You wrote an op-ed in the New York Times today titled “Stop Coddling the Super-Rich”, that is riddled with hypocrisy and inaccuracies. I have great respect for you as a person and an investor, but this piece was a bit over the edge. I feel obliged to write a rebuttal to your op-ed. I am not against higher tax rates for the rich (I am all for it, if it will be part of a package to reduce the budget deficit to 3-5% of GDP in the coming years). I am only responding to arguments that you made in your op-ed today. Your comments I put in italics, and my responses are in regular font.
OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
You consider anyone making over $250,000 to be mega rich (or at least Obama does, and you have supported his policies for higher taxes on these people). I know plenty of people who were making above that and lost their jobs and are suffering terribly; family friend who was working at IBM for 35, another one who was working at Weyth and got laid off after Pfizer acquisition. Someone who worked in financial services for 20 years who is now a handyman. These are three of dozens of stories I know of. You might not be suffering but these “mega-rich” are.
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.
Who said the ultra rich support the war in Afghanistan? I might not be in your elite club but I think the war is lost and we should bring our boys home. Any evidence that the rich support the war more than the middle class? Besides all the recent polling I have seen shows most Americans want our troops home.
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.
Warren Buffett you stated that you believe in a 100% tax on short-term capital gains, paid not only by taxable investors, but also by tax-exempt pension funds. You are contradicting yourself which one is it, why are you using traders paying higher taxes to further your argument, when in fact you favor much higher taxes on these people?
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.
It is true that Washington is beholden to rich supporters. But they also are beholden to big corporations, and we still have the highest corporate tax rate in the world after Japan. They also are beholden to unions like the teachersunion, which can grant them 3 million plus votes with the stroke of a pen.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
This is the biggest fallacy that you keep repeating over and over. Even if the highest rate was raised considerably it would barely effect you since most of your income comes from capital gains. This topic is discussed at length in a previous post here- http://www.valuewalk.com/warren-buffett-berkshire-hathaway/how-is-warren-buffett-in-such-a-low-tax-bracket/.
To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. suggested a 100% tax on short-term capital gains, paid not only by taxable investors, but also by tax-exempt pension funds.
Not sure what you means about payroll taxes, and not sure what you means the mega rich pay 15% capital gains, which you have not called to increase? Are you referring to hedge fund and private equity managers? If so I agree they should pay normal rate since is their principle income but why shouldn’t you also be taxed at normal rate instead of 15%?
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
You still had a low rate due to the issue discussed above, are you calling for higher capital gain taxes?
I didn’t refuse, nor did others. 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.
Are you calling for capital gain taxes? If so please just say it straight out like you have done with regular income taxes on the rich. Until then your arguments do not make sense.
Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
Because of the same issue you keep skirting; capital gain taxes.
The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun