Warren Buffet calls for higher taxes on the rich

[MarchHare]

Originally Posted by Locke

Interesting, but yes, there are people who pay 0% net income taxes. Hell, if you count refundable Government social programs then that could be a negative number.

It is correct that some people make so little money that they don't pay any income tax, but that's not where the 16% figure comes from. Nobody can escape the taxman; poor people still pay sales tax and taxes on consumer goods like gasoline, alcohol, and tobacco.

[MarchHare]

Azure: several times in this thread (and others) you have made unsubstantiated claims that Buffett lobbied congress to create tax loopholes favourable to him. Do you have any sources to support this position, or are you just assuming?

[crazy_eoj]

Originally Posted by Weiser Wonder

What most people who say increase the tax base fail to realize is how poor many Americans are. There's a huge level of poverty and the biggest reason so many people pay no income tax is there's not much to tax. Not to mention, all Americans are taxed in some way as the Economist article says.

The wealth disparity in the United States has been growing rapidly and the uber-rich have horded more and more of the wealth. This isn't at all up for debate as it's clear in the numbers the extremely rich have seen their net worth explode while the middle class has seen its stagnate over the last 20 years.

I'm for phasing out all of the Bush tax cuts, but I also think that the people who are making over a million a year should pay more on top of that. Poor people need the money and the US economy needs the poor people to keep their money so they can spend it in the economy. The rich will be as well off if they are taxed some more on their income over a million as they were before.

Don't forget that while the American system can be criticized, it is very clear there is no better country in the entire world to be 'poor' in. The poor in the US are very well off:

In 2005, the typical household defined as poor by the government had a car and air conditioning. For entertainment, the household had two color televisions, cable or satellite TV, a DVD player, and a VCR. If there were children, especially boys, in the home, the family had a game system, such as an Xbox or PlayStation. In the kitchen, the household had a refrigerator, an oven and stove, and a microwave. Other household conveniences included a clothes washer, a clothes dryer, ceiling fans, a cordless phone, and a coffee maker.
The home of the typical poor family was not overcrowded and was in good repair. The family was able to obtain medical care when needed. By its own report, the family was not hungry and had sufficient funds during the past year to meet all essential needs.
Poor families clearly struggle to make ends meet, but in most cases, they are struggling to pay for air conditioning and cable TV while putting food on the table.

[Bobblehead]

Originally Posted by Azure

To add, I also don't see Buffet get down to details and talk about increasing the long term capital gains tax rate. Or any of the other 'rates' that allow him to get away with actually paying less.

Otherwise known as the 'loopholes.'

I admire the man for his obvious brilliance, but he's not being forthright at all here. In fact he's intentionally misleading the public with generic statements like 'the government shouldn't coddle the rich.' True, but he's also not suggesting that the government should fix the REAL reason he pays $6 million/year in taxes. Nor does the government have it in their plans.

When your net worth increases by $3 billion in one year, and you pay absolutely nothing in capital gains taxes because of some loophole that you probably helped make, then you ought not to talk about marginal rates, and how your secretary pays more taxes than you. She does, but only because YOU helped ensure that you will pay less. Your secretary doesn't have the millions to lobby Congress to implement the loopholes so that you can add $3 billion to your net worth, and still get away with just paying $6 million in taxes. What is that, like .002% of what you 'made.' What a load of crap.

I can't believe you want to tax people based on their net worth. That is totally absurd.

[Azure]

Originally Posted by MarchHare

Azure: several times in this thread (and others) you have made unsubstantiated claims that Buffett lobbied congress to create tax loopholes favourable to him. Do you have any sources to support this position, or are you just assuming?

The Bush tax cuts were a great example. A lot of rich people with influence from Wall Street sent lobbyists to the Bush administration in order to get the tax cuts pushed through. It is rather interesting if you actually go back and read how the whole 'law' came into effect, and who was behind it.

People like Buffet exerted major influence to reduce the capital gains tax rate because they knew they could use it to keep more of their money. It worked remarkably well, given that Buffet can add $3 billion to his net worth, and not get taxed on a single dime of it.

Tax policy is rather complicated in the US, and some of the loopholes have just been exploited by corporations like BH without the government intending it to happen at all, but there is no doubt that certain 'tax breaks' throughout history were designed in such a way to benefit rich people like Buffet.

In fact that is the BIGGEST problem with the Bush tax cuts.

[MarchHare]

The Bush tax cuts were a great example. A lot of rich people with influence from Wall Street sent lobbyists to the Bush administration in order to get the tax cuts pushed through. It is rather interesting if you actually go back and read how the whole 'law' came into effect, and who was behind it.

People like Buffet exerted major influence to reduce the capital gains tax rate because they knew they could use it to keep more of their money. It worked remarkably well, given that Buffet can add $3 billion to his net worth, and not get taxed on a single dime of it.

Tax policy is rather complicated in the US, and some of the loopholes have just been exploited by corporations like BH without the government intending it to happen at all, but there is no doubt that certain 'tax breaks' throughout history were designed in such a way to benefit rich people like Buffet.

In fact that is the BIGGEST problem with the Bush tax cuts.

That didn't answer my question.

You say, "people like Buffett", but that's not the same thing as Buffett himself. Do you have any citations that show Buffett was personally involved in lobbying Congress to pass the Bush tax cuts or other loopholes favourable to the mega-rich?

[Azure]

Originally Posted by Bobblehead

I can't believe you want to tax people based on their net worth. That is totally absurd.

I never said that. I said that Buffet is misleading the public when he doesn't disclose the fact that he gets away with pay such a small tax rate because of a 'loophole.'

He is also not talking about raising the capital gains tax rate at all, even though that is the exact reason he is paying less taxes as a percentage than his secretary.

[MarchHare]

Originally Posted by Azure

He is also not talking about raising the capital gains tax rate at all, even though that is the exact reason he is paying less taxes as a percentage than his secretary.

He pretty much did. From his NYT article:

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.

Perhaps I'm reading it wrong, but I interpret that passage as him telling US lawmakers that they need not worry about slowing down economic investment and job creation if they raise the capital gains tax.

[Edit]
And further in the same article, he outright calls for an increase in the capital gains tax:

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.

[Cowboy89]

Originally Posted by MarchHare

He pretty much did. From his NYT article:



Perhaps I'm reading it wrong, but I interpret that passage as him telling US lawmakers that they need not worry about slowing down economic investment and job creation if they raise the capital gains tax.

I think that's only the half of his opinion. In the same rant he was critical of a person who makes money in 10 minutes speculating on Dow futures before market open getting taxed at the same capital gain rate as the long term investor who is cashing in on a prudent investment made years prior.

[Frequitude]

Originally Posted by Cowperson

. . . . . doubling the tax rate on Mr. Buffett’s fellow billionaires, America’s 400 wealthiest households, would raise enough money to run the federal government for only two days.

So? Last time I checked that's a massive amount of money.

[Slava]

I'm not bothering with most of this thread, but I just find it shocking that a guy who can afford it says he should be paying more in taxes (along with people of similar status) and there are people who won't accept that at face value. Its really bizarre...

[Bobblehead]

Originally Posted by Azure

I never said that. I said that Buffet is misleading the public when he doesn't disclose the fact that he gets away with pay such a small tax rate because of a 'loophole.'

He is also not talking about raising the capital gains tax rate at all, even though that is the exact reason he is paying less taxes as a percentage than his secretary.

Then why were you bringing his net worth into the discussion? It is a different topic. If you want to argue "loopholes" then have at it and bring forward some concrete examples. Otherwise you sound like you are railing against something you really don't know anything about.

Most "loopholes" were actually specifically designed to promote some sort of activity, like saving for retirement, keeping children active or donating to charity (to name a few basic examples).

[Azure]

Originally Posted by MarchHare

That didn't answer my question.

You say, "people like Buffett", but that's not the same thing as Buffett himself. Do you have any citations that show Buffett was personally involved in lobbying Congress to pass the Bush tax cuts or other loopholes favourable to the mega-rich?

People 'like' Buffet have been lobbying Congress for a long time. Can I prove that he was directly involved in creating some of the loopholes. Obviously not, as I doubt that information is available to the public. His company spends about $4.5 million/year lobbying the US government, and he is actively involved in things like the regulation of derivatives, so its not a stretch at all to say that he doesn't closely watch and try to make sure that he can exploit the capital gains tax as much as possible.

The fact that he is giving 99% of his wealth to the Gates Foundation is also interesting, because doing so he avoids a very hefty estate tax. Not that I don't want him to donate that much to such a great foundation, but I'm sure the 55% or whatever the rate is that he would have to give to the US government through the estate tax was a factor in his decision.

So, its a bit strange that he is writing op-eds whining that the US government shouldn't coddle him and his rich friends, when he and his rich friends are doing everything in their power to avoid paying more taxes.

[Azure]

Originally Posted by Bobblehead

Then why were you bringing his net worth into the discussion? It is a different topic. If you want to argue "loopholes" then have at it and bring forward some concrete examples. Otherwise you sound like you are railing against something you really don't know anything about.

Most "loopholes" were actually specifically designed to promote some sort of activity, like saving for retirement, keeping children active or donating to charity (to name a few basic examples).

I only said that he added $3 billion to his net worth and he never paid taxes on a dime of that money. But, he is not being open to the public about that. Is he talking about dividends or the lack of paying payroll taxes? No he isn't. He's talking about marginal rates and comparing him to his secretary. The US won't close the gap between revenues and spending by taxing individuals more. They'll close it by taxing rich corporations a bit more, specifically through closing loopholes. Sure, the $90 billion in additional revenues by increasing rates on the rich would be nice, but it still doesn't do much at all.

The Tax Foundation came up with $628 billion that the US government wasn't getting because of these loopholes. That is almost 8x more revenue collected than raising taxes on the 'rich' would collect.

Everything from the $32 billion to help prop up the price of corn, to the $170 billion that multinational companies don't pay because they never transfer their profits back to the US.

Is BH exploiting some of these loopholes(there are ten that get talked about more)? Absolutely. Is Buffet coming out and telling the public in detail what these are, how his company uses them to make more money, and encouraging the public to tell their representative to support a law to end them? No he's not. Instead he's focusing on the individual, and the supposed $90 billion that somehow should help the US close the $1.5 trillion dollar spending-revenue gap.

Almost hypocritical of him.

[Azure]

Originally Posted by Cowboy89

I think that's only the half of his opinion. In the same rant he was critical of a person who makes money in 10 minutes speculating on Dow futures before market open getting taxed at the same capital gain rate as the long term investor who is cashing in on a prudent investment made years prior.

Exactly. I realize he is talking about increasing the capital gains tax rate, but he's obviously not completely open about it considering his 'differences' between the long term investor and someone who is making a quick buck.

Either way, he's absolutely not being forthright about it enough and if people would actually bother to do some research, they'll find out that what he's advocating won't actually fix the problem. Its like placing a bandaid on a foot that got cut off.

[Azure]

Originally Posted by Slava

I'm not bothering with most of this thread, but I just find it shocking that a guy who can afford it says he should be paying more in taxes (along with people of similar status) and there are people who won't accept that at face value. Its really bizarre...

It is really bizarre because he's not being open about why he's not paying the same effective rate as his secretary.

He's also conveniently not mentioning that you can only fix this spending/revenue gap by increasing the revenues you collect from the corporate side.

I'm all for fair rates. Everyone should pay 20% if they make more than $25,000/year. Absolutely no exceptions. But that won't actually fix the problem, because it doesn't address why billions in capital gains can be added without a single cent being paid in taxes.

Or why companies are just keeping their profits overseas to avoid taxation in the US. On and on and on.

The whole problem goes a bit deeper than just saying 'tax the rich more because we can afford it.' Seems to me, people want to do that because it makes them feel better, even though it has been proven that it won't actually solve the problem.

[MarchHare]

Is BH exploiting some of these loopholes(there are ten that get talked about more)? Absolutely. Is Buffet coming out and telling the public in detail what these are, how his company uses them to make more money, and encouraging the public to tell their representative to support a law to end them? No he's not. Instead he's focusing on the individual, and the supposed $90 billion that somehow should help the US close the $1.5 trillion dollar spending-revenue gap.

Almost hypocritical of him.

No, it's not hypocritical at all. Warren Buffett the CEO of Berkshire Hathaway has a responsibility to the investors in his company to deliver the maximum possible shareholder value. He would be failing his fiduciary duty if he were to publicly speak in favour of changes to the tax code that would negatively affect the value of his shareholders' stocks.

On the other hand, Warren Buffett the private individual can talk all he wants about increasing personal income taxes, including taxes on dividends and capital gains. It's particularly noble of him because he is -- quite literally -- volunteering to put his money where his mouth is.

[MarchHare]

But that won't actually fix the problem, because it doesn't address why billions in capital gains can be added without a single cent being paid in taxes.

Did you even READ Buffett's op-ed piece to know what you're arguing against? Or even the relevant sections quoted in this thread? He flat-out stated that capital gains taxes should be increased. I don't know why you keep claiming the opposite.

[Azure]

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.

Not sure what he is calling elevated tax rates on capital gains.

In 1981 the capital gains tax rate was cut from 28% to 20%.

Capital gains revenues went from $29 billion in 1981 to $36 billion in 1983, obviously after the 8% reduction. In 1986 after the capital gains tax rate was raised again from 20% to 28%, total asset sales of taxable capital gains fell from $575 billion in 1986, to $246 billion in 1989.

Hell everytime a capital gains tax cut was signed into law, the stock market boomed. After the 1981 reduction, after Clinton reduced it in 1997, and again when Bush reduced it in 2003.

I don't think it is as straight forward as Buffet is trying to say it is. At the very least, the numbers seem to indicate otherwise.

[MarchHare]

Originally Posted by Azure

Not sure what he is calling elevated tax rates on capital gains.

Right here:

I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains

Did you even read his op-ed piece? It's right in there.