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Buffett says make the rich pay

By Judy Martel · Bankrate.com
Tuesday, August 16, 2011
Posted: 3 pm ET

Billionaire investor Warren Buffett caused a media stir this week with his op-ed in the New York Times titled "Stop coddling the Super-Rich." Buffett outed himself and his fellow mega-rich as tax-cheapskates, thanks to tax-friendly legislation, and urged Congress to raise taxes as part of a deficit-reduction plan.

Warren Buffett

Warren Buffett urges Congress to stop coddling the rich.

"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," he wrote.

To prove an argument for higher taxes on the rich, he says his federal tax bill last year was 17.4 percent of his taxable income, compared with the average 36 percent paid by 20 of his employees. The reason is that most of the mega-rich "make money with money" and owe tax in the form of capital gains of 15 percent on their investments, while paying very little in payroll taxes.

Buffett also dismisses any notions that the rich will refuse to invest if capital gains tax rates are increased. "People invest to make money, and potential taxes have never scared them off," he notes in the op-ed.

Higher taxes not contagious

To gain a little perspective, I turned to Bankrate's tax expert, Kay Bell. First, she wants to reassure nervous taxpayers that higher taxes are not contagious. "Taxing higher earners has long been part of the progressive U.S. tax code," she says. "In the 1950s, the top tax rate was in the 90-percent range, topping out in 1952-1953 at 92 percent on incomes exceeding $400,000. The tax reform act of 1986 set the lower baseline that we tend to use for tweaks to our current rates."

Also, several states levy "millionaire taxes" for those earning $1 million or more, Bell notes, including Maryland, New Jersey, California, Connecticut, Hawaii, Oregon and Wisconsin.

But wealthy taxpayers have long had ways to get around higher tax rates. "The beauty of capital gains is that you can have a gazillion-dollar portfolio and, for the most part, you don't owe the IRS anything until you sell and take your profit on your holdings," says Bell. "That's why so many investors take advantage of tax-deferral techniques, including structured sales, charitable trusts, installment sales and 1031 property exchanges."

In putting an end to tax breaks for the rich, Buffett is calling for "shared sacrifice." He advises leaving rates alone for 99.7 percent of taxpayers, "who need every tax break they can get." However, he wrote, "for those making more than $1 million -- there were 236,883 such households in 2009 --I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more -- there were 8,274 in 2009 -- I would suggest an additional increase in rate."

Do you agree with Buffett's plea to Congress to tax the rich at a higher rate?

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10 Comments
Rita
August 20, 2011 at 9:22 am

If it helps to get the economics of this country straighten out, then I say tax them.

Although I think Donald Trump has a better idea, and that is to tax the zillions of goods shipped here from China. (I have a hard time finding anything not made in China, so Donald's idea should be a great help.

Sil
August 18, 2011 at 6:05 pm

What we all need to do is to go on vacation with our families,all of us at the same time, no work, no problem, it is time to go home. No work go to the beach, it's free.
Let the rules the wealthy make apply to themselves who make them and let them clean their own houses, make their own food, walk their own dogs, cut their own lawns run their own companies make their own money, and raise their own kids.
It is no longer worth working for anyone who think so little of those who serve them. I'm making lemonade, playing chest and thinking outside the box. Maybe the bottom has to fall out so we can all get back to caring about each other instead of systems that only serve a few. What is really happening? Our country has been blundered, those elected to serve the people have given a piece of our country, money, resource, ports and soon all of our IDs (as a private French company is buying out the driver license and passport info database). Wake up sleeping beauties, you have only worked to benefit the rule makers or the monopoly boardwalk owners. Why want a job, it is better to barter.:)

Frank
August 17, 2011 at 9:17 pm

This is the stupidest argument I have ever heard and it keeps getting repeated by the brainless talking heads on radio and TV. Since WHEN is 'percentage' a measure of fairness??? If Olde Warren nets a billion dollars a year and pays 1% in taxes then he pays TEN MILLION DOLLARS in tax. If Sally his secretary pays 30% and nets $40K the she pays twelve THOUSAND. So for you mental midgets, Warren's %1 bill is a whole lot MORE than poor %30 Sally's, like NINE MILLION NINE HUNDRED AND EIGHTY EIGHT THOUSAND MORE!!! So go back to grade school and actually open your math book this time.

Ronnie
August 17, 2011 at 8:04 pm

What people fail to understand when Warren Buffett says increase taxes on the millionaires/billionaires is that the taxes won't affect him. His salary is $100,000/year. If he is so concerned, why doesn't he write a nice fat check to the federal government. Rather hypocritical to call to raise taxes when there is a loop hole for him to dive into.

Mario
August 17, 2011 at 7:23 am

You're going to have a hard time finding anyone who isn't in the upper 10% that won't agree with Mr. Buffett.

Wasn't the "tax break" from the rich supposed to help create jobs and blah blah blah?

It's a fallacy, it isn't happening. That extra money in their pockets is staying within their grasps.

Tax them.

kim
August 17, 2011 at 7:09 am

Our next war will be a class war if we do not work together to solve our economic problems. London was the tip of the iceberg.

kim
August 17, 2011 at 7:09 am

Our next war will be a class war if we do not work together to solve our economic problems.

Mike
August 16, 2011 at 8:32 pm

Great Mr Buffet, lead the way and write the first monster check to help pay off the debt and get some of your 'mega-rich' friends to do it too. That or admit you're nothing more than a mega-rich hypocrite and STFU. By the way, they even accept payment by credit card now, so it's even easier to put your money where your mouth is.

Pete Williams
August 16, 2011 at 8:31 pm

It seems that rich folks like Warren Buffet and Bill Gates don't mind paying more in taxes. Why doesn't Congress go along? I guess the 200+ millionaires who in Congress just don't want to pay their fare share in taxes.

Bob Edwards
August 16, 2011 at 4:24 pm

Warren, you old devil. Again, you're right on target but if you think that congress will betray their masters by taxing the rich and corporations, guess again.
As long as we allow lifetime sinecures in Congress we will have government of the peopole, by the people and for the rich and the corporations who pay little or no taxes.
Immediate need is for term limits ands line item vetos.