- Apr 12, 2008
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August 19, 2011
Warren Buffett’s Proposed Tax Hikes Would Provide Insignificant Revenue
by David S. Logan
Warren Buffett's recent call to increase taxes on the super- and mega-rich has garnered much media attention. But how much money could such increases actually raise? What effect could they have on reducing the nation's deficit or debt? As it turns out, not much. Below is a quick look at the latest IRS data on earners making more than $100,000:
Mr. Buffett specifically called to raise tax rates on Americans making more than $1 million and proposed an additional increase on taxpayers whose income exceeds $10 million. Suppose Mr. Buffett got his wish and loopholes and deductions were eliminated, making it possible to tax the "super-rich" (those earning $1M - $10M per year) at an effective rate of 50%. The following table shows the effect that such a historic hike on effective rates would have on the deficit and debt:
In addition, Mr. Buffett wanted those making more than $10 million per year to pay even more. The table below exhibits the effect of imposing a 100% effective rate on these individuals:
So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation's debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation's deficit by 12 percent and the debt by 2 percent. There's simply not enough wealth in the community of the rich to erase this country's problems by waving some magic tax wand.
Finally, to put everything in perspective, think about what would need to be done to erase the federal deficit this year: After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.