Attack of the Buffett

Warren Buffett has an op-ed calling for higher taxes on the rich that has been sent to me by just about every liberal I know, every liberal I’ve ever heard of and, I understand, was found in alien radio transmissions detected by the revived SETI network.

I’m hesitant to disagree with a titan of finance like Buffett. And, in fact, if you push aside the class warfare gibberish and straw manning of the opposition, I think he makes some valid points:

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.

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.

What he’s dancing around is that we tax people a *lot* less for flipping money around than working. If you’re a doctor making six figures saving people’s lives, you’re taxed at a marginal rate of 33%, plus state taxes and payroll taxes. But if you make money on credit default swaps, stock market gambling and housing flips, you’re taxed between 15-20% with no payroll tax. We conservatives always say that incentives matter. You don’t have to be a rocket scientist to see why so many of our best and brightest have moved from making and building and doing things to playing with money and wrecking the economy.

Buffet also debunks a talking point I’ve grown tired of. The argument that the rich are taxed too much is based on what percentage of income tax they pay versus what percent of income they take. However, this fails to account for all taxes, specifically capital gains taxes.

However, Buffett isn’t completely in Earth orbit. He complains about the payroll tax not applying to the rich. But first off, the Medicare tax does apply to the rich, at least for income. And second, the Social Security tax is capped because benefits are capped. You can remove that cap if you want (and give us a gigantic marginal rate) but you then have to stop pretending Social Security is anything but a welfare system.

But the biggest problem with Buffett’s article is his laser-like focus on the “mega-rich”. He ignores that, for Democrats, “the rich” start at $250,000 and most of the “rich” are closer to $250,000 than they are to $10 million. Of course the mega-rich will be fine no matter what the tax system does. They’ll buy enough Congressmen to create loopholes and exemptions for them (Buffett himself is heavily invested in “green” technologies which are getting tax benefits). It is the “not-so-mega-rich” who are most sensitive to tax policy.

To wit: Buffett does not mention the AMT at all, which is a huge regulatory and financial burden on the not-so-rich. He says nothing about the small business that drive the economy, many of which pay taxes as individuals and many of which are about to get hammered by PPACA taxes. He conspicuously fails to mention Sarbanes-Oxley, which may a bigger burden on our system than taxes. And he fails to note that the higher marginal rates of the past were leavened with huge tax shelters which benefited … the mega-rich like Warren Buffett. He also doesn’t talk about the inheritance tax, which can hit small business very hard. Ted Frank has claimed that one of the ways Berkshire-Hathaway makes money is by buying business that have to sell because of the inheritance tax.

In short, this crosses me as a very rich person arguing for a tax system that will hit him, but hit the competition harder. Haven’t we danced that dance enough times?

The more we debate tax policy, the more something along the lines of Simpson-Bowles looks like a smart idea. Eliminate as many loopholes, deductions and exemptions as possible; eliminate the distinction between capital gains, stock income and earned income; lower the marginal rates into the 20’s. This would bring more revenue to the Feds while minimizing the tax burden on investors and business owners. And it would especially do it without knee-capping those who compete with Warren Buffett.

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  1. Seattle Outcast

    They all talk a good game, but then never actually follow through and throw billions at the IRS to back it up. It’s a PR scam, and always has been.

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  2. AlexInCT

    Buffet is actually just saying this stupid shit because he is hoping, feverishly, to preserve the status quo. This asshat has enough accountants to insure he pays as little as possible, and any new taxes on income wouldn’t touch him a bit either. For those too dumb to know better, let me point out that Buffet’s wealth is in stocks and commodities on which he doesn’t pay taxes unless he sells them, and he rarely if ever sells them. His annual income is a joke, and paying a lot more on that isn’t really going to do anything but give him a good laugh.

    What we have here is an elitist asshole saying he is fine with the game to get rich being made much harder. On other people. Buffet already is on top of the rich mountain, and like all the elites at the top, he is desperately trying to keep out the riff-raff, fend off the challengers of you allow that comparison, and he knows damned well that more tax on income the government imposes on these challengers, the more of them will be prevent or turn away from the challenge. He doesn’t need some wannabes blocking his view, or worse challenging him for the title.

    By saying stupid shit like this he also endears himself with the current kleptocrats who want to grab more money from other people. More importantly, he prevents them from actually considering any real changes that might hit him in the pocketbook. He figures that if he gives lip service to their tired old idea of punishing wealth creation and income tied to that, they won’t come after his estate or investments.

    If he is so dead set on higher taxes, he can convince me he is serious by selling off his shit, not using accountants to keep as much as he possibly could, and then sending a fat ass check to the IRS. Otherwise he can shut the fook up and get his geriatric ass out of the news, where he is only given face time because he is parroting the shit the kleptocrats and their propagandists in the LSM want to push in order to aid them in their class warfare routine.

    But the biggest problem with Buffett’s article is his laser-like focus on the “mega-rich”. He ignores that, for Democrats, “the rich” start at $250,000 and most of the “rich” are closer to $250,000 than they are to $10 million

    Democrats consider anyone that isn’t on welfare, other than themselves and their fellow ideologues, to be rich. Most of them don’t feel any shame not paying the taxes they demand everyone else pay more of. The rest pretend they are doing Jesus’ work through the very entity Jesus showed the most scorn and derision for: evil and all knowing government. Easier to do good with other people’s money.

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  3. Hal_10000 *

    This goes especially because Buffett takes advantage of a lot of tax shelters and exemptions. How much does he have in tax-free municipal bonds? How much is he putting into green tech? His tax rate is a symptom of a diseased and broken tax system, not special subsidies for rich people.

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  4. bgeek

    Buffet already is on top of the rich mountain, and like all the elites at the top, he is desperately trying to keep out the riff-raff, fend off the challengers of you allow that comparison, and he knows damned well that more tax on income the government imposes on these challengers, the more of them will be prevent or turn away from the challenge.

    This. A form of regulatory capture at its finest.

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  5. richtaylor365

    This asshat has enough accountants to insure he pays as little as possible, and any new taxes on income wouldn’t touch him a bit either.

    Buffett does not earn “income”, the reason his tax rate is so low is because he lives on dividends and long term capital gains from his stock holdings, these are taxed at 15%. Most of the upper middle class, those with actual jobs that do earn income pay roughly 50%, combined federal and state, he is hardly in any position to point fingers at fellow wealthy folks.

    The federal tax code has always been flawed because it taxes the rich based on their income, not on their wealth, If you are rich, it’s because of what you have, not because of what you make. If Buffett really wanted his own kind to carry more of the load he would be advocating a tax on high net worth, not high earned income. Doing this would eliminate all capital gains taxes, the AMT, estate tax, and gift taxes, all enacted solely to make sure the “rich” pay their “fair” share.

    But Buffett’s basic premise is wrong to begin with, the super rich already pay a higher share of their income in taxes than the middle class.

    IRS data for 2008, for example, show that households in the top 10% of earners (above about $114,000) paid 19% of their income to the feds. Those in the top 1% (above $380,000) paid 23.3%. The top 0.1% of earners, with incomes of $2 million or more, end up paying a slightly lower tax of 22.7%, because they get more of their income from investments (more about this below).

    So what about the rest of us? According to IRS data, a median-income household ($35,000) in 2008 paid about 4% of its income in federal income tax.

    These are “effective” tax rates, the percentages actually paid to the feds, after accounting for all deductions and exemptions.

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  6. Miguelito

    These are “effective” tax rates, the percentages actually paid to the feds, after accounting for all deductions and exemptions.

    And the only reason that last fact in the quote looks so low, is because it includes the ~51% that pay no federal income tax at all (many getting a net positive “refund” in fact).

    Take those out and the number would be a hell of a lot higher then 4%, that’s for sure.

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  7. AlexInCT

    Did I also mention Buffet owns at least six insurance companies that lost a huge chunk of profit, something over 10% of their intake, because of the lower estate taxation regulation passed by Bush? If these collectivists change the estate taxation regulations to be more consfiscatory, like Buffet suggests they should, then his insurance companies will make a damned killing selling the rich people some coverage. That’s because in order to hide more of their income, these rich people will invest it in insurance vehicles that are then not considered part of their estate, both to reduce their total wealth and to make sure they have enough cash to cover taxes on what they can not hide. And Buffet’s companies will make a killing selling more of these when there is more estate taxation.

    Buffet isn’t saying any of this out of the goodness of his heart or because he believes it makes economic sense: he is doing it because he is very well positioned to make a financial windfall/killing when these collectivists do what they want. He is the prime example of the kind of people that these very leftists are always screaming is robbing everyone, and he is able to do it because he can take advantage of government regulation to make himself rich. This will not hit him a bit.

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