Warren Buffett argues for minimum tax on the “ultra rich”, debunks GOP’s myth on capital gains
In a New York Times editorial, billionaire investor Warren Buffett argued that a minimum tax should be impose on high-income earners to restore fairness to the nation’s tax code and debunked the popular myth that higher tax rates on capital gains would discourage the ultra rich from investing.
Buffett, the CEO of Berkshire Hathaway, proposed minimum tax rates of 30% on incomes between $1 million to $10 million a year and 35% on incomes exceeding $10 million a year.
“A plain and simple rule like that will block the efforts of lobbyists, lawyers, and contribution-hungry legislators to keep the ultra rich paying rates well below those incurred by people with income just a tiny fraction of ours,” wrote Buffett.
He pointed out that although the average income for the ultra rich was about $202 million in 2009 – translating to about $97,000 per hour based on a 40-hour work week – most of these high-income earners paid less than 20% in taxes, if at all. In comparison, an individual earning between $35,351 to $85,650 in wages would fall in the 25% tax bracket.
In addition to his proposed minimum tax on the wealthy, Buffett endorsed President Barack Obama’s position that the Bush-era tax cuts should not be extended to high-income individuals. However, Buffett wrote that he would “prefer a cutoff point somewhat above $250,000 — maybe $500,000 or so.”
In his editorial, Buffett also debunked the myth that if tax rates go up on capital gains – or incomes from the sales of stocks, bonds, real estate or other properties – it would deter wealthy individuals from investing.
Buffett mocked the argument propagated by Republicans in this hypothetical scenario:
“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.”
Buffett also cited, as an example, his success in selling securities in the 1950s when capital gains rate was 25%.
“Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered,” he wrote. “So let’s forget about the rich and the ultra rich going on strike and stuffing their ample funds under their mattresses – if gasp – capital gains rates and ordinary income rates are increased. The ultra rich, including me, will forever pursue investment opportunities.”
“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,” Buffett advised.
- New York Times: A Minimum Tax for the Wealthy
- WhatTheFolly.com: Overview of Mitt Romney’s 2011 tax return
- WhatTheFolly.com: Analysis: Romney paid 14.1% effective tax rate in 2011
- WhatTheFolly.com: Romney insists he paid at least 13% in taxes
- WhatTheFolly.com: How the 2001 and 2003 Bush tax cuts benefit the wealthy
- Wikipedia.org: File:Warren Buffett KU Visit.jpg