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Oldtimer said:We need a compromise plan to get us out of 50+ years of building debt- both major spending cuts and tax reform/additional income....
"My friends and I have been coddled long enough by a billionaire-friendly Congress," he wrote. "It's time for our government to get serious about shared sacrifice."
Buffett to Congress: Don't 'coddle' me
By Aaron Smith @CNNMoney August 15, 2011: 9:20 AM ET
NEW YORK (CNNMoney) -- Billionaire investor Warren Buffett, saying he doesn't want to be "coddled" by Congress, says that wealthier Americans should pay higher taxes, and that higher taxes do not dampen job growth.
Buffett, chief executive of Berkshire Hathaway (BRKA, Fortune 500), wrote in an op-ed piece published Monday in The New York Times that taxes should be raised on Americans who make at least $1 million per year.
"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," wrote Buffett, who has mentioned in past interviews that the rich should pay higher taxes.
The philanthropist said that his 2010 federal tax bill, including income and payroll taxes, was $6,938,744.
"That sounds like a lot of money," wrote the Omaha, Neb.-based billionaire. "But what I paid was only 17.4% of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office."
He added that some investment managers were taxed only 15% on billions of dollars in income. He compared that to the middle class, with its income tax bracket of up to 25%.
He said that 40 million jobs were created between 1980 and 2000, when the tax rate for the rich was higher than it is now. "You know what's happened since then: lower tax rates and far lower job creation," he wrote.
Buffett proposed that Congress impose a higher tax rate on millionaires, and an even higher tax rate on those making at least $10 million per year.
"My friends and I have been coddled long enough by a billionaire-friendly Congress," he wrote. "It's time for our government to get serious about shared sacrifice."
Buffett, a Wall Street guru who has made billions during his 60 years of investing, has pledged to donate 99% of his wealth to charity.
In a recent interview with Fortune, Buffett said he still believes the United States is an AAA-rated nation, despite the recent Standard & Poor's downgrade of the credit rating. He said he also continuing to buy stocks, because recent market volatility has created lots of deals.
Buffett is right: Raise taxes on the wealthy
By William G. Gale
August 15, 2011 7:17 p.m. EDT
(CNN) -- In Sunday's New York Times, Warren Buffett discusses the need to raise taxes on the wealthy. He's absolutely right. Tax increases, in general -- as well as tax increases on the wealthiest households, in particular -- need to be a part of the solution.
Past major budget agreements, such as the 1983 Social Security reforms and the 1990 and 1993 budget deals, ultimately included both revenue increases and spending cuts. It's not hard to see why: Cutting deficits from both sides of the budget provides a sense of fairness, shared sacrifice and political equilibrium.
Also, raising taxes to pay for current spending has proved more effective at restraining spending than allowing the government to finance its outlays with deficits. Every time we have tried to cut spending by restraining taxes, we have failed. In the 1980s under President Ronald Reagan and in the past decade under President George W. Bush, taxes fell, but spending rose. The only time in the past 30 years when spending fell was in the 1990s, under President Bill Clinton, when taxes were also raised.
Even the massive tax increases during and after World War II -- amounting to a permanent rise of 10% to 15% of gross domestic product -- and the much smaller tax increases in 1990 and 1993 did no discernible damage to U.S. economic growth.
If we are going to raise taxes as part of the fiscal solution, the tax burden on high-income, high-wealth households needs to rise. The recently enacted debt deal contains only spending cuts and has little or no impact on high-income households. Rather, it puts the entire burden of closing the fiscal gap on low- and middle-income households. High-income households should not be exempted from helping resolve the nation's fiscal problem.
Households in the top 1% of the distribution can afford to contribute. They have done enormously well during the past 30-plus years. In 1979, their income accounted for 10% of total income. According to the most recent data (from 2008), their share of total household income more than doubled to 21%. In contrast, real income for middle-class workers has remained roughly constant over the same time frame.
There are, of course, better and worse ways to raise taxes. A general goal would be to broaden the tax base -- reduce the use of specialized credits, deductions, loopholes and so on -- and minimize the extent to which tax rates need to rise.
One good place to start? High-income households: Limit the rate at which itemized deductions can occur to 28%. This would affect only households in the highest income ranges, it would not raise their official marginal tax rate, and it would raise $293 billion over the next decade, relative to how much money would be raised according to current law, according to the Congressional Budget Office. This would be a small move in the right direction.
Of course, sticking to current law revenues -- that is, either not extending the Bush tax cuts after their scheduled expiration date of 2012 or paying for any extension with a reduction in various tax expenditures -- is even more important. Extending the Bush tax cuts would reduce revenues by about $2.5 trillion over the next decade, relative to current law. Counting net interest savings, it would cost $3 trillion. Letting the cuts expire could actually help economic growth since the lower deficits would more than offset the effect of slightly lower marginal tax rates, and it would be progressive. That would be a big move in the right direction.
Eventually, the nation will need to deal with the ballooning costs of Medicare, Medicaid and Social Security for an aging population. Even if substantial cuts are made to these programs, the combination of a greatly expanded elderly population and higher federal net interest payments than in the past (because of the higher public debt/GDP ratio) will create a need for additional revenues. There are good options there as well, including a value-added tax -- the equivalent of a national consumption tax and a feature of the tax system of every industrialized country except the U.S. -- and higher energy taxes, to promote a cleaner environment as well as raise revenues.
None of this means that the U.S. needs to move to European taxation levels. But between the depleted tax revenues we raise now -- the lowest share of the economy in six decades -- and the high taxes experienced in European countries, there is plenty of room to raise revenues in an economically sound manner to support a reasonable level of government.
William G. Gale is the Arjay and Frances Miller Chair in Federal Economic Policy and the former vice president and director of the Economic Studies Program at the Brookings Institution. He conducts research on a variety of economic issues, focusing particularly on tax policy, fiscal policy, pensions and saving behavior. He is also co-director of the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. Gale attended Duke University and the London School of Economics and received his Ph.D. from Stanford University in 1987.
Prior to joining Brookings in 1992, he was an assistant professor in the Department of Economics at the University of California, Los Angeles, and a senior staff economist for the Council of Economic Advisers under President George H.W. Bush.
