Congress Has the Whole Tax Thing Wrong

According to Warren Buffett, higher taxes for the super rich doesn’t kill jobs.

This morning, I was very pleased to read the words written by a voice of reason: Warren Buffett. Buffett is one of the richest men in the world, a man who built his fortune through investing. This article in the New York Times, “Stop Coddling the Super-Rich,” is his attempt to talk reason to the U.S. Congress using facts.

He writes:

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.

While this isn’t news, what’s refreshing about it is that it’s being stated by one of the “mega-rich,” a man who paid $6.9 million (not a typo) in taxes last year. He points out that while his 2010 tax bill was 17.4 percent of his taxable income, other people in his office paid 33% to 41% (with an average of 36%) of theirs.

Tax PictureIt’s the percentages that are important here. Imagine a taxable income of $100K. 17.4% is $17,400. But 36% is more than double that: $36,000. Is it fair that someone with a taxable income of $40 million like Mr. Buffett, who gets to keep about $33 million of that after taxes, should be paying a lower tax rate than someone making $100K who only gets to keep $64K after taxes?

If you don’t know the answer to that question, maybe the picture I provided here for you will help?

(By the way, I’m all for a flat tax and still can’t figure out why we can’t have one. The rate would likely be low enough that folks earning under $200K would save money. And wouldn’t it be nice to figure out your taxes by yourself in an hour instead of paying someone else to do it for you?)

Mr. Buffett goes on to tear apart the argument that higher taxes for the super-rich prevent them from investing or kill jobs:

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. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

These are facts from history, not vague guesses based on economic theories. And since Mr. Buffett has a reputation as someone with financial prowess, I’d tend to take his word on the situation before the word of the self-serving morons we’ve elected to Congress — career politicians who would rather lie to the American people than do what’s right for all of us.

Of course, all this makes me wonder why Congress is so insistent that taxes not be raised, even for the wealthiest Americans — people like Buffett who wouldn’t mind a tax increase if it helped the country out of its financial woes. Whose bank accounts are the members of Congress protecting? Their own? Their friends in major corporations who fund their campaigns?

They’re obviously not interested in protecting the bank accounts of the majority of the American people. With unemployment hovering around 9% nationwide, millions of people are tapping into savings, losing their homes, and giving up on the “American Dream.” Yet the government continues to subsidize the oil industry, which continues to reap record profits, offer tax breaks to companies that send American jobs overseas, and enforce a tax code that gives tax breaks to the mega-rich. (By the way, is it a coincidence that the oil industry donates generously to political campaigns? I think not.)

As the Debt Ceiling debates of July 2011 proved, the American Congress is dysfunctional. I really believe that all incumbents should be voted out of office in the next few elections. Start again with a clean slate, hopefully with people who care about their constituents.

But what can we do until then? Contact your Representatives and Senators. Tell them that you think Warren Buffett is right: that the mega rich should be paying the same percentage of taxes as the rest of Americans. If you email them, link to the New York Times piece I quoted here. Tell them to read it and learn. Remind them that they’re working for all of the American people — not the corporations who fund their campaigns.

We need to turn this country around and it’s obviously not going to happen if we wait for our dysfunctional Congress to do it for us.

And in November 2012, remember to vote for someone who has the American people at the top of his or her agenda — not partisan politics.

7 thoughts on “Congress Has the Whole Tax Thing Wrong

  1. In Washington State, Bill Gates’ father (wealthy in his own right and Seattle social blue blood) organized an effort to raise or implement new taxes (can’t remember which, now) on the wealthy, but his measure was defeated by the voters. All those Microsoft millionaires still pay little of their taxable incomes compared to the average Joe and Jane. Years ago, Washington State citizens voted out the state inheritance tax that almost none of them would ever have to pay, and the state lost big bucks it’s never been able to regain.

    When the lumber mill industry tanked because mill owners were sending raw lumber to Asia for finishing and then bringing it back to sell to us, and logging went belly-up in many communities because of generations of over-logging, poor environmental practices, and cheap lumber imported from places like other nations’ rainforests, liberals and the spotted owl were blamed, and voters in those counties voted out the longtime Democratic Senator that had been getting programs passed to help them survive and transition. They replaced her with a Republican who did not do squat for them.

    Voters in this country, especially those who were children children in 1980 and born since then, have grown up with a propaganda drumbeat that continually convinces them to vote against their own interests and then blame the wrong parties when things are bad. it is a class struggle as old as time almost, one we were lifting ourselves out of despite opposition, but the opposition never gave up and has been winning for 30 years. Lifting ourselves out of this class struggle, thus far, has proved to be the aberration.

    • I don’t believe in the “inheritance tax.” The way I see it, if taxes were already paid on the money when it was earned, it should not be taxed again when it changes hands. That’s double taxation.

      I do, however, believe that we should close up the tax loopholes to level the playing field. Why should Warren Buffett and other people who earn their incomes through investing pay so much less (percentage-wise) than those of us who work for a living? It makes no sense. In fact, I think you could argue that they should pay a higher rate on that “unearned” income. But no, I won’t go there — I earn some of that income, too.

      The problem in this country is apathy. If it doesn’t have a catchy slogan or involve a social gathering of people with the same ideas, they’re not interested. It’s easy to say “raise taxes on the wealthy,” but no one really knows what the situation is. That’s why I found Mr. Buffett’s article so enlightening. He’s explaining what’s going on in simple terms. And he’s saying that removing the tax loopholes is okay with him.

  2. And now, socialist democratic countries in Europe are under attack from the same forces. They aren’t going down as easily without a fight because their cultural backgrounds are entrenched in socialist democratic values while ours have existed only a comparatively short time, but their politicians are being bought too, Murdoch has been destructive there for decades now, and so they are being chipped away at too, all for higher profits in fewer international pockets.

  3. Actually Maria, you and Warren have it all wrong on taxes. I am thinking of a four letter word which begins with “f.” No, not that one. The word I have in mind is “fair.” Per centages are NOT what is important. What is important is what share of tax revenues are being paid by what portion of the population. The numbers are stunning! The top 1 % of income earners pays about 38% of all federal income taxes. The top 10% pay about 68% and the bottom 50% pay just 3% with most in this group payng zero or actually receiving payments form the government. Looking at these numbers, how anyone can logically conclude that those who are already subsidizing the lifestyle of hundreds of million of Americans should pay even more is beyond understanding. The arguments that “they have the money” and “they can afford it” have nothing to do with “fair.” Most folks in these higher income brackets didnt inherit their money or take if from others, they earned it the old fashined way, often by starting and building successful businesses. Nothing fair about redistributing the wealth that they created to others at the other end of the scale. I am all for a basic safety net for those unable to help themselves, but we have gone way beyond this in the U.S. and have actually created powerful disincentives for folks to make their own way in the world (and get their hand out of the pockets of those who have made the effort necessary to do well).

    • That math doesn’t fool me, Rick. You say the rich pay the most taxes, but you neglect to mention that they also earn the most money.

      A flat tax is the way to go. Add up all the income, apply a fixed percentage, and pay the tax. That’s FAIR.

    • I certainly agree that a flat tax is more towards fair than the current system, especially if every dollar of income is taxed (no deductions, period). Every person living on U.S. soil should have some skin in the game, even if it is a token amount. However, this is not going to happen because politicians understand that this will shift more of the tax burdern to those who are not the “millionaires, billionaires, and private jet owners” that Obama keeps railing about to buy votes.

What do you think?