Buffett: Tax the Rich

[Eddie Dane]

"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 said.

Linky


Well, that's from the horse's mouth, I'd say.

 

[jimtron]

I don't know why more people in the U.S. aren't furious that many millionaires and billionaires pay 15-18% income tax while working people making $40k a year pay 25%. To establish and continue the Bush tax cuts during war time and economic strife is deplorable.

 

[rwguinn]

I don't know why more people in the U.S. aren't furious that many millionaires and billionaires pay 15-18% income tax while working people making $40k a year pay 25%. To establish and continue the Bush tax cuts during war time and economic strife is deplorable.

Remember that they are getting taxed on Earnings, not established wealth. The millions/billions that they already have invested in stocks, bonds, CDs, and whatever are untouchable. Only the earnings on that wealth are taxable

 

[Segnosaur]

I don't know why more people in the U.S. aren't furious that many millionaires and billionaires pay 15-18% income tax while working people making $40k a year pay 25%. To establish and continue the Bush tax cuts during war time and economic strife is deplorable.

Ummm... just out of curiosity, do you have any proof that "many millionaires pay 15% tax"? Is this a common thing, or are you talking about special cases? Is this a "one time occurrence", or do they regularly pay such small amounts?

As others have said, people are taxed on income (what they currently earned in the year), not wealth (what they've managed to accumulate). Its possible for a millionaire to actually pay no tax in a given, if most of his money is earned through investments and he looses money due to a bad stock market (for example). Of course, those people probably made up for it by paying a much higher tax rate in other years (when the markets were rising sharply), so people shouldn't concern themselves with individual cases where millionaires pay "less tax". Instead, they should consider what the tax rate has been over the long term, which is likely more than the "middle class" tax bracket.

At this point I make no claim about the rich paying "enough". Perhaps the rich people should be paying even more. Or maybe they're already paying enough. I'm just dealing with the specific claim that "the rich are paying less than others", which I don't think is true.

 

[jimtron]

Ummm... just out of curiosity, do you have any proof that "many millionaires pay 15% tax"? Is this a common thing, or are you talking about special cases? Is this a "one time occurrence", or do they regularly pay such small amounts?

I have proof that long term capital gains tax is 15% for 2010: "For 2010, the maximum capital gains rate for most people is 15%." http://www.irs.gov/newsroom/article/0,,id=106799,00.html

I assume that there are many Americans who make most or all of their income from capital gains, but I don't have a cite for that off the top of my head (anyone help with this?).

As others have said, people are taxed on income (what they currently earned in the year), not wealth (what they've managed to accumulate). Its possible for a millionaire to actually pay no tax in a given, if most of his money is earned through investments and he looses money due to a bad stock market (for example). Of course, those people probably made up for it by paying a much higher tax rate in other years (when the markets were rising sharply), so people shouldn't concern themselves with individual cases where millionaires pay "less tax". Instead, they should consider what the tax rate has been over the long term, which is likely more than the "middle class" tax bracket.

At this point I make no claim about the rich paying "enough". Perhaps the rich people should be paying even more. Or maybe they're already paying enough. I'm just dealing with the specific claim that "the rich are paying less than others", which I don't think is true.

I'm not saying that all rich people are paying less, I'm saying that there are many very wealthy people who are paying less (smaller percentage) than people making much, much, less than them. For example, a hedge fund manager who makes all her money as capital gains.

Why would an investor pay a much higher tax rate when the markets are rising sharply?

 

[jimtron]

From Forbes.com:

As we’ve pointed out before, thanks to the historically low 15% tax rate on long term capital gains, the uberrich pay a lower effective federal income tax rate than ordinary rich folks, who get more of their money from salary and other ordinary income, taxed at a top 35%. (Warren Buffet has famously complained that he pays a lower effective tax rate than his secretary.) In 2008, the top earning 400 paid an effective federal income tax rate of 18.11%, up from a record low 16.62% in 2007, when an even higher share of their total income came from capital gains. By comparison, as the IRS report here shows, in 2008, taxpayers with an adjusted gross income between $500,000 and $1 million paid an effective tax rate of 23.4%. Even those earning between $200,000 and $500,000 paid a higher effective tax rate —19.6%—than the plutocrats.

 

[LTC8K6]

Does Buffet send in a check each year for the extra taxes he thinks he ought to pay?

Why make the government take it if you believe you owe it?

 

[mhaze]

Simply to correct some of the erroneous assumptions in this thread, let's examine the "Alternative Minimum Tax". This was created by Congress largely to eliminate the gross unfairness which occurs when wealthy individuals, through a combination of things, manage to pay little or no tax. Some of these include capital gains, rent, and royalty income, as well as depreciation.

The AMT essentially establishes a "floor" for taxation. Irregardless of the various tax dodging methods (whether intentional or NOT....note an elderly widow may live on dividends or sales of long held stock, eg, capital gains) the effect of the AMT, is for persons earning above a certain baseline, they pay a certain percentage tax.

Period.

So the "unfairness" mentioned in this thread has ALREADY BEEN HANDLED by Congress, and perversely, inflation has caused the baseline for the AMT to creep lower in real income. Today the AMT is threatening "regular people" - you and I in various circumstances.

Just saying.

 

[jimtron]

Does Buffet send in a check each year for the extra taxes he thinks he ought to pay?

Not that I know of, but he is giving away most of his fortune to charity.

Why make the government take it if you believe you owe it?

I don't understand this question. Buffet is saying that ultra rich people like him should be paying more in taxes. People like him pay a smaller percentage in taxes than many other Americans making far less income. Where specifically do you disagree with him?

 

[jimtron]

Simply to correct some of the erroneous assumptions in this thread, let's examine the "Alternative Minimum Tax". This was created by Congress largely to eliminate the gross unfairness which occurs when wealthy individuals, through a combination of things, manage to pay little or no tax. Some of these include capital gains, rent, and royalty income, as well as depreciation.

The AMT essentially establishes a "floor" for taxation. Irregardless of the various tax dodging methods (whether intentional or NOT....note an elderly widow may live on dividends or sales of long held stock, eg, capital gains) the effect of the AMT, is for persons earning above a certain baseline, they pay a certain percentage tax.

Period.

So the "unfairness" mentioned in this thread has ALREADY BEEN HANDLED by Congress, and perversely, inflation has caused the baseline for the AMT to creep lower in real income. Today the AMT is threatening "regular people" - you and I in various circumstances.

Just saying.

The point is, if you make millions from long term gains you're only paying 15-18% income tax. If you make let's say $40k to $300k from a payroll job, you'll be paying a much higher percentage. Do you agree or disagree? I don't understand how the AMT negates Buffet's point--could you elaborate, and be specific?

 

[DC]

when the rich have to pay less %ually compared to others, this should change indeed.
sound extremely unfair.

 

[jimtron]

when the rich have to pay less %ually compared to others, this should change indeed.
sound extremely unfair.

Yeah, we're not talking here about whether rich people should pay a higher percentage of tax than folks who make less money. Buffet's point is that hedge fund billionaires are paying a significantly smaller percentage than working people.

I understand not everyone is in favor of progressive taxation, but I don't understand how you defend billionaires paying a smaller percentage than a working person making $40k a year.

 

[LTC8K6]

Not that I know of, but he is giving away most of his fortune to charity.



I don't understand this question. Buffet is saying that ultra rich people like him should be paying more in taxes. People like him pay a smaller percentage in taxes than many other Americans making far less income. Where specifically do you disagree with him?

I disagree that the tax problem in the US is that the rich are not paying enough.

You could, IIRC, take all of the income from the top 5% and it wouldn't even make a noticeable difference.

Again, what's stopping him from sending in a check if he thinks he isn't being taxed enough?

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782

Here's a little illustration:

http://www.hughhewitt.com/blog/g/4e311c3e-4d30-4cf9-bc5a-5ca3388c5205

 

[Merko]

Buffet has been making this point for years. He has issued a challenge to his fellow billionaires to show that they pay higher taxes than their secretaries. As far as I've been able to find out, no one has taken the challenge.

 

[jimtron]

I disagree that the tax problem in the US is that the rich are not paying enough.

You could, IIRC, take all of the income from the top 5% and it wouldn't even make a noticeable difference.

I don't think anyone in this thread, nor Buffet, has claimed that it's "the tax problem in the U.S."

The point isn't that taxing the rich more will solve all of our economic problems. The point is that billionaires shouldn't be paying a smaller percentage (as much as half) in taxes than people making much less income. Do you agree or disagree? If you disagree, please specify how.

Again, what's stopping him from sending in a check if he thinks he isn't being taxed enough?

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782

Nothing is stopping him from doing that. What's your point? He's giving away the vast majority of his fortune to charity. He's not pointing to other people and saying they should get taxed more--he's saying people like him should pay more in taxes. Again, if you disagree with him, could you please elaborate how?

 

[Segnosaur]

Ummm... just out of curiosity, do you have any proof that "many millionaires pay 15% tax"? Is this a common thing, or are you talking about special cases? Is this a "one time occurrence", or do they regularly pay such small amounts?

I have proof that long term capital gains tax is 15% for 2010: "For 2010, the maximum capital gains rate for most people is 15%." http://www.irs.gov/newsroom/article/0,,id=106799,00.html

Ah, so it was capital gains you're referring to. (I thought you might have been referring to various loop holes, etc.)

If you're dealing with capital gains, things get a little more, complex:
- There are divisions between short term and long term capital gain rates. Furthermore, the rates are changing. (Yeah, the rates may still be lower than 'earned' income, but its not always '15%')
- Because of the way inflation is handled, a person can pay taxes even if the overall "value" of their investments decreases
Of course, capital gains are taxed at a lower rate than 'earned income' because they typically require the individual to put money into businesses, which should increase employment/economic production/etc. In a way, its almost a "charity contribution".

Of course, I'm Canadian, and as such we have our own rules, so I'll defer to any U.S. tax experts here.

I'm not saying that all rich people are paying less, I'm saying that there are many very wealthy people who are paying less (smaller percentage) than people making much, much, less than them.

Yup, and in many cases those people are also carrying a larger risk. Many businesses fail. The big gamble that could earn you millions in "capital gains" could end up loosing money.

For example, a hedge fund manager who makes all her money as capital gains.

Not sure if that's how a hedge fund manager would actually be earning money. After all, they'd be employees of their financial firm, so they'd probably be paid (and get taxed) as regular income.

Now, some executives may get paid through things like stock options/shares, but then again there is also the risk that their "pay" in that situation could actually go down in value.

 

[LTC8K6]

Yes, I shouldn't single out Buffet. Any of these rich folks who think they should pay more are free to do so at any time. They can either write a check, or change the way they do their taxes.

 

[LTC8K6]

I don't think anyone in this thread, nor Buffet, has claimed that it's "the tax problem in the U.S."

The point isn't that taxing the rich more will solve all of our economic problems. The point is that billionaires shouldn't be paying a smaller percentage (as much as half) in taxes than people making much less income. Do you agree or disagree? If you disagree, please specify how.


Nothing is stopping him from doing that. What's your point? He's giving away the vast majority of his fortune to charity. He's not pointing to other people and saying they should get taxed more--he's saying people like him should pay more in taxes. Again, if you disagree with him, could you please elaborate how?

IMO, it's a relatively small tax problem that sounds good when Buffet brings it up, but wouldn't actually do much of anything.

Buffet's comments seem designed more to get attention than anything else.

 

[jimtron]

Ah, so it was capital gains you're referring to. (I thought you might have been referring to various loop holes, etc.)

If you're dealing with capital gains, things get a little more, complex:
- There are divisions between short term and long term capital gain rates. Furthermore, the rates are changing. (Yeah, the rates may still be lower than 'earned' income, but its not always '15%')
- Because of the way inflation is handled, a person can pay taxes even if the overall "value" of their investments decreases
Of course, capital gains are taxed at a lower rate than 'earned income' because they typically require the individual to put money into businesses, which should increase employment/economic production/etc. In a way, its almost a "charity contribution".

I understand that it's complex, and I did point out in other posts above that it's not always 15% (and that I'm talking about long term gains). Still, the point stands--many ultra rich people are paying a lower tax rate than folks making much less income--that's a fact. Right, or do you dispute that?

Yup, and in many cases those people are also carrying a larger risk. Many businesses fail. The big gamble that could earn you millions in "capital gains" could end up loosing money.

Agreed, but do you think that because of that risk they should pay a lower tax rate than poorer people?

Not sure if that's how a hedge fund manager would actually be earning money. After all, they'd be employees of their financial firm, so they'd probably be paid (and get taxed) as regular income.

Now, some executives may get paid through things like stock options/shares, but then again there is also the risk that their "pay" in that situation could actually go down in value.

OK, but again the point still stands. Buffet pays a lower tax bracket than his secretary. Many very, very wealthy people pay somewhere around 15-18% taxes while people making far, far less pay more than that, sometimes around twice as much. Do you agree that's happening? If so, do you support it?

 

[jimtron]

IMO, it's a relatively small tax problem that sounds good when Buffet brings it up, but wouldn't actually do much of anything.

Buffet's comments seem designed more to get attention than anything else.

OK, again, no one (that I know of) is saying that changing this will solve all of our economic woes. But when you say it wouldn't actually do much of anything, I disagree. If multi-millionaires and billionaires who make their income from long term capital gains had their taxes raised from 15-18% to something like 35%.

Again, I'm not saying that would solve all our problems, that's not Buffet's point, and not mine. The point is that it makes no sense for Buffet to pay a lower tax bracket than his secretary.

eta:

Regarding Buffet getting attention: from what I've read about him he doesn't seem like the type to be making pronouncements just to get in the spotlight. You don't think he has a worthwhile point?

I'm really kind of stunned that so many on this thread are so quick to dismiss this.