Posted on 08/06/2007 6:14:14 AM PDT by Loyal Buckeye
Some of the biggest stories of the past few weeks have been about the great tax dodges by the financial kings of the hedge-fund and private equity world. Investment managers making upward of a $1 billion a year are paying lower tax rates than the people who teach their children or deliver their mail.
Warren Buffett, the world's third-richest man, blasted the U.S. tax system earlier this summer because he pays a lower rate of taxes than his secretary. Buffett said, without trying to avoid taxes, he paid 17.7 percent on the $46 million he made in 2006, while his secretary, who made $60,000, was taxed at 30 percent.
This imbalance is a consequence of decades of tax reforms that have benefited those at the top, with a marked acceleration under President Bush.
Buffett could not have been clearer about the pernicious consequences. He said tax disparities have expanded income inequality in a way that has hurt the economy, by constricting opportunity and stifling motivation.
This country has simply got to get back to a progressive tax structure if we are to fund our future liabilities and bring fairness to the system. The Democrats in Congress need to understand that their party's future depends not on collecting money from the rich for campaign contributions, but in collecting money from the rich for taxes. The worst thing the Democrats can do is reinforce the view that it doesn't matter which party is in power, since they are all beholden to the haves.
Progressivity used to be a basic principle of the U.S. income tax structure. The idea is simple: Those at the top of the income pyramid, who have benefited nicely from the economy and governmental policies regulating it, pay a greater proportion of their incomes in taxes.
The most well-adjusted and decent societies are those where the government provides basic social services (good schools, health care, police and fire protection), invests in infrastructure, including human capital, and promotes a thriving middle class. A progressive tax code contributes to this model by having society's most advantaged citizens provide the necessary resources for a more beneficent society. It also tamps down income inequality, and since people tend to view their lot in life in relative terms, this increases general well-being.
But America has been moving in the opposite direction. Since the 1960s, the widening of income inequality has been cheered on by a tax code that takes proportionately less from acquired wealth while keeping the burden on workaday paychecks.
We are at a point now, according a recent analysis by economists Thomas Piketty of the Paris School of Economics and Emmanuel Saez of the University of California at Berkeley, that in a matter of a few years we could see essentially a flat-tax system for middle-income earners and above. The progressivity will have been erased, because of increasing payroll taxes and the impact of the Alternative Minimum Tax on the middle class, coupled with decreasing estate and corporate taxes that are paid by the wealthy.
Piketty and Saez looked across all major forms of wealth and income taxes, including payroll, estate, income and corporate taxes. They say that in 1960, the top 0.01 percent of earners paid 71 percent of their income in federal taxes. In 2005, the same 0.01 percent, or those making more than $18 million annually, paid only about 35 percent.
Taxes for America's wealthiest are at historic lows, according to the economists. Meanwhile, the average federal tax rate for the middle class has remained roughly constant or ticked up a few percentage points, depending on where in the middle one falls.
Flattening the income tax, reducing if not eliminating capital-gains, estate and corporate taxes -- all in the service of the rich -- have been long-standing Republican priorities. Bush purposely allowed his tax cuts to exacerbate the Alternative Minimum Tax problem for the middle class in order to give bigger breaks to those at the very top.
According to Citizens for Tax Justice, Vice President Dick Cheney and his wife saved $111,000 in taxes last year thanks to the breaks he and the president stewarded through Congress. The Cheneys paid an effective tax rate of 23.4 percent on $1.8 million in income in 2006. Also less than Warren Buffett's secretary.
In 1983, Leona Helmsley famously told her housekeeper that only the little people pay taxes. Bush and the Republican Congress have made that quip truer than ever.
Robyn Blumner writes for Tribune Media Services.
blumner@sptimes.com
For additional health information, visit OhioHealth
On every 1040 form there is a place to make a voluntary donation to help reduce the public debt.
If he’s complaining about paying too little in taxes he can always volunteer to pay more. Obviously he didn’t so Buffet, therefore, is a liberal hypocrite.
Well, of course. If Buffett’s secretary makes $60,000 a year, then she’s considered rich by liberal standards.
In service of the rich, my ass! That's what a strong economy needs. This writer is a commie rat.
Buffett is either lying or he is using statistics to lie.
At $60,000 his secretary would not be even be in the 30% marginal income tax bracket unless she is single with no dependents and neglects to itemize her deductions. Even then it is doubtful she would pay 30% of her NEXT dollar in income taxes let alone 30% of her income. However, if he is so concerned about this, he can restructure his income stream so that more of his income is the form of wage earnings and less is in the form of capital gains and other forms of investment income that are taxed at lower rates. Then he can pay more of his income in taxes.
So called journalist are overpaid also.
Warren Buffet can always pay more if he wants to. I personally have no desire to turn more money over to the govt just so they can waste it.
And why is it only the wealthy that must do their part. Why can’t the lifetime welfare losers get a job?
5.56mm
good little conservative economists, huh ?
It would be nice if the consideration would be to reduce everyone's income taxes to the same rate as capital gains...
Plus the insurance companies shield him from capital gains taxes.
I guess the writer didn't bother to check into who is paying more in taxes these days. After Bush's "tax cuts for the rich" the top 1% of income earners are paying a higher percentage of all income taxes than they were under the clinton administration. Same for the top 2%, the top 5%, and the top 10%. So if all these super-wealthy people are not paying their fair share today but they are paying a bigger share of all income taxes than they were when clinton was president then I guess clinton is even more evil than Bush.
He is probably lumping FICA in that rate as well.
Yes. Buffet likes the tax code just the way it is, thank you.
Plus Buffett probably takes his income as dividends and cap. gains and very little salary.
Is he suggesting that dividends and cap gains s/b taxed the same as salaries, which would include using the tax tables plus adding on social security and medicare taxes?
Kennedy, Kerry, Edwards, Pelosi, Feinstein, Corzine, Bloomberg (RINO)...to name a few.
Count me in, I am sick of Buffet and his drivel being trumpeted by so-called journalists. Worse than sanctimonious Holly-weirds.
I notice the piece has no comment about what happens to the economy when you tax the rich in their class envy hatred. Clue — The economy contracts. Ask Jimmy Carter for more insight.
It's interesting how fast the left has got on the tax, spend, fund socialism and gun control plan. You would think it was all they knew. Funny I don't recall this in the platform for 06, did I miss something, or is this just assumed standard issue when you elect liberals.
I read this in “Pravda West” yesterday. I guess the other paper just picked it up.
If this guy took my econ class and still said this, I'd shoot him. He needs to study a little more about economics and incentives...he might start with the Laffer Curve. The Kennedy and Reagan tax cuts both saw unprecedented growth simply because both lessened the crushing burden of the progressive tax structure. Prior to the Kennedy cuts, you got to keep 8 cents on the dollar if you made over $100,000/yr. How hard would you work if someone came along and stole 92 cents of every dollar you made?
Further, comparing a secretary's salary to Buffet's in the manner used by this clown is bear-baiting. If you want to level the playing field, use a flat tax with absolutely no deductions. I'd even vote for the Fair Tax over the current system because the current system distorts resource allocation simply because of a politician's political whim (although the "pre-bates" of the Fair Tax bother me).
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