Warren Buffett to Congress: Seriously Guys, Raise Our Taxes

Berkshire Hathaway CEO Warren Buffett
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Berkshire Hathaway CEO (and Forbes second wealthiest American in 2010) Warren Buffett penned an assertive op-ed in Monday’s New York Times calling for the congressional “super-committee” assigned to draft a debt reduction plan to raise taxes on the “super rich”. The piece did not mention any members of congress or political parties by name but was highly critical of the structure of the U.S. tax code.

Buffett called for a plan that would,”leave rates for 99.7 percent of taxpayers unchanged”, and “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.”

Buffett prefaced the plan by saying,

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.

Often cited by Democrats during the debt ceiling negotiation this past month, Buffett is famous for raising the problematic fact that he pays a lower percentage of his taxable income than his own secretary, an argument he reiterated in his op-ed.

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.

Buffett went on to address the effect of tax rates on jobs and investments – an issue congressional Republicans have been using as a reason not to raise taxes or increase government revenue by claiming America would lose jobs and see corporate money flee overseas.

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.

Buffett ended with a plea for action from the 12 members of Congress assigned to the “super-committee” to save money and restore faith in the political system. He also hints at the importance of tackling entitlement reform…

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 “super-committee” has until Thanksgiving of this year to propose a plan to reduce the debt by 1.5 trillion over the next 10 years or face automatic across-the-board spending cuts that have been intentionally devised as painful to both parties. If a plan comes forward a process is in place that would streamline the voting process in both chambers of Congress. Although it would be possible for a plan to include government revenue increases as part of the package, all 6 Republican members of the committee have signed Grover Norquist’s anti-tax pledge, which would make it politically difficult for them to do so.

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