Warren Buffett Proposes Higher Taxes for Rich
Written by Faith Anderson on August 16, 2011
“Shared Sacrifice” and Taxation of Wealthy Americans
Warren Buffett writes in his opinion piece, “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.” Buffett goes on to say that it seems lawmakers “feel compelled to protect” wealthy Americans, like they are some sort of “endangered species.” According to Buffett, his 2010 federal tax bill, including income and payroll taxes was $6,938,744. While that sounds like a lot of money, it actually only amounts to 17.4% of his taxable income, while everyone else in his office paid an average of 36%. Buffett also says that some investment managers were taxed only 15% on billions of dollars of income, while the income tax bracket of the middle class is up to 25%.
Making a few small changes to tax rates for the rich could mean an extraordinary positive change for America as a whole. If lawmakers added a new 50% tax rate to taxable income over $1 million, it could raise an additional $34 billion in one year, according to the Tax Policy Center. Furthermore, the Joint Committee on Taxation estimates that if lawmakers opted to tax carried interest as ordinary income, the change could raise an additional $21 billion over ten years. In addition, if tax rates on capital gains and dividends were raised to 20% for individuals making more than $200,000, it could raise approximately $107 billion over ten years, according to the Treasury Department. With these three changes combined, it is possible that the Treasury could raise more than $450 billion over a decade.
What Higher Taxes for the Rich Could Mean for Consumers
Although the potential gain of $450 billion is less than 5% of the new debt the U.S. is on track to accrue over the next ten years, it’s a lot of money in terms of valuable government programs that might otherwise need to be cut without additional revenue. And while those opposed to higher taxes for the rich believe Buffett’s deficit plan will discourage investment, Buffett states, “I have worked with investors for 60 years and I have yet to see anyone—not even when capital gains rates were 39.9% in 1976-1977—shy away from a sensible investment because of the tax rate on the potential gain.” By taking Buffett’s advice and imposing a higher tax rate on millionaires, and an even higher tax rate on those making at least $10 million per year, lawmakers can take a more balanced approach to deficit reduction. According to Warren Buffett, the United States is still a AAA-rated nation despite the recent downgrade by Standard and Poor’s. Now it’s up to Congress to raise taxes on the mega-wealthy in order to more evenly distribute the tax burden.