Wednesday, August 17, 2011

Warren Buffet advocates higher taxes

In a forthright NYT op-ed, displaying leadership that have been missing in action elsewhere, Warren Buffet takes the issue head on and advocates higher taxes on the well-off.

Lamenting that while most Americans struggle to make ends meet, the mega-rich continue to get their extraordinary tax breaks (more specifically the 15% capital gains tax on carried interest earned by investors), he questions the oft-repeated claim that higher taxes disincentivizes effort,

"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."

For the record, he himself was taxed at only 17.4% of taxable income, a lower percentage than was paid by any of the other 20 people in his office, whose tax burdens ranged from 33-41% and averaged 36%. And his advice for the 12 member Congressional Committee entrusted with the responsibility of reducing 10 year US budget deficit by atleast $1.5 trillion, is emphatically unambiguous,

"I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get. But for those making more than $1 million — there were 236,883 such households in 2009 — I would 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. 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."

It will not be a surprise if the Tea Party conservatism in the US is outflanked by the alleged "victims" themselves of higher taxation. If this gathers momentum and others join in support of higher taxes on themselves, then we could have the extraordinary event of tax payers mobilizing and demanding higher taxes on themselves, thereby forcing a "reluctant/hesitant" government to actually raise taxes on the super-rich. Is it a sign of the bankruptcy and partisanship of the current political leadership and the statesmanship of a handful of America's super-rich?

Update 1 (23/8/2011)

Warren Buffet's proposals to increase the current 35% top rate for those making morethan $1 million, a further increase for those more than $10 m, and taxing dividends and capital gains (currently, they are taxed at a maximum rate of 15 percent) as ordinary income, elicits a strong approval from Bruce Bartlett.


KP said...

Dear Gulzar,

Interesting scenario that you paint, one of being outflanked by the "victims" ... that would shock the wits out of the tea-party.

In some sense the theory of taxing the "job creators" less and the artificially created crisis of "climate of uncertainty for business" has also been debunked.

Bill Maher on voting against your interests

Why "business needs certainity" is destructive in Salon

I'm providing above a link to a video of Bill Maher's humorous and credible takedown of prevailing theories. While the language is partisan, the substantive part is relevant. The other is about the destructiveness of business certainty.

In many ways, the crisis has seen a repudiation of some key hypotheses of public finance theory.

What has got insufficient attention is the faith in the "innovation" based economy, the narrowing of US' innovation / competitive advantage, the huge problem of outsourcing (US jobs outsourced) that is linked to globalization and the supply-chain economy.

Most critical is the need for creating an in-built mechanism wihin the market based system for a more equitable distribution of wealth - required for its consumption based sustenance. ( while the opposing theory is whether such consumption led wealth creation / distribution is at all sustainable).


Naren said...

Right wing commentators have already started writing against Buffet

Sampler -