Buffett of late has been spouting off that taxes should be raised on the super-rich and mega-rich to solve the debt crisis. Asisde from the fact that taxing the rich would shrink savings/investment in the country, it simply wouldn't accomplish Buffett's implied goal.
David Logan at the Tax Foundation has done the math to show how absurd Buffett's proposal is:
(ViaDrudgeReport)Mr. Buffett specifically called to raise tax rates on Americans making more than $1 million and proposed an additional increase on taxpayers whose income exceeds $10 million. Suppose Mr. Buffett got his wish and loopholes and deductions were eliminated, making it possible to tax the "super-rich" (those earning $1M - $10M per year) at an effective rate of 50%...
In addition, Mr. Buffett wanted those making more than $10 million per year to pay even more [Suppose they are taxed at 100%]...
taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation's debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation's deficit by 12 percent and the debt by 2 percent. There's simply not enough wealth in the community of the rich to erase this country's problems by waving some magic tax wand....
...to put everything in perspective, think about what would need to be done to erase the federal deficit this year: After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.
The YouTube video titled "Eat the Rich" is a beautiful example of this fallacy of "fixing" our problem by taxing the rich to make them pay their "fair share."
ReplyDeletehttp://www.youtube.com/watch?v=661pi6K-8WQ
I wonder how many of Buffet's long time shareholders/worshipers agree with the old coot? If he were really honest about taxing the super rich he would push to have tax exempt interest and the preferential treatment of dividends and capital gain done away with in exchange for eliminating the corporate income tax.
ReplyDeleteThe ingenious politics behind increasing tax rates on the supposed 'rich' (say those earning $200,000+ a year in taxes) is that with inflation over time, people with lower incomes (when adjusted for inflation) will be taxed at the higher rate. It's a trap.
ReplyDeleteHedge-fund managers pay 15% on their income through a loop hole that treats their pay as capital gains (subject to 15%) rather than as income.
ReplyDeleteMany hedge-fund managers themselves admit it, but say they're only willing to pay the regular rate if long-term investments, such as the kind Buffett holds, are taxed even if not sold....which would not be an improvement for the average guy.
I submit that all of us should be taxed at 15%, if hedge-fund managers are taxed at that rate.
Why the special dispensation for the financial industry, ground zero of the financial crisis?
It wouldn't "solve the problem"... it would balance the budget for ONE YEAR, and then what? After you've made it impossible for the few people with the capital, skills, drive, and desire to build prosperous enterprises to be successful at it here, they will have left for Hong Kong, Singapore, Switzerland, or some other jurisdiction which appreciates them more, and then what will you do NEXT YEAR?
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