The most respected investor and capitalist on the planet, Warren Buffett, took to the pages of the New York Times this morning to bust a myth that has dominated political discourse in recent months:

The idea that raising taxes on super-rich people would hurt the economy.

Buffett observes that his own personal taxes as a percent of his income have plummeted in the past decade, to all-time lows. He observes, as he has before, that he pays a much lower tax rate than his secretary. He calls out the absurdity of hedge-fund managers and other professional investors playing "long-term capital gains" rates on short-term trading profits.

And then he takes aim at the biggest rationale for preserving these astonishing tax breaks: The claim that, if taxes on deca-millionaire and billionaires were increased, these super-rich Americans would stop investing, thus clobbering the economy and hurting job growth:

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.

When presented with these facts, those who argue against tax increases on the super-rich--or, even more absurdly, for more tax cuts--often point to President Ronald Reagan, observing that he cut taxes for the wealthy, helping usher in a long economic boom.

This ignores the point that Reagan also raised taxes. And more importantly, it ignores how high tax rates on super-rich people were when Reagan cut them: In 1980, the top bracket was a startling 70%. It also ignores how Bill Clinton raised taxes and then took the US from the perpetual deficits of the Reagan years to a surplus. It ignores how George Bush cut taxes, plunged the budget back into a deficit, encouraged the wild borrowing spree that inflated the housing bubble, and then oversaw the worst recession since the Depression. It ignores how the US prospered all through the 1950s and 1960s, when marginal tax rates were super-high. And so on.

In short, it ignores almost all the economic data we have. And it appears to be based on a rigid ideology, rather than common sense.

Buffett, by the way, isn't proposing a blanket increase on today's entire top tax bracket, those making over $379,150, many of whom protest against the idea that they are "rich." Buffett is suggesting the implementation of two new brackets--one for taxpayers making over $1 million, of whom there are 237,000 in the country, and one for taxpayers making over $10 million, of whom there are only 8,000.

In other words, Buffett's tax-increase-on-the-super-rich would affect 1 in 1,253 Americans, less than 1/10th of 1% of the population.

Warren Buffett for President, Bill Maher for Vice-President. I'd vote for Mr. Serious and Mr. Not So Serious over anyone the Republican'ts and the Party of No are likely to place on the ballot in 2012. We had, as Maher says, "The cowboy from Toy Story as president for eight years." Might as well try intelligence and humor for an election cycle, or two.
I like Buffet's tax proposal and Bill Maher's take on RWCWJs and other religious zealots. That's my wheelbarrow full of nearly useless dollars worth. Carry on...

I'll take raising revenues more seriously AFTER Congress takes cutting spending more seriously.

Warren needs to also address that 50% of the country now pays NO income tax. I'm starting to lean more and more towards the flat tax and eliminating loop holes. Warren won't like that though.

50% don't pay income taxes because they don't make schit for income...and as a percentage of their income, they pay far more taxes than most since most of their money goes directly to buying things, not savings, not stocks, not real estate.

Typical right wing hogwash..."to be fair, we really need to tax those low- and middle-income people more!".

Fish on...

Todd

+1,000 Todd

There's some typical left wing hogwash in there too.

Big difference between what Buffett is proposing and what comes out of Obama and the Dems mouths: Buffet's pool of rich people is much smaller than Obama and Co's pool. Obama wants to go as low as $200k to $250k income. Buffet is targeting a much smaller percentage of the population and actually I don't have a big issue with that. However, if there isn't a much more serious effort to cut and control spending even squeezing Buffet's buddies for more dough ain't gonna make much of a difference.

"You know what's happened since then: lower tax rates and far lower job creation."


"Warren needs to also address that 50% of the country now pays NO income tax."

Agreed. All of those large corporations need to start paying their share and, money pool wise, it's more like 90%.

Brilliant statistical analysis, as always.

Yes, when anyone on the right brings up the 50% who don't pay income tax, that's exactly what they are saying...that we need to tax those low- and lower-middle class malingerers more, not the ultra-rich, and certainly not all the corporations who are bilking and milking our country out of zillions.

Fish on...

Todd

For the longest time I've wondered why "capital gains" aren't taxed like regular income. That's where most of Buffet's income is; it's not like he has Hathaway write him a paycheck every couple weeks. Seems to me that low capital gains tax rates is more about low taxes for the rich than it is about encouraging investing business job creation or anything for the general welfare.

I've never had any capital gains to declare for the lower taxes.

Sg

First of all, the discussion is about personal income tax, not corporate taxes so you are lumping apples in with oranges. And while I didn't specify it previously, no I don't agree with taxing "the truly poor" but I would try to get those in the upper levels of the lower 50% to get some "skin in the game" as well.

That's the truth...and the sad part is that about 45% of the country is doing their bidding for them, while taking it in the ass from them just as much as the rest of us...

Fish on...

Todd

I have never understood why the guy making $35-$40,000 a year parrots the talking heads from the right about why we shouldn't tax people making $500,000 a year a little more.


At the same time, i have never understood a really poor person saying we should tax the rich more....when that term to them is relative. To them the guy making $15.00 an hour might be rich.


Ultimately the really rich in this country are not really affected one way or the other, because they have tax shelters and trusts to put their money into. So the 'rich' that get taxed is usually the upper middle class and it rolls down from there.

A flat tax is a significant tax increase for those who can least afford it, and a significant tax decrease for those who don't need it.

Fish on...

Todd

"First of all, the discussion is about personal income tax, not corporate taxes so you are lumping apples in with oranges."

The fruit is in one basket and should NEVER be a seperate discussion. This nation needs x dollars of revenue to operate. Even after cuts it's gotta come from that basket.

Marty has a good handle on it IMO. "Taxing the rich more" is always a popular cry because it is taking the other guy's money because he is "rich". The 40k a year family is only paying tax on about $25k in adjusted income which means they pay about $2800 a year. Buffet's definition of rich is certainly different than many other politicians who think that the line should be at $200k to 250k. If you are married and make $250,000 with standard deductions you pay the feds $55k. That's a lot of money.

Bottom line is there are wayyy to many loop holes and with a sliding scale the flat tax would be way more efficient and would generate more overall income. However, the DC crowd doesn't need more money because they can't handle the amount they are getting now effectively.

Gee, thanks for pointing that out, then.

Do you need any help?

With spelling, for instance?

Because I can help you with that.

No problem.

I tutored slow kids when I was in high school, so it takes me back.

http://www.tampabay.com/specials/2010/graphics/wealth-graphics/


Interesting chart, 40% of Americans have almost 0 net worth.