WARREN BUFFETT SOUNDING LIKE TEDDY ROOSEVELT

In Op Ed published in the New York Times billionaire, chairman and CEO of Berkshire Hathaway, Warren Buffett has thrown some coal on the fire of the debate regarding tax reform.  To the likely chagrin of Tea Party adherents, he urged the government to raise his taxes and do the same for the rest of the wealthiest Americans, saying: “It’s time for government to get serious about shared sacrifice.”  President Obama will find some welcome support in Mr. Buffett’s remarks.

Buffett revealed that his tax bill for 2010, including income and payroll taxes he paid plus payroll taxes paid by his employer on his compensation, was $6,938,744.  He feels that is a large sum in absolute terms but not relative to the percentage of taxable income paid by him compared to others less fortunate.  His tax burden he said was 17.4% of taxable income while the other 20 people in his office paid from 33% to 41% of taxable income.  Buffett did not reveal the percentage of tax to gross income but with the tax write-offs available to wealthy taxpayers, one can speculate that the percentage difference might be yet wider.

Buffett believes that those earning over $1 million (236,883 individuals in 2009) taxes should be raised immediately on all income over $1 million.  The super-rich earning over $10 million, he believes should be subjected to an even higher rate.

He believes equity in the tax system has decreased since 1992 when American’s among the top 400 earners, reported taxable income of $16.9 billion and their federal taxes on that amount came to 29.2%.  By 2008, taxable income of the top 400 rose to $90.9 billion but the rate of tax paid on taxable income dropped to 21.5%. 

Buffett disagreed with the oft claimed notion that higher tax rates are a disincentive for investment claiming that “people invest to make money, and potential taxes have never scared them off.” Moreover, he said, “40 million jobs were added between 1980 and 2000, “(when tax rates were higher). “You know what’s happened since… (i.e., since the Bush tax rates became effective)… far lower job creation.”

In a speech delivered on August 31, 1910 Theodore Roosevelt said:

In every wise struggle for human betterment one of the main objects, and often the only object, has been to achieve in large measure equality of opportunity. In the struggle for this great end, nations rise from barbarism to civilization, and through it people press forward from one stage of enlightenment to the next. One of the chief factors in progress is the destruction of special privilege. The essence of any struggle for healthy liberty has always been, and must always be, to take from some one man or class of men the right to enjoy power, or wealth, or position, or immunity, which has not been earned by service to his or their fellows. That is what you fought for in the Civil War, and that is what we strive for now.

… [T]his conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of free men to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will.

In our service based economy, much has changed from Mr. Roosevelt’s age.  Many deserve what they have earned, those who’ve created companies like Bill Gate’s Microsoft; and, others have earned more than they deserve, who risked nothing, who manipulated EPS to maximize incentive based compensation or gambled in hedge funds.  Moreover, even those at the very top of the earnings chain, who justly deserved what riches they have earned, are beneficiaries of our system as much as of their effort. 

Mr. Buffett appears to understand what Mr. Roosevelt was speaking about.  Clearly, a budget deficit is made up of spending and revenues, and is not achieved solely through spending.  Reducing the deficit will require dealing with both sides of the deficit coin.  At the same time we can make our tax system not only comprehensible, but equitable.  I applaud Mr. Buffett for his candor in stating that those who can afford should contribute proportionately more for the betterment of all.

Copyright 2011 by Robert S. Steinberg

All rights reserved

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