Skip to comments.Why Warren Buffett is wrong (singling out the super-rich for more taxes is misguided)
Posted on 08/16/2011 10:50:29 AM PDT by SeekAndFind
-- In a recent New York Times op-ed article, Warren Buffett asserts that the super-rich do not pay enough taxes. He suggests that any new budget deal should raise rates on the super-rich, especially on their "unearned" income from interest, dividends and capital gains.
Buffett is wrong. Bad government policies play a major role in generating inappropriately high incomes, but singling out the super-rich is misguided. And the policy Buffett criticizes most -- low tax rates on capital income -- should be expanded, not eliminated.
The first problem with Buffett's view is that the number of super-rich is too small for higher rates to make much difference to our budget problems.
In 2009, the income earned by the 236,833 taxpayers with more than $1 million in adjusted gross income was about $727 billion. Imposing a 10% surcharge on this income would generate at most $73 billion in new revenue -- only about 2% of federal spending. And $73 billion is optimistic; the super-rich will avoid or evade much of the surcharge, significantly lowering its yield.
Focusing on the super-rich also fosters a counterproductive attitude toward material success. The way to promote a hard-working, entrepreneurial and innovative society is to celebrate great wealth so long as it has been earned by legitimate means. When this is not the case, policy should target the wrongdoing directly, not demonize everyone who hits it big.
Most importantly, singling out the super-rich distracts from the real problem: the myriad policies that make no sense in the first place because they inhibit economic growth and that simultaneously redistribute from low-income households to the middle and upper classes.
(Excerpt) Read more at cnn.com ...
What keeps Warren Buffett from paying more if he wants to?
Had a friend who set out to become the best woodworker anywhere. Extraordinary talent, hard worker. Never made much money. Loved boats, though, so he got into the “yacht-building business.” Eked out a living (38K/yr) for himself and his family...
Until the “Yacht Tax.”
Then, he was out of work.
What could be more perfect that a Yacht tax, right? After all, only rich, fat industrialists profit from “yachts.”
Fortunately there was a rescue:
Have YOU ever worked for a poor person?
Whatever extra taxes Buffett may pay will be more than offset by the favorable government treatment his companies will gain as his payoff for shilling. That’s how ‘crony capitalism’ works.
Well, he can always pay more if he feels compelled, but why does he take it upon himself to speak for other people with his kind of money? It is their money, not the government’s.
Realistically speaking, this is what Buffet wants -— He is saying that If you want to deal with the deficit, you need to cut spending AND raise revenue. Cutting without raising revenue is like having a meal without the vegetables. Yes, you can get by, but it doesn’t promote a healthy body if your not taking all the right steps ( I think this was his analogy ).
One of Warren’s main talking points was that taxation has never stopped investors from buying a good deal.
He argues that if you even raised taxes among billionaires by 4% and dropped taxes for the middle class by 2-4%, you’d still raise revenue while giving people money back in their pockets to do direct investing, buying, and following a standard circular flow of money. In fact it’d be better for business because that 2-4% would go back into companies instead of a bank account where it then might not get touched again for years and is essentially dead money to our active economy.
That is his argument not mine. You are free to rebut him and in fact, this is what this thread is for.
As regards Buffett, by saying that taxes need to be raised on certain people, he is in effect, volunteering someone else's money. My take is that Buffet should contact other people and see if they agree to have their money taken before he suggests that it be taken. Otherwise, as others have noted, nothing is stopping him from sitting down and writing a check to the U.S. Treasury for 30 billion dollars instead of giving that money to the Bill Gates foundation.
Not only that but this tax the rich scheme never seems to do what it sets out to do: namely tax the rich as the term “rich” is often defined to include upper middle class - middle class folks. I think Buffet should ease his conscience by voluntarily giving more of his money to the State if he so desires but he has no right to mandate that anyone else do the same as that’s just State sanctioned theft.
Buffet is a stupid arse moron.
Our payment on the debt is $4BILLION per day...so, let him and another 364 Billionairs (if there are the many in the USA...) divide up the interest on our debt and pay it off for a year...
FUBO and the horse you rode in on...
Warren Buffet can afford to be wrong.. I cannot...
No doubt Warren has some of his portfolio in hard gold..
He already has his fortune.. he can experiment..
BUT OBAMA??... Warren defaults to OBAMA!!>>>
He knows something thats suspicious.. about Obama..
Is martial law in our future?... or some other gambit?..
I’m not ready to account Buffet as being senile YET!!!..
Billionaires going for Obama is very suspicious..
Obama is the Wily E. Coyote of Capitalism..
The Daffy Duck of free market trading...
The Yosemite Sam of American socialism..
Something doesnt add up.... actually many things do not add up..
Did anyone else see Stusrt Varney on FoxBusiness this morning? I didn't quite catch his argument, but he was saying Berkshire Hathaway's core business relies on selling instruments (insurance? bonds?) that act as tax shelters and the higher the taxes go, the more demand for their services. Can anybody flesh this out?
It reminds me of the Soros scam, funding all the US groups that weep over drilling for oil in poor Mother Earth (keeping US production constricted) while investing big-time in overseas producers (Petrobras and Hess).
Brainless. How can anybody fall for this?
So the money that he'll have to pay to the IRS he was going to otherwise bury in a back yard in Omaha? Is Buffett having brain failure? He says he would invest exactly the same amount exactly the same way. He's a liar.
I have never been employed by a poor person. In fact, I think the term "poor person" is itself despicable. Those who have low incomes can always increase their wealth through diligence, smarts and good old ingenuity.
That said, I will grant that there are two major obstacles standing in the way of a person bettering himself.
1). The minimum wage: This vile invention of the corrupt Roosevelt administration (1936) deprives a worker of individual freedom and liberty. The artifice of the minimum wage prohibits a worker from negotiating a wage with an employer since a threshold has been established by the government.
2). Labor unions: The evil wrought by labor unions merits an entire thread unto itself. Suffice it to say, unions are largely responsible for the loss of American economic might. The goons, thugs and bosses from Big Labor have saddled the producers of jobs with burdensome work regulations and vastly inflated wages, crippling American business.
Warren Buffet has totally missed the boat (or yacht, in keeping with the crux of your point). The so-called "super rich", which is a patently obscene term, are the job creators who have obtained their wealth by dint of providing products and services that have excelled in the free market. These are the last people who need the additional burden of taxation. They stoke the engine of our economy and should be praised not punished!
If he were using his brains and truly cared about our country, Warren Buffet would be using his influence to call for the abolition of the minimum wage and to advocate for right-to-work laws across the land.
What a lame excuse.
Then why not reduce taxes on the super rich, since the number of super-rich is too small for lower rates to make much difference to our budget problems.
Actually, I just want to deal with Buffet’s arguments which are these :
1) He pointed out that he pays a lower tax rate than anybody in his office, including the secretary.
Well, what Buffet does not tell us is WHY this is so.
When Buffett receives dividends and capital gains, it is true that he pays only 15 percent of that money on his tax return.
Companies that have made a profit can do one of two things with the excess cash. They can (1) take the money and reinvest it to earn even more money, or (2) take the excess funds and divide them among the company’s owners, the shareholders, in the form of a dividend.
If the company decides to pay out dividends, the earnings are taxed twice by the government because of the transfer of the money from the company to the shareholders. The first taxation occurs at the company’s year-end when it must pay taxes on its earnings. The second taxation occurs when the shareholders receive the dividends, which come from the company’s after-tax earnings. The shareholders pay taxes first as owners of a company that brings in earnings and then again as individuals, who must pay income taxes on their own personal dividend earnings.
So, dividends and capital gains are both forms of double taxation. So if Buffet wants honest effective tax rate numbers, he needs to show the 35 percent corporate tax rate that has ALREADY BEEN PAID.
2) Buffett also completely ignores the impact of the death tax, which will result in the federal government seizing 45 percent of his assets. To be sure, Buffett may be engaging in clever tax planning, so it is hard to know the impact on his effective tax rate, but it will be significant.
BTW, didn’t Buffet try pledge most of his money into the Bill and Melinda Gates Foundation? Well, this is simply a way of NOT giving to the government.
If he wants the government to take more of his money for “fairness”, why does he not just leave it alone so that when he dies, the government will take close to half of it to make him happy?
3) Buffett says that he doesnt consider the tax implications for his investments.
I call BS on this. one of the major tenets of the value investing practice Buffett follows, which he wrote in his book, is to hold equities as long as possible to minimize the impact of taxes and therefore maximize internal returns.
WHY DOES HE WANT TO MINIMIZE THE IMPACT OF TAXES AND MAXIMIAZE INTERNAL RETURNS IF HE WANTS THE GOVERNMENT TO TAKE MORE OF HIS MONEY?
Buffet might be a different breed of investor ( although as I said, I can’t believe him here ), but the rest of the investing world is solely concerned with after-tax returns to their investments. Tax rates including the capital gains rate, dividends rate, corporate income tax rate, and individual tax rate are major determinants of after-tax returns.
DING! DING! DING! DING! DING! DING! DING! DING! DING! DING! DING! DING! DING! DING!