Skip to comments.Why Obama is right to back Buffett (This old Reagan policy adviser has fallen off the deep end)
Posted on 09/27/2011 6:18:41 AM PDT by SeekAndFind
Barack Obama last week put forward a package of tax increases to pay for a proposed $447bn jobs programme. The most controversial proposal is that no one making more than $1m a year should pay a smaller share of his income in taxes than a middle class family pays. This is popularly called the Buffett Rule, after the billionaire Warren Buffett, who has long complained that he pays a lower tax rate than his secretary, and famously came out in public recently asking to pay more.
Republicans were quick to denounce the proposal as class warfare, and to argue that low taxes on the wealthy are essential to boost the economy in these difficult times. This echoes the debate in Britain where 20 prominent economists from the left and right sparked a nationwide debate after writing to the Financial Times suggesting that the top 50 per cent rate of tax, introduced in the 2010 tax year, should be lowered to encourage investment and hiring.
But polls show wide public support. A Gallup poll found that two-thirds of Americans favour raising taxes on those making more than $250,000 a year. While I spent many years working for Republican administrations, one of whose core principles was low taxes, I believe Mr Obama is on solid ground asking the rich to pay more.
Mr Buffett said publicly that he had an effective federal income tax rate of 17.4 per cent in 2010. This low rate undoubtedly reflects the fact that the bulk of his income consists of dividends and capital gains, which have been taxed at a maximum rate of 15 per cent since 2003. His secretary, however, probably gets the bulk of her income in the form of wages, which are taxed at a higher income tax rate and also covered by taxes for the giant US entitlement programmes, Social Security and Medicare, the healthcare scheme for the elderly.
Calculations by the Tax Policy Center indicate that about a quarter of those with incomes as low as $30,000 to $40,000 pay a higher combined tax rate than Mr Buffett does. Assuming that his secretary is pretty well paid and falls into the $75,000 to $100,000 group, the median taxpayer in that income range pays about the same as Mr Buffett, with 40 per cent of them paying considerably more between 18.3 per ent and 23.8 per cent of their income to the federal government.
Strikingly, the tax rate on the wealthy has fallen sharply over the past 25 years, according to the Internal Revenue Service. The top 1 per cent of taxpayers those with incomes above $380,354 in 2008 had an effective income tax rate of 33 per cent in 1985 and 29 per cent in the mid-1990s. During George W. Bushs administration, it fell to just 23 per cent.
The Republican party position argues that low tax rates on the wealthy are essential for economic growth. But growth was much more robust in the 1980s and 1990s, when both their average and marginal rates were higher. There is no evidence whatsoever that lower rates on the wealthy stimulated growth in the 2000s. Indeed when the Congressional Research Service examined the economic consequences of allowing all the Bush era tax cuts to expire at the end of 2010, it concluded that the impact was likely to be slight because their effect on growth was virtually non-existent.
Reducing the budget deficit by cutting spending alone, as Republicans insist, means that the burden of adjustment will fall almost entirely on those with low and middle incomes, since those with high incomes do not benefit much from federal programmes. Raising taxes is the only way of ensuring that the cost of deficit reduction is shared among all income groups.
Also, it is unrealistic to think that the deficit can be reduced significantly without higher revenues, which are at a historical low of 15.3 per cent of the gross domestic product, compared with a postwar average of 18.5 per cent. As a matter of practicality, the well-to-do will have to pay more because they have a greater capacity for doing so. And because of various deductions and credits, many enacted by Republicans, close to half of all tax filers pay no federal income taxes.
While it is unrealistic to think that very many rich people are going to follow Mr Buffett and call for higher taxes on themselves, there are a few. On September 19, Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team, wrote on his personal blog that people like himself ought to be paying more.
In France, where the tax burden is far higher than in the US, a group of wealthy people, including Christophe de Margerie and Maurice Lévy, have signed a petition calling on the nations richest citizens to make an exceptional contribution to the public finances. Traditionally that would have been seen in the US as another sign of the ruinous socialist ethos of western Europe. But polls in the US say that Mr Obama is on solid ground, politically.
The September 20 Gallup poll found 2-to-1 support for higher taxes on those making more than $200,000 a year to pay for his proposed jobs bill. This might seem improbable in a country which has always prided itself on its commitment to low taxes and the purer form of free market capitalism. But these are exceptional times and they require exceptional measures.
The writer served in the administrations of Ronald Reagan and George H. W. Bush. His latest book on tax reform, The Benefit and the Burden, will be published in January
still trying to figure out how raising taxes creates jobs.
OK, I give up... lets tax the rich... make the law such that every person who has uttered some form of “I’m wealthy, I should be paying more taxes” are the ones who will pay, and kick their teeth in with it, take 50% of all their earnings, no 75%, take that money and pay everybody’s else’s mortgages and health insurance premiums.
Dear Mr. Buffet,
Here’s the solution to your problem:
As regards regular income: fire your accountants, give the money saved as a bonus to your secretary, fill out a 1040 EZ form (that’ll take 2 minutes), and given the absence of accountants, don’t worry about the myriad deductions I’m sure they normally find for you.
As regards dividend income: calculate your taxes using the dividend rate (easily done with TurboTax as long as your name is not Timothy Geithner); recalculate your taxes by multiplying dividends received times 0.396 (the Bamsters desired value); pay the former; determine the difference relative to the latter; send a check for that difference to the Bureau of the Public Debt:
Bureau of Public Debt
201 3rd St Ste 4
Parkersburg, WV 26106
Problem solved - now leave us alone
I had some exchanges with Bartlett a few years ago-—something happened to him, and I mean serious. He absolutely HATED Bush, and anything Bush did (including the tax cuts). I don’t know if he got turned down for a job or what, but it has nothing to do with rational thought or policy. It apparently is something extremely personal.
Really? How do you know they don't favour lowering taxes on those making less than $250,000 a year?
Or did you even ask them that question?
I haven't donne the mathe myselfe, but I have hearde that even iffe you raised the taxes on millionaires to 100%, you couldn't funde the gouvernment for an entire yeare.
RE: It apparently is something extremely personal
Does he hate the father as much as he hates the son? After all, he use to work for the father.
RE: I haven’t donne the mathe myselfe, but I have hearde that even iffe you raised the taxes on millionaires to 100%, you couldn’t funde the gouvernment for an entire yeare.
I can’t spell using the style of Canterbury Tales :), However, let me direct you to the Economist and occasional substitute of Rush Limbaugh, Professor Walter Williams.
See here :
I’ve often said that I wish there were some humane way to get rid of the rich. If you asked why, I’d answer that getting rid of the rich would save us from distraction by leftist hustlers promoting the politics of envy. Not having the rich to fret over might enable us to better focus our energies on what’s in the best interest of the 99.99 percent of the rest of us. Let’s look at some facts about the rich laid out by Bill Whittle citing statistics on his RealClearPolitics video “Eat the Rich.”
This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day. Can we prey upon the rich to cough up the money? According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It’s not even yacht and Learjet money. All told, households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.
How about corporate profits to fill the gap? Fortune 500 companies earn nearly $400 billion in profits. Since leftists think profits are little less than theft and greed, Congress might confiscate these ill-gotten gains so that they can be returned to their rightful owners. Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get us to the end of June. Congress must search elsewhere.
According to Forbes 400, America has 400 billionaires with a combined net worth of $1.3 trillion. Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry.
The problem is that after fleecing the rich of their income and net worth, and the Fortune 500 corporations of their profits, it would only get us to mid-August. The fact of the matter is there are not enough rich people to come anywhere close to satisfying Congress’ voracious spending appetite. They’re going to have to go after the non-rich.
That other stuff that could have shown up as income just disappears in the maw of their personal financial structure as designed by their accountants and lawyers to evade taxation of any kind, or, at worst, get taxed at some lower rate!
By now many of the former advisors to Ronaldus Magnus are getting up in years and may not be expressing what they know to be the truth ~ to wit, that "the Rich" are inherently tax cheats and they have the money to make it all look honest. This analyst and many others of the era of "Reagan Tax Reform" know well that people like Buffett, no matter what they say to the contrary, intend to evade the system ~ it's just a game to them.
Obama is an idiot to believe Buffett.
Every FReeper should keep this in his or her aresenal. This issue comes up time after time. This is by far the best rebuttal I've ever heard or read.
His book on black history, trying to link the Democrats to racism, had dismal sales among conservatives (and everywhere else). That apparently embittered him. Shades of David Brock and his Hilary book failure.
Wow. I hadn’t even heard of that book. There’s certainly something there.
Like Paul Craig Roberts, Bartlett has been sounding increasingly deranged over the years.
I don’t have any problem with raising the billionaires taxes. They’re all liberals anyway and besides, they’ll find a way to avoid paying. Raise their taxes in exchange for something else.
Well, the story is that, in exchange for Buffett’s support for “raising tax rates that apply to the rich”, President Obama will support Buffett’s fight to keep the $1 billion plus of taxes that the IRS claims Buffet owes.
Buffet is not considered to be a stupid man.
They cost him his job at a think tank.
Not sure if it was them, per say, but he blames them.
He wrote a book bashing Bush on spending, but it wasn't acidic, and he worked at a conservative think tank, his book hit Bush from the right, but once he lost his job, holy crap, he loathed and despised the entire Bush family, and every republican in sight.
He also became persona non grata, which really ticked him off ( I actually use to read his articles, he was actually a very good conservative economist).
Nor totally honest, note, he hasn't actually released his tax returns, or showed anyone how he got to where he is. Its his word, and alot of people speculating, and no one from his staff has been made available to comment on his claims, not will anyone release, even anonymously their returns.
He was a good conservative economist. Didn’t know the think tank story, but he also had huge issues with the Iraq war. Someone can correct me on this, but I think he became very “Norquistian” in his approach to the terrorists.
I know his issues with the iraq war had to do with money spent, and what he felt were dishonest numbers tossed (IIRC, the original economic advisor, whose names escapes me at the moment, gave an accurate estimate, just spitballing, only to have the white house refute it).
I do know, that Bartlett was friends with a few folks inside the white house, so I don't know what kind of impact that had (or if he was lead to believe he might be looking at a job and never got one).