Posted at 12:34 PM on August 15, 2011
by Jon Gordon
In Cannon Falls today, President Obama referenced a New York Times editorial by financier Warren Buffett to back his call for higher taxes on wealthy Americans.
in cannon falls, MN, POTUS cites Warren Buffet's Sunday NYT oped about how the wealthy should pay more in taxes http://t.co/T1upiX1
Here's the Buffett opinion piece, "Stop Coddling the Super-Rich." Excerpt:
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.
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.
To Mr Buffet and all the "Happy to Pay" types................
Just write an extra check out to the IRS or MN Dept of Revenue each month.
Nothing is stopping you from doing it if it bugs you that much.
Set an example for all of us.
GaryF, I think you're confused about what Mr. Buffett is saying. His point is that it the way the current tax system treats the super wealthy doesn't make sense.
Your rebuttal doesn't make sense either. It isn't even a rebuttal. It's a snarky one-off comment that probably plays well around the water cooler but fails as any sort of reasonable policy. Are you really advocating tax policy where everybody just pays what they want? Because that would fail miserably.
Furthermore, why do you feel the need to defend the super wealthy? You know they already own most of the media and most of our politicians, right? I suspect they'd do just fine without you.
Well said, B Joe to the mean spirited attack by GaryF on what Warren Buffet was trying to say in his editorial piece. Warren Buffet's editorial has some valid points including the fact that even though taxes have been very low, job growth and creation has not taken place as promised by the Republicans. It is time those myths supported by the Republican party are exposed as what they are. Lies!
So, by taxing the rich more, they will produce more private sector jobs?
So by punishing people more for taking risks with their capital, they will want to produce more?
Mr. Buffett fails to phrase a question or make his point in a clear way other than to complain that he doesn't pay enough taxes. Should we tax all income, regardless of source at a progressive rate? Perhaps, but then that is what he should have said. How would that work out for 401K's, municipal bond sales, home sales, etc?
I think if you went to most offices you would find the disparity is not quite as bad as it is in the Oracle's. Mr. Buffett would not have built Berkshire to what it is without taking advantage of the tax structure. Moreso, it is unlikely that his secretary would accept the risk of a capital investment with its potential for loss and lowered liquidity to go with the lower tax rate in exchange for her highly taxed salary. Mr. Buffett seems to have lost sight of those facts over his piles of money.
Gary, when you have empirical evidence that low taxes on billionaires causes a decrease in unemployment, you be sure to let us all know. As it stands now, corporate america is flush with cash, as are these billionaires. America's tax environment is one of the nicest in the industrialized world (especially if you're rich). The idea that somehow the "job creators" aren't creating jobs because of an oppressive tax environment is ridiculous.
Matt, anyone who makes most of their income in capital gains can afford to take large risks. Buffett could burn a billion dollars, literally, burn it in a large pile. Risk of loss = 100% and he'd still have more money than the vast majority of Americans will earn in their lifetimes.
Speaking of the average person, illiquidity and loss of investment, have seen the housing market lately? I'm pretty sure that most people are familiar with these concepts directly or at least implicitly through the experiences of their neighbors. The difference is that when rich people lose money on their investments, they tend to still have a bunch of money left over. The average person loses their house, their credit rating, and depending on whether they can access health care, perhaps even their life (or at least their health).
And its ridiculous to compare people saving for their retirement via 401ks to Buffett. Seriously. He's talking about the super wealthy here, so your comparison with the average person is irrelevant.
Really, rich people don't need you to defend them. They'll be just fine.
See page 13 and you will see that of the 400 taxpayers with highest income over the span 1992 - 2006 (the last time frame the IRS reported the data for) that 72% made the list only once and 12% made it twice. A large taxable income is rarely a recurring problem. So while Mr. Buffett is forced to write ridiculously small checks to the IRS each and every year he is, and always will be, an exception. Basing tax policy on his situation would be foolish.
Your position of Buffett being able to afford the loss, while appealing as a sentiment, doesn't translate well into tax policy. Same problem as Buffett, you offer a clever concept but it doesn't scale any better than "write a check".
Your assertion that anyone who doesn't agree with Buffett is protecting the rich is a straw herring at best.
Obviously, taxing billionaires wouldn't be THE base of all tax policy, just part of tax policy. I'm pretty sure that you're the only one talking about taxing the wealthy as the basis for all tax policy.
Not sure what your point is with the IRS pdf. Just out of curiousity, what does one need to make to have the 450th highest income? Or the thousandth highest income. A lot? Yes. I don't think anyone is proposing that we tax people based on income ranking, but in fact on income size and source. Who cares about ranking?
And speaking strawman arguments, I never claimed that everyone who doesn't agree with Buffett is protecting the rich. It does just so happen that the two people in here who disagree with Buffett are defending the rich, so there's that.
Taxing the wealthy was Buffets policy...which you rushed to the defense of. The point of th .PDF was already explained but you seem to want to respond more than you want to read. Good luck.
I wonder what it is in Mr. Buffet's remarks, or indeed, in the notion of "the wealthy"paying a fair percentage of INCOME taxes that frightens Gary F. and Matt so much.
I wonder what sinister implications lurk in Mr. Buffet's comments or indeed in the concept of "the wealthy" paying a proportionately fair INCOME tax that frightens Matt and Gary F. so much.
No, guys, I didn't rewrite my scintillating prose to be more scintillating; The Machine rejected my first contribution at -- you will note -- 6:47, and in my naivite I figured it was probably lost irrevocably and my second entry was better anyhow. Just another proof that technology is no place for sissies and I'm probably better off staying out of the fray and going back to cleaning up my beach. I'm one of those -well, maybe, a little more fortunate; ..I don't like parting with money either, but bills must be paid.
I know why you think the pdf is relevant. However, you do realize that a person can have a large taxable income and not have income that makes the list of the 400 highest incomes in the United States, right? And I'm not quite sure why you thimk turnover is that important. Presumaby the folks who fail to remake the list are mostly still wealthy, so even if they have a bad year investing they aren't, say, underwater with 20 years left on their mortgage.
The problem with mr buffets proposal is that he just compares his effective rate with other people without any other consideration. Mr Buffett could have sold his stake in Berkshire decades ago and worked for salary (taxable at the highest rate) and he would easily have the highest rate in his office. He himself, by virtue of his extraordinary success, positioned himself for a favorable tax rate. If you consider that most of the taxpayers with high incomes get those high incomes by casing out business, in most cases far smaller than buffets interests, get a one time payout. In most cases they do not have the success or ability to do what mr Buffett has done.
Again if mr Buffett wants to pay higher taxes, or if we want to establish a tax scheme that creates more revenue for the treasury it makes infinitely more sense to choose a more sensible approach than comparing one man to his staff. Would you design a health care system based on the healthiest persons needs or a careful consideration of intended outcomes, incentives, and societal norms?
Just because Obama parroted the article today doesn't make it sensible. Kill the fanboy act people.
For the record, I think Obama is a chump.
And who cares if someone who has the momentary misfortune of belonging to a group with an adjusted gross income of 263 million dollars also has to pay more than 15% on it? Really? Even at an effective tax rate of 50%, those folks would be left with, on average, 131 million dollars. In one year.
If I were in a position to be taxed that heavily, I would be just fine. Ask anyone ever, whether they'd like to pay 50% tax rate on $263 million and I guarantee you that 99.99999999% of all of the people you ask would take the deal. Who has $131 million after taxes and says to themselves "You know what, this really isn't enough money."? If I ever say something like that, I would hope someone would slap me in my face.
I don't care if a person -only- makes 1 million dollars off their investments. If they can make that kind of money investing, then they're likely good with money and can figure out how to afford to pay more than 15% and they ought to pay more than 15%.
Incidentally, the average AGI in this top 400 group increased by over 570% between 1992 and 2006. What's the increase in real wages been for the average American been in that time?
So now we have moved from one extroridanary man's position to a hypothetical question as a basis for tax policy. Okay.
Don't complain about me derailing the discussion. You're the one who brought up the pdf. And for the fourth time, no one is talking about a "basis for tax policy". We are talking about one component of a comprehensive tax policy.
Just because you don't like the comparison Buffett makes doesn't mean it isn't apt. You're missing the point if you think the fact that he's an outlier invalidates his position.
Let me restate his position (as I understand it): the income of the super rich is taxed at a significantly lower rate than the middle class even though the super rich can afford to pay much more. This is likely due to the fact that the super rich have cozy relationships with politicians. We should stop pretending that taxing the super rich more will discourage investment because it won't (he might be more of an expert on this part than you). We should stop pretending that lower tax rates encourage job growth, because hey, look at the last ten years.
Now, tell me where in this argument does Buffett's income come up? Nowhere. Where does it rely on his consistent investment returns? Nowhere. Is the person making the argument even mentioned? No. Is is possible to make this same argument and not be Warren Buffett? Yes.
You are choosing to focus on Buffett rather than his argument because it's more convenient rhetorically.
I'm pretty sure most people would be at least slightly appalled at the idea that folks who make hundreds of millions of dollars a year pay a smaller effective tax rate than folks who make, say, 60,000 dollars a year. Your response would apparently be to think to yourself "Well, it -is- really difficult to consistently be one of the 400 best paid people in America, so we should give these super rich people as much of a tax break as we can."
I don't think Buffett is the one who is out of touch here.
Buffett is the one that brought up the 400 largest incomes in the article.
You are incorrect, due to being incomplete, in stating that the rich pay a lower rate than the middle class. The rich have much higher marginal rates on regular income and an equal rate on capital gains and other types of income. Buffett is also wrong, due to being incomplete, because Berkshire Hathaway pays a corporate tax (avg for BH is about 30%) he just has the luxury of being able to show this on a different return.
Do we do away with the preferential rate for capital gains? Just for people with income over $1 million in income? Does that have any impact on our economy? How does that impact people that sell a family farm or business for a one time cash out that puts them into that bracket? What about treasury and municpal bonds do those remain tax free? Why wouldn't a wealthy investor just plow all of their money into those investments with lower risk and no tax liability rather than a startup where there principal is at risk and then they have to pay 35% of any profit?
Buffett has been bringing out this same old tune for years now and each year it gets hyped and he is seen as statesmen for his bold proclamation. But through all of those years he has not put his substantial clout behind a serious effort for tax reform and continues to pay his 17%. He is not serious, his proposal is not intelligent, and other than stirring a few slack jawed reporters and commentators the only thing he does is stroke his precious ego. Meanwhile he still practices tax avoidance better than anyone else.
Why do you keep treating his argument as if anyone were considering it a complete solution to current fiscal problems? It would be one component of a comprehensive tax policy.
And you're still focusing on Buffett and ignoring the gist of his argument.
You're not addressing the notion that the ultra-rich get unwarranted tax deals. On top of that, your point about the ultra rich having to pay higher marginal income tax rates is mostly irrelevant. If most of a person's income is in the form of capital gains, then the rate for capital gains will dominate when it comes to determining effective income tax rate.
And yes, this tax increase would likely hit all those people in the unfortunate position of making a million dollars in a year, regardless of how they made it. Putting in exemptions makes things overly complicated.
And it would be interesting to see what investors do if we deprive them of their sweetheart deal on capital gains. I suspect that they'd find other places to put their money and we'd all be just fine. We seemed to do okay when capital gains taxes were much higher.
And your tax assumptions about bonds are incorrect. While the interest on municipals is tax free, interest on treasury bonds isn't, and both are subject to taxes on capital gains. So if both income and capital gains tax rates are increased, I'm not sure that it would necessarily cause people to embrace munis any more than they already do. As I'm sure you're well aware, people already love treasuries.
"Why do you keep treating his argument as if anyone were considering it a complete solution to current fiscal problems?" Where did I bring up fiscal problems, debt, deficit or jobs?
"It would be one component of a comprehensive tax policy" What is the rest? - that is, and has been, my only argument - Buffett is a one trick pony and the one trick is very impressive. Equates to invading Iraq without an exit strategy it appeals to people who want to see blood spilled but not so smart.
"You're not addressing the notion that the ultra-rich get unwarranted tax deals." Regular income taxed at the highest marginal rate, gains taxed at the same rate for everyone - where is the unwarranted deal? Calling a lack of a penalty to be a positive? Your day is better since I didn't back my car into yours?
"your point about the ultra rich having to pay higher marginal income tax rates is mostly irrelevant" Irrelevant to who? For two Minnesotans - Adrian Peterson and Mark Dayton it makes a 20% difference. I know you don't feel sorry for eithers tax bill, nor do I but it is relevant to a discussion about taxes. Again Buffett decides how he gets paid, he is relevant because if you or I wrote the op-ed the NY Times would not have published it and nobody would be discussing.
"We seemed to do okay when capital gains taxes were much higher" there is no causation and not even any correlation - might as well say that we do well when the third digit of the year is a 9.
"And your tax assumptions about bonds are incorrect." Agreed, I gaffed on the Treasury bonds.
Where did I bring up fiscal problems, debt, deficit or jobs?
In your August 15, 2011 7:03 PM response you imply that Buffett's plan would be a bad approach to bringing more revenue into the treasury. Over and over you seem to imply that Buffett's folks think Buffett's plan would serve as a basis for tax policy, when in fact no one is saying that.
What is the rest? - that is, and has been, my only argument - Buffett is a one trick pony and the one trick is very impressive. Equates to invading Iraq without an exit strategy it appeals to people who want to see blood spilled but not so smart.
So your position seems to be that a person cannot offer a suggestion for changes to the tax system unless that person also has a comprehensive plan to completely overhaul the system? That's ridiculous. The op-ed wasn't presented as a grand strategy, why are you upset that it isn't?
Regular income taxed at the highest marginal rate, gains taxed at the same rate for everyone - where is the unwarranted deal? Calling a lack of a penalty to be a positive? Your day is better since I didn't back my car into yours?
Don't be dense. The income distribution of the super wealthy tends to be heavily weighted towards capital gains, so that their effective tax rate is smaller than that of the average person. Why is that difficult to understand?
Irrelevant to who?
It's irrelevant to anything I'm writing about.
there is no causation and not even any correlation - might as well say that we do well when the third digit of the year is a 9.
I can accept that there's no correlation or causation. That's essentially the problem with supply siders (I'm not sure if you're one of them) - they impute causation and correlation between tax rates and the economy where none necessarily exists.
Wait, aren't you the guy who just casually implied that an increase in capital gains taxes is going to cripple the ability of startups to get funding? Where is your evidence of correlation and causation there?
I maintain that our economy did fine when taxes were higher, therefore, it stands to reason that we can raise taxes and the economy could still do fine. You can question the statistical soundness my reasoning all you want. I'm not going to pretend this my argument is being presented in formally rigorous way.
Thanks for the good debate, I appreciate people that keep it above the belt and on point.
Personally I a libertarian so I fall in the all taxation is theft category on the basic level, but recognize I don't live in a libertarian world and so at the practical level I believe we need to pay for what we have purchased. The country has no choice other than raising taxes and it must fall much more on the wealthy as they truly have benefitted from govt intervention in the markets. So I would propose three flat tax rates - 0% on the first $50K, 20% on the next $200k and 40% after that (no deductions, exemptions, exclusions, etc.) and a flat corporate tax of 20% - no carryovers of losses...of course the flip side would be serious spending constraints. Once we have erased the deficit and found what our true level is then, and only then, would we consider changes.
The whole tax code should fit on a sheet of paper.
Obama and Buffets lies when it comes to Buffet's Tax liabilities http://news.yahoo.com/real-reason-warren-buffetts-taxes-low-171220991.html
Likewise with the debate. I enjoyed it. There are too many GaryFs on the internets.
I sympathize with many libertarian views, probably more so on the social end of things. I don't give much default trust to the politicians or businesspeople, primarily because they are humans. I do think that a strong democracy should be able to hold both in check and I can't foresee how such a democracy could do so without an effective legal framework to control bad actors in the private sector when the market fails to do so.
I think it would make sense to simplify the tax code. Though at this point, anyone with enough political power to do so would likely just simplify it in such a way that favors whichever special interest groups give them the most money.
You're missing Buffett's point.