[Vision2020] WARREN E. BUFFETT: A Minimum Tax for the Wealthy

[Scott Dredge]

It should be deemed 'A Minimum Tax for High Income Earners'.  There is no tax for simply 'being wealthy' and sitting on a ginormous pile of cash.  Knock yourself out.

Date: Mon, 26 Nov 2012 10:58:08 -0500
From: art.deco.studios at gmail.com
To: vision2020 at moscow.com
Subject: [Vision2020] WARREN E. BUFFETT: A Minimum Tax for the Wealthy




   
   


   
   


   


November 25, 2012

A Minimum Tax for the Wealthy

By 
WARREN E. BUFFETT

 


 

    
Omaha        

SUPPOSE that an investor you admire and trust comes to you with an 
investment idea. “This is a good one,” he says enthusiastically. “I’m in
 it, and I think you should be, too.”        

Would your reply possibly be this? “Well, it all depends on what my tax 
rate will be on the gain you’re saying we’re going to make. If the taxes
 are too high, I would rather leave the money in my savings account, 
earning a quarter of 1 percent.” Only in Grover Norquist’s imagination 
does such a response exist.        

Between 1951 and 1954, when the capital gains rate was 25 percent and 
marginal rates on dividends reached 91 percent in extreme cases, I sold 
securities and did pretty well. In the years from 1956 to 1969, the top 
marginal rate fell modestly, but was still a lofty 70 percent — and the 
tax rate on capital gains inched up to 27.5 percent. I was managing 
funds for investors then. Never did anyone mention taxes as a reason to 
forgo an investment opportunity that I offered.        

Under those burdensome rates, moreover, both employment and the gross 
domestic product (a measure of the nation’s economic output) increased 
at a rapid clip. The middle class and the rich alike gained ground.     
   

So let’s forget about the rich and ultrarich going on strike and 
stuffing their ample funds under their mattresses if — gasp — capital 
gains rates and ordinary income rates are increased. The ultrarich, 
including me, will forever pursue investment opportunities.        

And, wow, do we have plenty to invest. The Forbes 400,
 the wealthiest individuals in America, hit a new group record for 
wealth this year: $1.7 trillion. That’s more than five times the $300 
billion total in 1992. In recent years, my gang has been leaving the 
middle class in the dust.        

A huge tail wind from tax cuts has pushed us along. In 1992, the tax 
paid by the 400 highest incomes in the United States (a different 
universe from the Forbes list) averaged 26.4 percent of adjusted gross 
income. In 2009, the most recent year reported, the rate was 19.9 
percent. It’s nice to have friends in high places.        

The group’s average income in 2009 was $202 million — which works out to
 a “wage” of $97,000 per hour, based on a 40-hour workweek. (I’m 
assuming they’re paid during lunch hours.) Yet more than a quarter of 
these ultrawealthy paid less than 15 percent of their take in combined 
federal income and payroll taxes. Half of this crew paid less than 20 
percent. And — brace yourself — a few actually paid nothing.        

This outrage points to the necessity for more than a simple revision in 
upper-end tax rates, though that’s the place to start. I support 
President Obama’s proposal to eliminate the Bush tax cuts for 
high-income taxpayers. However, I prefer a cutoff point somewhat above 
$250,000 — maybe $500,000 or so.        

Additionally, we need Congress, right now, to enact a minimum tax on 
high incomes. I would suggest 30 percent of taxable income between $1 
million and $10 million, and 35 percent on amounts above that. A plain 
and simple rule like that will block the efforts of lobbyists, lawyers 
and contribution-hungry legislators to keep the ultrarich paying rates 
well below those incurred by people with income just a tiny fraction of 
ours. Only a minimum tax on very high incomes will prevent the stated 
tax rate from being eviscerated by these warriors for the wealthy.      
  

Above all, we should not postpone these changes in the name of 
“reforming” the tax code. True, changes are badly needed. We need to get
 rid of arrangements like “carried interest” that enable income from 
labor to be magically converted into capital gains. And it’s sickening 
that a Cayman Islands mail drop can be central to tax maneuvering by 
wealthy individuals and corporations.        

But the reform of such complexities should not promote delay in our 
correcting simple and expensive inequities. We can’t let those who want 
to protect the privileged get away with insisting that we do nothing 
until we can do everything.        

Our government’s goal should be to bring in revenues of 18.5 percent of 
G.D.P. and spend about 21 percent of G.D.P. — levels that have been 
attained over extended periods in the past and can clearly be reached 
again. As the math makes clear, this won’t stem our budget deficits; in 
fact, it will continue them. But assuming even conservative projections 
about inflation and economic growth, this ratio of revenue to spending 
will keep America’s debt stable in relation to the country’s economic 
output.        

In the last fiscal year, we were far away from this fiscal balance — 
bringing in 15.5 percent of G.D.P. in revenue and spending 22.4 percent.
 Correcting our course will require major concessions by both 
Republicans and Democrats.        

All of America is waiting for Congress to offer a realistic and concrete
 plan for getting back to this fiscally sound path. Nothing less is 
acceptable.        

In the meantime, maybe you’ll run into someone with a terrific 
investment idea, who won’t go forward with it because of the tax he 
would owe when it succeeds. Send him my way. Let me unburden him.       
 


	
Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.	


	







-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com





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