Monday, August 15, 2011

The mega-rich vs tax breaks

Update (6:20 p.m.) below.

Warren Buffett lends the Democrats a hand: "Stop Coddling the Super-Rich."
Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But 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.

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.
Serious talk about tax increases, it's almost a shock these days. And Buffett's cleverly doing so by talking about shared sacrifice, he's making an equality argument.

Nice to see a respected business leader who may bring many others along stepping up at a key moment to counter the pervasive conservative tax narrative.

Wonder if Mr. Flaherty and his world finance pals agree with Mr. Buffett? They've penned an op-ed that's in the Globe today and contains this line: "Difficult decisions on spending, entitlements and taxes in countries with large budget deficits are unavoidable." A piece worth reading, a narrative is being shaped for here too.

Update (6:20 p.m.): Obama ran with it today:
Basically what we need to do is we need to cut about $4 trillion over the next 10 years. Now, that sounds like a big number -- it is a big number. But if we were able to, as I proposed, cut about $2 trillion in spending, if folks who could best afford it -- millionaires and billionaires -- were willing to eliminate some of the loopholes that they take advantage of in the tax code and do a little bit more, and if we were willing to take on some of the long-term costs that we have on health care -- if we do those things, we could solve this problem tomorrow. I put a deal before the Speaker of the House, John Boehner, that would have solved this problem. And he walked away because his belief was we can't ask anything of millionaires and billionaires and big corporations in order to close our deficit.

Now, Warren Buffett had an op-ed that he wrote today, where he said, "We've got to stop coddling billionaires like me." (Applause.) That's what Warren Buffett said. He pointed out that he pays a lower tax rate than anybody in his office, including the secretary. He figured out that his tax bill, he paid about 17 percent. And the reason is because most of his wealth comes from capital gains. You don't get those tax breaks. You're paying more than that. And -- now, I may be wrong, but I think you're a little less wealthy than Warren Buffett. That's just a guess. (Laughter.)

The point is, is that if we're willing to do something in a balanced way -- making some tough choices in terms of spending cuts, but also raising some revenue from folks who've done very well, even in a tough economy -- then we can get control of our debt and deficit and we can start still investing in things like education and basic research and infrastructure that are going to make sure that our future is bright. (Applause.) It's not that complicated, but it does require everybody being willing to make some compromises.