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<a href="http://www.nytimes.com/"><img src="http://graphics8.nytimes.com/images/misc/nytlogo153x23.gif" alt="The New York Times" align="left" border="0" hspace="0" vspace="0"></a>
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<div class="">November 25, 2012</div>
<h1>A Minimum Tax for the Wealthy</h1>
<h6 class="">By
<span><span>WARREN E. BUFFETT</span></span></h6>
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<p>
Omaha </p>
<p>
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.” </p>
<p>
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. </p>
<p>
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. </p>
<p>
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.
</p>
<p>
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. </p>
<p>
And, wow, do we have plenty to invest. <a href="http://www.forbes.com/sites/luisakroll/2012/09/19/the-forbes-400-the-richest-people-in-america/">The Forbes 400</a>,
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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.
</p>
<p>
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. </p>
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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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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.
</p>
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<p>Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.</p> </div>
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<br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br><br>