Billionaire Tells Congress to Stop Coddling the Billionaires

September 2011 - Since the early days of the George W. Bush administration, reasonable people have been pointing out the irrationality of his policy of coddling billionaires with huge tax cuts. I’ve complained about it more than once in this space. Yet the craziness continues.  Even after President Obama’s election, with Democratic majorities in Congress, Republicans were still able to hold federal budgets hostage by filibustering, and have consequently kept the Bush era tax breaks for the super-wealthy in place.

The complaints about that continue, but now there is a new wrinkle.  Now even the billionaires are acknowledging the stupidity of their continued special treatment at the expense of the rest of us.

In an extraordinary commentary in the New York Times recently, billionaire investor Warren Buffett declared that he and his fellow super-rich have been coddled enough, and that the time has come to ask them to share in the national sacrifice of pulling the nation out of Bush’s great recession.

The super-rich like himself, Buffett noted, derive the bulk of their income from capital gains and carried interest, taxed at much lower rates than working people’s paychecks.  That’s why with a taxable income of $40 million in 2010, Buffett paid an income tax of just 17.4 percent, a far lower rate than any of the less well-paid support staff in his office.

“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 wrote.

Tax rates on the super-rich used to be much higher – and government revenues and investments greater and the deficit smaller - but Bush and the Republican Congress slashed them, on the alleged grounds that the wealthy will refuse to invest if their profits are taxed.  It was a bogus argument all along, Buffet wrote, because “People invest to make money, and potential taxes have never scared them off.”

Think about it.  If you stood to make a $10 million profit on an investment, which would be taxed at 40%, would you refuse the remaining $6 million just because of the tax obligation?  It’s an absurd suggestion.

Neither did Buffett or any of his peers.  “I didn’t refuse, nor did others.  I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain,” Buffett  explained.

Yet, Republicans in Congress still demand that the mega-rich get more special favors.  “These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.  It’s nice to have friends in high places,” Buffett wrote.

In 1992, the richest 400 Americans had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum.  In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

Buffet proposes leaving rates for middle-income earners unchanged, and continuing the current 2-percentage-point reduction in the employee contribution to the payroll tax (a tax Republicans actually want to increase, apparently because it helps the poor and middle class, not billionaires).

But for those making more than $1 million — there were 236,883 such households in 2009 — he would raise rates immediately on taxable income in excess of $1 million, including dividends and capital gains.  And for those who make $10 million or more — there were 8,274 in 2009, including Buffett — he suggests an additional increase in rate.

Working people are sick and tired of continuing to try to scrape by in a down economy that desperately needs public works investment that the government can’t afford because it continues to make tax breaks for the super-rich its top priority.

Warren Buffett agrees. “My friends and I have been coddled long enough by a billionaire-friendly Congress.  It’s time for our government to get serious about shared sacrifice.”

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