Warren Buffett, the world’s third-richest man, hasn’t raked in his $50 billion-plus by nursing a bleeding heart for the middle class.
In fact, those closest to him (I am talking about his kids and grandkids here) have personally told me the Seer of Omaha is as hard-nosed as they come. To him, playing the market is a game — and he wants to be the best on the planet. “Dad always says, ‘Bury me with a Ouija board, because when I die, I want to keep on playing,'” one of his sons told me in 2008.
Bottom line: this is not a man looking to be parted with his bucks.
And yet…when confronted with the Hieronymus Bosch painting of political and financial horrors of the past few years, he has felt the need to speak up about the wounds he feels are needlessly being inflicted on ordinary Americans.
In the following New York Times editorial, which should be read by one and all, he offers a brief economic education for those who seek to propagate the untruths ginned up by the deep thinkers in Washington to protect the wealthy from their worst horror of all — tax hikes.
Stop Coddling The Super-Rich
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.
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. 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.
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.
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.
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. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.
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.
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.
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.
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 work but they all like to invest. (I can relate to that.)
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.
Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.
He overlooked the gimmick of contributing his highly appreciated stock to his “charitable trust” shared with his other charitable buddies like Bill Gates. They get a deduction against ordinary income for the full FMV of say Microsoft even though the actual cost 20 yrs ago was 2 cents to Gates/buffet etc.
The income on those appreciated stocks etc is 100% exempt.
Frankly, he must have picked a year no charitable contributions were made—and hes not attributing the income in the controlled tax exempt trusts to himself–so hes holding back on how bad it really is. The so called charitable trusts are devices for the megas to have their cake and eat it too—-as board members they can be sure the control blocks held bty the trusts are voted as desired–forget the IRS rules about donor controls.
My guess is that the deghree of interplay on the charitable trust boards constitutes something pretty much like the old intetlocking directorates that Teddy Roosevelt thought he did away with.
Oh Yes–it sort of goes without saying that charitable gifts during life–inter vivos—-will have some interesting estate tax consequences. i would imagine that the combined/integrated personal income tax and estate plans largely enable him to operate as an equity controller through the charitable trusts—-with substantial tax avoidance under claim of exempt purposes–on the meager outgoing side. However, the utilization of the trusts as equity holders for personal purposes in leass often if ever the subject of abuse of the exempt purposes. Those are aimed at make believe preachers using contributed [deducted] funds to facilitate cross-country odysses by diesel RVS preaching the gospel at racetracks and the Grand Canyon. Abuses related to diversion of trust assets to personal [vs charitable purposes].
Clearly for WB, who at 80 still is playing the game of concentration of wealth, the idefinite control of large chunks of assets is paramount. He certainly leaves a legacy—his name will be remembered —but not because of good that he did for society–or any portion thereof. He will be briefly remembered as an individual who exercised great power in financial and political circles at a time when that power either contributed to–or stood on the sidelines–while others destroyed the political institutions and economies of much of the developed world.
How much reasonable adaption—how much more efficiently could the world have been run to reach sustainability without the ongoing and accelerating pain and anguish foe the entire developed world/?
Henry Ford. Thomas Edison et al—-even Gates in his inventive stage–all contributed something that made people more advanced—-that helped mankind understand nature and limits on growth. Even the old AIG guy built a functioning company that filled a public purpose–insurance. Buffet has no legacy but absolute and pure acquisitive desire without purpose. The “game” is like monopoly with unlimited assets and currency. He likes the aircraft and limos and attention—–not much into the big houses–because he cant use them–running out of time.
He probably realizes this and at one point or another simply accepted that he was a sad soulless creature –a 5 year-old with brilliance. How I pity a poor creature that has lived so long, enjoyed such power, but never became mature or wise enough to contribute anything positive to the ebb and flow of mankind. With his power, he could have elimiinated the awful threat posed to humanity by nuclear power—caused enduring architecture physical and societal for men to move to the future. Instead he watched a wasteful decade of debauchery–the destruction of governments—no mark at all. This last deathbed confession of presiding over creation and operation of an awful regressive tax regime–amongst the myriad wastes–will not buy his way into heaven. It isnot even a full confession–its easy for him in his last years to talk about lifetime income taxes. His interest is estate taxes—-why not talk about those estate taxes that provided deterrents to the aggregious wealth accumulators–such greed must be restrained. 85% for more than $100 million would fill a nice hole in the deficit. Use his progressive income tax in the estate setting also. Its a better deal than Marie Antoinette got.
The problem here is that Buffett helped cause the great recession. He was a major shareholder in a ratings agency, at the same time that he was making his cautionary speeches about financial weapons of mass destruction, and the tides going out and leaving people naked.
Those same ‘weapons of mass destruction’ were being rated AAA by his own ratings agencies and sold to widows and orphans.
People have asked him about this. His response was, to paraphrase, that he would invest in tobacco companies too but that doesnt mean he would smoke cigarettes. I have forgotten who did this interview with him, but if you fart around youtube long enough you can find it.
Buffett is the master of talking out of both sides of his mouth, and who shall stop him? Remember, he loaned Goldman Sachs $5 billion during the market nosedive in 2008 that rivaled the Great Depression — and then defended the bank, as a shareholder, when Goldman was charged by the Securities and Exchange Commission for defrauding its investors. Not a man without many conflicts of interest.
I noted a few days ago that maybe Warren buffet could redeem himself by using his wealth and power to prevent damage to the human race from nukes. Maybe the 9 that declared risks today in and around DC might be a wake-up call. The risk does not lie alone on the shores of Japan–or even just California.
There appears to be increased earthquake activity –possibly due to the same physical events causing increases in global warming—the fact that earth is entering the closest proximity to the sun in the most circular orbit in 100,000 years. The most powerful of the Milankovitch cycles.
Sort of highlites the question: which is worse, runaway nuclear meltdowns and land uninhabitable forever, …. or increased CO2 as
existed for most of the history of the Earth? Come on Mr Buffet use your money or there may be nobody to remember how much money you made. No grandchildren. Not even in the most elite institutions. In fact, it looks like they would be among 1st to go if t had been an 8.
Buffet claims: 1.) That it is unfair that the middle class taxpayer pays a higher payroll tax rate (never mind that most really wealthy people don’t pay payroll taxes), and 2.) the country has a revenue (not spending) problem, so therefore 3.) Congress should tax the rich to cover the deficit. There’s only one problem with Buffet’s math: according to Buffet’s own research, the top 400 wealthiest Americans made $90 billion. He doesn’t say how much was dividends and capital gains, but even if Congress confiscated 100% of the earnings of the wealthiest 400 people, that money would pay for less than 30 days of Obama’s current budget and the economy would then start running deficits again. Buffet makes his living off of creating tax shelters for the rich. No taxes on the rich, no shelters, no huge profits for Warren. Poor disingenuous Warren.
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