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Old 08-15-2011, 09:17 AM   #1
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Stop Coddling the Super Rich

Great editorial from Warren Buffet in the NYT today.

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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.
A few days earlier, Matt Damon had gone on a similar rant and had this to say:

Quote:
I don’t know what we were paying in the roaring ’20s; it’s criminal that so little is asked of people who are getting so much. I don’t mind paying more. I really don’t mind paying more taxes. I’d rather pay for taxes than cut ‘Reading Is Fundamental’ or Head Start or some of these programs that are really helping kids. This is the greatest country in the world; is it really that much worse if you pay 6% more in taxes? Give me a break. Look at what you get for it: you get to be American.

"I didn’t go start a small business with my tax break, and I don’t know anyone else who did. No, everybody’s socking their money away,” he said. “I was against those tax cuts. I thought they were ridiculous. So little is asked of the upper class anyway. I mean what percent of them or their kids are fighting in any of these wars? What percent of their day is occupied by the fact that there are men and women in positions over the world, risking their lives? If you walk down 5th Avenue, there’s no sense of shared sacrifice."
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Old 08-15-2011, 09:23 AM   #2
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Don't these people believe in American Exceptionalism?
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Old 08-15-2011, 09:34 AM   #3
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good one.
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Old 08-15-2011, 10:32 AM   #4
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Matt Damon is a job creator!
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Old 08-15-2011, 10:39 AM   #5
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excellent!
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Old 08-15-2011, 10:45 AM   #6
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The counter argument I hear all the time when someone like Buffet comes out and speaks like this is that he can "cut a check to the gov anytime if he wants to pay more"
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Old 08-15-2011, 10:48 AM   #7
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I love Warren Buffett-still lives in a modest home where he came from, in Omaha. I think he is a brilliant, down to earth, and compassionate man.

This is his house. I guess that's all he can afford since Obama took all his money away.

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Old 08-15-2011, 10:50 AM   #8
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Originally Posted by BEAL View Post
The counter argument I hear all the time when someone like Buffet comes out and speaks like this is that he can "cut a check to the gov anytime if he wants to pay more"
That is a ridiculous argument, because the problems we are facing are structural, and as such, a drop in the bucket by Buffett does nothing to solve them.
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Old 08-15-2011, 11:21 AM   #9
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Originally Posted by BEAL View Post
The counter argument I hear all the time when someone like Buffet comes out and speaks like this is that he can "cut a check to the gov anytime if he wants to pay more"
If Republicans want to cut more government spending they can start by sending their paychecks back to the gov.
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Old 08-15-2011, 11:58 AM   #10
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I love the contradiction in the argument that a higher tax would stop people from investing, when at the same time every student is being taught that a person that can make even a dime from an investment, compared to leaving the money in his bank account, will make this investment immediately.
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Old 08-15-2011, 12:19 PM   #11
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The U.S. needs more Warren Buffets, a LOT more.
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Old 08-15-2011, 12:22 PM   #12
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Not just the US, the entire West is in great need of managers, investors etc. who haven't thrown their morals out the window in favour of a quick buck.
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Old 08-15-2011, 02:05 PM   #13
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Originally Posted by Billy Rotten View Post
The U.S. needs more Warren Buffets, a LOT more.
There ARE a lot more. That's what is so frustrating. I'd love to see a poll of millionaires and billionaires to see what percentage of them think the Bush tax cuts were a good idea.

The Agenda Project: Patriotic Millionaires' Message to Congress "Tax Me" - YouTube
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Old 08-15-2011, 06:47 PM   #14
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politico.com

By JENNIFER EPSTEIN | 8/15/11 1:38 PM EDT

The people gathered at a Monday afternoon town hall in rural Minnesota don’t make as much money as Warren Buffett, but they likely pay a higher tax rate than him, President Barack Obama said during his appearance, citing the billionaire investor’s op-ed in The New York Times to make the case that Washington needs more revenues.

“Now, I may be wrong, but I think you’re a little less wealthy than Warren Buffett, but that’s just a guess,” Obama said to laughter along the waterfront in Cannon Falls.

Even so, those who turned out to hear Obama are likely taxed at a higher rate than the 17 percent Buffett said he pays, the president said.

“You don’t get those tax breaks, you’re paying more than that,” Obama said, using Buffett’s argument to make the case that the congressional supercommittee needs to find ways to bring in additional revenues to help reduce the deficit.

Obama has often cited Buffett’s call for higher tax rates on the rich, and he seized on the Monday op-ed in the Times and the coverage it’s gotten on the Web and on cable news to do so again.

“He said we’ve got to stop coddling billionaires like me,” Obama said. “That’s what Warren Buffett said.”

“He pointed out that he pays a lower tax rate than anybody in his office, including the secretary,” the president added. “He figured out that his tax bill, he paid about 17 percent. And the reason is because most of his wealth comes from capital gains.”

Campaigning in New Hampshire on Monday, Mitt Romney rejected Buffett’s argument, saying it would hurt businesses.

“He is taxed at the personal income tax rate, so if we raise taxes on wealthy people that means businesses see their taxes go up. I don’t want to raise taxes on employers. Certainly not now. With the economy the way it is,” Romney said.
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Old 08-16-2011, 02:52 PM   #15
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The people who say that raising taxes will slow economic growth and so cutting spending is the right thing to do to decrease our deficit are fools or cons or both.

Lets say you raise taxes on a rich person by $1/year. He is going to replace that extra dollar from either his savings account, or from cutting his spending by $1. More likely then not, he has substantial savings from which to withdraw, and so his spending will not need to be cut down in order to meet the extra taxes. So, if he takes that dollar out of savings, or hell, if he takes $.50 of that out of savings and $.50 out of spending money, then overall, he would be spending $.50 less. Spending $.50 less means that U.S. economic growth is negatively impacted by $.50 less in spending.

Now lets say you cut spending on Social Security checks by $1 per person. More likely then not, the person on the receiving end of the Social Security check is spending most of that money for living needs, and more likely then not, he does not have substantial savings in order to replace the missing dollar. So, he has to cut $1 out of his spending. $1 less for him means U.S. economic growth is negatively impacted by $1 less in spending.

For the people who like to say that raising taxes is bad for the economy, they should know and admit that cutting spending can be worse.

Of course, the real solution is to have a compromise from both the revenue and spending side.
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