paying taxes altogether by way of deductions? What about wealth itself? Is it derived from income or holdings? Are you “rich” at the Obama threshold of $250,000 if you live in Manhattan? How about at the million dollar mark Buffet advocates if you reside in Beverly Hills?
These are all questions we fully intend to take up in our next posts. In the meantime, there’s no doubting that Mr. Buffet’s proposals usefully move the tax discussion forward. They are aimed at the twelve members of the bipartisan dept panel committee entrusted with the difficult task of devising a deficit reduction plan by November 23rd. Basically, Buffett recommends that taxes be raised immediately on households with taxable income of more than a $1 million, not forgetting any earnings from dividends and capital gains. He puts the number of these lucky few at roughly 250,000. And for those making $10 million or above – Buffett counted just above 8000 of those in 2009 – he suggests an additional rate increase. He would also rescind the privileged tax treatment offered to hedge fund managers allowing them to be taxed at lower rates.
Mr. Buffet is offers no specifics yet as to the actual rates he would enforce. Notwithstanding, the gist of his argument is essentially that he and his fellow plutocrats have been given preferential treatment by a Congress overfriendly to billionaires. As he sees it, the mega-rich have not been invited to participate in what he calls the nation’s “shared sacrifice” while the poor and the middle class have been edging ever closer to hopelessness. Accordingly, he would leave tax rates for 99.7% of taxpayers unchanged and extend the 2 percentage point reduction in their employee contribution to the payroll tax.
It is obvious that for Mr. Buffett this is indeed an issue of fairness as he defines it. And as we’ll see, beyond the expected disagreements regarding the exact numbers, specifically as to the effectiveness of his proposed tax increases in reducing the deficit, it is precisely with the fairness of his proposals that his critics have had issue.