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Warren Buffett’s NYT Op Ed on Coddling Super-Rich

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Warren Buffett wrote an op-ed for the New York Times today that has garnered, understandably, a lot of attention. It’s a message he’s been saying for years (anyone who has heard him mention how his tax rate is lower than his secretary, you’ve heard part of it).

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.

There’s no heavy handed political rhetoric, there aren’t pitchforks, no emotional outbursts – just a level headed argument, backed with a lot of information, for something that makes perfect sense.

Update: President Obama has endorsed Buffett’s op-ed and called for the new Super Committee tasked with $1.5 trillion in deficit cuts to embrace Buffett’s proposals for more substantial savings.

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37 Responses to “Warren Buffett’s NYT Op Ed on Coddling Super-Rich”

  1. Glenn Lasher says:

    So . . .

    We’ve been hearing from many different perspectives that we need to raise revenue and cut spending . . .

    . . . so when are Congress going to get the hell on with it?

    • Steven says:

      The Republicans have been working very hard towards those goals this whole time!!!

      Cut spending on the poor and needy, while increasing revenues for the rich and wealthy.

  2. Aaron says:

    The last time we had a recession this stubborn and severe, we ran massive record deficits that provided Americans jobs in the form of WWII, then raised the marginal tax rate on the super-rich to over 90% in the 1950s.

    I don’t know we need to raise taxes that much, but it seems odd to me conservatives who think the US was perfect in the 1950s can’t accept a raise in the tax rate for the super rich a few percentage points.

    I’m not partisan, btw. I think the left is being ridiculous as well for fighting raising the min age to draw Social Security retirement benefits, when people are living longer.

    I just get sick of both sides completely ignoring basic facts and reality.

    • rey says:

      Its not so much that progressives don’t understand that people are living longer, but in today’s economy, older workers are often discriminated against in the work place. There are millions of 50 something and 60 something workers out there that can’t find work and will never find work.
      And as far as living longer, poor people live 4.5 fewer years that someone in the upper socio-economic class. Yet poor people pay a higher percentage of their income to SSI, but statistically will not recoup their lifelong contribution. If anything, there shouldn’t be a cap on SSI contributions or if not, SSI benefits should be means tested.

      • Texas Wahoo says:

        If older workers are being illegitimately discriminated against, the answer is to stop the illegal discrimination, not to let them collect social security earlier.

        • NateUVM says:

          Who’s talking about providing SS benefits early? I believe we’re only comparing the status quo to a scenario where they are provided LATER in life…

          • Texas Wahoo says:

            Why is it important to note the change relative to the status quo? We’re deciding when to provide SS benefits (earlier or later). Is there something great about the status quo that we want to consider that as a factor in the analysis?

          • NateUVM says:

            Again, TW, I don’t think anyone is advocating providing SS benefits earlier in life. That would be more expensive than…wait for it….the status quo.

            The entire argument here is whether this is a place where spending cuts can be made…by making the full retirement age later than it currently is. Once again, you compare the cost/benefit of making such a change by comparing the proposal (making it later) to…wait for it, here it comes again…the status quo.

            Not sure why you wouldn’t want to compare a proposed change to what is being provided currently. How else would you be able to decide which is better?

          • Texas Wahoo says:

            Sure, the status quo is easy as something to compare any other alternative with – as long as you don’t value it for its own sake. I just don’t see the point of arguing over semantics about earlier/later. I meant earlier than the other options we are discussing – not earlier than the status quo. Giving benefits earlier (as is now the status quo) is more expensive than giving benefits later (as some have suggested).

            I see no benefit to attaching value to the current age because that is what we currently do.

      • freeby50 says:

        Rey, Lower income people get a higher return on their SS than higher income people.

        For example : If you make $25k a year your SS check is going to be around $930 a month or about 44% of their pay. If you make $100k a year your SS is $2130 which is only 25% of their pay. Both individuals would have put the same % of their income into SS.

        Also SS is means tested to a degree. Social security is taxed if you have income over a certain amount. Therefore people with income from other sources end up paying tax on their social security while low income individuals don’t. So you can pay full income tax rates on up to 85% of your social security. A very high income individual would be paying 35% income tax on 85% of their SS which is effectively taking away about 30% of their SS check. Low income individuals get all their SS tax free.

        So take that low income person making $25k and they end up with SS replacing 44% of their salary. If that high income person who had income of $100k also had a very nice pension and other investments that put him in the top tax bracket then his SS which replaced 25% of his pay would also be taxed at 30% so now his after tax SS is worth 17.5% of his pay.

  3. Brianne says:

    People aren’t “technically” living longer, we just have better infant mortality rates. So someone who reaches adulthood now doesn’t live that much longer than someone who managed to reach adulthood when social security was created. The whole “people only lived to be 63″ included more deaths of infants and children than we do now so that dragged the average down.

    I definitely agree we need to raise taxes, even to just the Clinton levels. and we need to do something about the cap on Social Security that hasn’t budged in a long time. I don’t reach the cap, but my manager does. So effectively, I pay a higher percentage of my salary into social security than she does.

  4. freeby50 says:

    Brianne, Our higher life expectancy is NOT just due to infant mortality rates. Someone who reaches adulthood now DOES live longer on average. Several years longer.

    However you’re right that if you just look at life expectancy at birth then that confuses the situation. Life expectancy at adult ages makes more sense if you look at social security. Life expectancy at birth may have gone up 15 years but life expectancy at adult has gone up like 5-7 years.

    • Courtney says:

      But are they workable years? Ageism in hiring for people over 55, people who work in physical labor and wear their bodies out, medical conditions that cause minor to major disabilities, etc etc. People may be SURVIVING longer due to improvements in public health and medical technology, but many people still can’t work past their mid to late 60s.

      • freeby50 says:

        Yeah we can’t expect everyone to work forever. But gradual increases to the full retirement age would make sense. I mean raising full retirement age from 67 to 68 should be manageable. But theres only so much they could accomplish with raising the retirement age. 1 year increase would fill about 16% of the long term funding gap and raising it to 70 years would fix half the long term short fall.

        Labor force participation for people over 65 has actually gone down over the decades. 100 years ago 60% of men over 65 worked and now its about 20%.

  5. MD says:

    1. Buffet keeps hammering away with this fallacy. Again, read Steven Landsburg for clarity.

    http://www.thebigquestions.com/2010/09/15/capital-gains-followup/

    His point:

    “A tax on wages is (among other things) a tax on capital gains, because your capital gains are proportional to your savings and a tax on wages reduces your savings. Capital gains, therefore, are taxed in advance at exactly the same rate as earned income. The capital gains tax (along with any other tax on capital income) sits on top of that. And it’s only the total that matters.”

    2. Buffet is free to pay whatever tax he feels is just. He can gift any amount to the US Treasury.

    • NateUVM says:

      The flaw in this argument is that the gains, themselves, have NEVER been taxed before. Sure, they are limited by the amount of capital used, which is a function of post-tax savings. But to imply that the funds have been taxed twice is reminiscent of Enron accounting practices…

      Pyramid Head (commenting on that article) makes the relevent point that most of the people we are talking about here are NOT, in fact, wage earners. That they receive compensation in other forms that a treated preferentially come tax time. As such, Mr. Landsburg’s argument falls apart, with respect to our discussion here.

      Also, the current problem in our country (as decided by a private consultancy headed by GOP supporters) is the Federal Budget. The entire country needs to chip in, and on a mandated basis. As the old and poor are contributing in a disproportionate basis, it’s time that those that benefitted the most from tax cuts, defense contracts, etc… chip in to pay their share. Raise taxes back to the level they were at when we had economic growth and balanced budgets.

      • Texas Wahoo says:

        Why don’t we tax those who make their “wages” in the form of carried interest at capital gains rates and leave the long term capital gains rates for individual investors as-is? That has always made sense to me.

        And I generally don’t make decisions based on the decisions of unnamed “private consultancies” funded by any political parties.

        • NateUVM says:

          Because, once again, this is a way for the economically elite to “hide” their earnings from the same type of taxation that the typical American pays on their earnings.

          Why not simplify the tax code and tax ALL earnings (wages, short/long-term capital gains, carried interest, etc…) at the SAME marginal rates as everything else. Eliminate loopholes/rare exclusions. THEN…we can possibly afford to LOWER the marginal rates for EVERYONE while at the same time increasing revenues.

          • Texas Wahoo says:

            If we’re going to simplify like that, why not stop taxing corporations entirely. If we’re taxing everything, whether it comes out of the company in the form of wages, dividends, or capital apreciation, equally, why not stop taxing it at the corporate level at all?

            I would be all for simplifying the tax code to tax outputs only (and all at the same rate).

          • NateUVM says:

            Um, because corporations have earnings as well… Earnings that don’t get doled out to employees, investors, reinvested etc… Those earnings shouldn’t just be a tax shelter. How fair would it be for someone making $25k to pay taxes but Apple (who, it was revealed recently, had more cash reserves than the Fed) doesn’t get taxed at all?

            And how is that simplified? You’re already separating entities into two different tax treatments.

  6. Ben says:

    How about a voluntary “Guilt Fund” at the IRS that Buffett and others can contribute to as they stroke their consciences?
    Buffett hinted at a significant point that deserves more attention: The Federal Gov’t has “future promises that even a rich America can’t fulfill.” This is the understatement of the century. It could be better stated that even a rich America cannot even afford the INTEREST PAYMENTS on the kind of debt we are talking about. Sure, add a few billion in taxes on the evil rich! That will not make a dent on the TRILLIONS in debt we are talking about. We cannot afford to pay Social Security to people who have paid into it their whole lives using money from people paying in today!!
    Where did all that money go?
    Buffett may be smart and successful but he is not GOD and he is not thinking clearly.
    It is a mistake to reward such a grotesquely irresponsible and inept federal govt with more money!!! The whole “fair share” argument is a socialist concept to begin with.

    • saladdin says:

      Ben,
      Please educate yourself before posting inaccurate information based on forwarded emails. You do not have a basic understanding of how social security works. Please think for your self and research.

      saladdin

    • NateUVM says:

      Sure Ben. Debt is out of control. Let’s apply a more balanced fiscal policy and raise revenue. No more taking this out on the vulnerable populations (old and poor) that can least afford it and, instead, ask those that benefit most from recent fiscal policy to contribute more.

      For those that STILL think that trickle-down economics works, and wouldn’t want rich indiduals or corporations to be taxed any more than they are… You’ve heard about all the cash reserves these people/companies are hoarding… If they’ve got all this cash on hand, why aren’t they hiring?

      I’m sorry. These entities can afford to pay their fair share. The old and the poor cannot afford to pay it for them.

  7. freeby50 says:

    Ben,

    We can afford to make the debt payments on the national debt. As of 2010 the interest on the debt is 6% of federal spending.

    Social security is fully funded for over 20 years and even then it will still be funded 70%. So yes we can afford to continue to pay benefits. If they cut benefits and/or raise the tax it will be funded forever.

    The bigger problem is medicare/medicaid spending. Thats the area that is going up so fast that it will not be sustainable into the future.

  8. GE Miller says:

    Jim – glad you have the balls to actually back what you believe in. People like Buffett are a rarity. He has a ton of money but prefers to give it away to charities. I’m just tired of Republican divisiveness. Coddling the rich, indeed. Sadly, this won’t move the needle. Our political climate is too toxic. Republicans will just chalk this up to Buffett being an Obama supporter and write it off.

    • NateUVM says:

      What was it John Stewart said the other day… Something like “Facts are liberal.” Hard to make a convincing arguement when the person you’re talking to can’t see past the end of their own nose.

      But seriously, doesn’t the current situation scream of “those that don’t learn from the mistakes of the past are doomed to repeat them”, or whatever that quote is? As a nation, we’ve been here before. We know what conditions existed when we pulled out of it. Why are we going in the opposite direction?

  9. PeterVA says:

    I don’t think anybody is forcing Mr. Buffett to take advantage of all of the deductions he is allowed, so if he feels he isn’t taxed enough, he should just stop taking the deductions. It would also save him money on his tax preparation bill.

  10. Chris Ward says:

    In my old age I seem to continue to move more towards the center, hense why I do not like labels like Democrat or Republican… That said I agree with Warren on this particular issue, but it will not solve the problem in terms of our national debt…

    Until we:

    1) extend the retirement and medicaid age eligibility for those of us that are still young on some sort of sliding scale…
    2) start means testing for social security and medicaid
    3) have a sensible energy poilcy that embraces natural gas (come on Obama clean coal? really?)This is a jobs creator btw…
    4) have sensible consistent regulations on our financial system — anyone who thinks the government and indeed ourselves didn’t have a big part in creating the problems that crescendoed in 2008 are fooling themselves.
    5) Rationalize our military priorities–we can’t be the policeman of the world anymore.

    Unfortuneately, this won’t solve unemployment–the unemployment rate in my opinion is structural. Meaning, we had employment running on a consumption model that was unsustainable and popped in 2008. We simply had too much capacity, and on top of it, after the bubble burst our companies simply did what they do best; do more with less. So it is going to be a long slog out.

    Just my humble opinion and you know what they say about those.

  11. lex says:

    You old fraud!

    Lex

  12. Kim says:

    Buffett chooses to forgo a salary and is paid through equity he purchases through his company, thereby receiving the capital gains tax rate. This is a lower rate of taxation. Why doesn’t he quit acting as if he is being denied the ability to donate and just give?

    • John says:

      Kim you are right on! It is sad Jim sees his argument as level headed. Buffet is very misleading. First, he insinuates that higher taxes will create jobs. They don’t! Second, he is an Obama supporter and long time democrat so he has every intention to mislead. Third, the real reason he pays no taxes is exactly that he avoid paying himself a salary and is compensated through equity and probably dividends he gets from other investments in other corporations. However, with the corporate tax rate at 35%, his dividends are much smaller than they would be otherwise. So is he paying less than than his secretary? Absolutely not.

  13. Derek says:

    Right problem, wrong classification and wrong solution.

    Warren correctly points out the problem that people who make money off investing OTHER PEOPLE’s money have a wonderful loophole allowing them to be taxes as if their money was made on their own investments. This would be the same as my “profit sharing” bonus being taxed at the corporate tax rate not my personal income tax rate. Income should be income regardless if you make it by swinging a pickaxe, flipping burgers, typing on a computer or guiding investments.

    The problem is that he characterizes it as a rich vs. poor thing. It’s not! This loophole tends to benefit a certain segment of rich people, but it shouldn’t matter how much you make this way. It should simply be income. I’m guessing there are alot of people who are benefitting from this little loophole who would not even be on Mr. Buffett’s radar. They should be taxed the same as everyone else.

    Which brings me to his other problem, his solution. Increase taxes on the rich. How does this help? Even if you increase the income tax rate on the rich this income is not classified that way for taxation purposes. The rates are fine. Fix the classification and the actual rates will adjust themselves.

  14. Steve F says:

    What warren fails to mention is that he is simply not taxed like the average American, due to his status with Berkshire Hathaway. That isn’t to say his proposals don’t have some merit, but he doesn’t paint a completely accurate picture.

    See the WSJ article here:
    http://online.wsj.com/article/SB10001424053111903918104576504650932556900.html?mod=googlenews_wsj

    Also, until the country gets it’s spending under control, we will continue to have fiscal problems. That means controlling spending in the short term, not some nebulous promises for cuts 5 or ten years down the road, which will, in all likelihood, never take place.

    We should also cut capital gains and corporate tax rates, ala Canada, which is well on it’s way to eliminating their deficit problems in record time, due largely to such measures.

    • NateUVM says:

      Canada also has socialized medicine, which is another reason why they are having a better time dealing with their budgetary problems.

      I would be on board with most any approach to our issues if socialized medicine were on the table as part of a greater compromise.


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