Warren Buffet, whose annual income dwarfs yours, and who has wealth you can only dream of amassing, writes, in the New York Times:
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
. . .
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. 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.
So, why does our government – and specifically, why do members of the Democratic Party, who are supposed to be looking out for the working man – continue to reduce the amount that the incredibly rich pay in taxes, while settling the yoke of funding the government ever more firmly on the shoulders of the middle class? Why is that, Democrats? Why do you keep doing that, and so long as you do, why should anyone give any credence to your claims of caring about the Common Man?
Talk is cheap. Until politicians – and especially the Democrats – make real efforts to change the tax structure to shift some of its burden onto those who can manifestly afford to bear it, all their noise is bullshit. At the very least, defend Social Security and Medicare. Failure to do that is surrendering to the enemy in the ongoing class war.
Clinton had boatloads of rich friends and in general hung out with the well-heeled crowd.
Obama is no different, which is probably why he didn’t sunset the Bush tax cuts when he had the chance (and the rich types in Congress were on baord with this as well).
Tax rates are not what is actually paid. When the rates were much higher then there were more deductions/shelters. A lot of those disappeared in the 1986 tax reform.
So Buffet doesn’t pay much. I saw Ted Turner on TV and he said he didn’t pay anything- due to charitable deductions.
Note that I don’t think Gates pays that much either. His actual salary, bonus and stock grants was low at Microsoft and the only real income he has was from the sale of his stock in the company, which is a lower rate.
Oh and for all of you Bostonians- when Gillete was sold to Proctor and Gamble the deal was structured to minimize the taxes to major Gillete shareholder and board member Buffet. You didn’t see him pointing that out then.
He traded them for votes for the START treaty, to extend unemployment, and to end DADT. I think a payroll tax cut was also in the mix. You don’t have to like the deal or agree with the president’s priorities, but give him credit for being about something more than just pleasing wealthy donors.
The system is set up to support the wealthy. The idea of the ‘graduated income tax” was a come-on. There is always enough friendly regulation in the tax code to help the wealthy. It’s your hide that gets gotten.
The IRS is famous for their “quantity over quality” approach to taxes that audits the easier, smaller income returns to boast of how many audits they do. The wealthy’s tax returns are more complicated and their lawyers can tie up a audit for decades. And, of course, they have a direct line to the politicians.
Whenever the state’s politicians talk of getting a graduated income tax in Massachusetts, they’re talking about beating the average taxpayer down. We’d be fools to go for it.
This land may be made for you and me, but the government belongs to the rich.
Now, with his Jan. 28 backing of Procter & Gamble Co’s (PG ) novel two-step, tax-free deal for Gillette Co. (G ), Buffett is again seizing an opportunity to exit a position without triggering a giant tax bill. Berkshire’s gain on the 96 million Gillette shares it has held since 1989: $4.3 billion. Yet because it is plowing all of that gain into shares of the new company, Uncle Sam will have to wait for his piece of the profits.
Exactly who suggested the deal structure is not clear. Neither Buffett, Gillette’s largest shareholder, nor the investment bankers involved would comment. Given Buffett’s well-known aversion to taxes, though, bankers most likely devised the structure to satisfy him while also preventing an all-stock deal from drastically watering down P&G’s earnings. Just as important, the ingenious structure could become a Wall Street model for future mergers and acquisitions. At the same time it comes with a lesson about what investors can and can’t learn from watching Buffett.
Think of the deal as a two-step jig: The first movement makes Buffett happy, while the unusual second step pleases P&G. First, P&G will pay for Gillette with nothing but stock, issuing 0.975 shares of its common stock for each Gillette share. Gillette investors will owe no tax since they’re exchanging one stock for another. If, instead, P&G had paid for Gillette with cash, Berkshire alone would have faced a whopping $1.5 billion tax bill thanks to the 35% corporate rate it pays.
Problem is, all that new stock will dilute the value of the shares P&G’s current investors hold and slash its earnings per share. So as part of the deal P&G announced that it will spend $18 billion to $22 billion over the next 12 to 18 months buying back some of the stock it just issued for Gillette. The result, says P&G, is the same as if it had paid for Gillette with a package of 60% stock and 40% cash.
Why not just structure a 60-40 deal in the first place? Because that could leave many Gillette shareholders with an unwanted tax bill, as happened to Buffett in 1996. Then, Capital Cities/ABC Inc., in which Buffett held a $2.2 billion unrealized profit, sold out to Walt Disney Co. (DIS ). Disney agreed to pay partially in stock, but when the Disney shares were divided among all Cap Cities shareholders who wanted them, Buffett ended up with half his money in cash — and a tax bill of some $400 million.
P&G’s two-step gets around that. Gillette shareholders can keep as much stock as they want, controlling when their taxes come due. Tax-exempt pension funds or others who want to cash out can sell in the open market whenever they choose. And because P&G will be spending billions on the buyback, there’s less risk that a wave of investors selling out will send the shares tumbling. “It is very democratic,” says Lawrence A. Cunningham, professor of law and business at Boston College and the editor of a book of Buffett’s essays.
Eliminating the Bush Tax Cuts would not go after the “Super Rich”, it would go after the middle class.
Is that why you didn’t read it?
Or maybe an annual income greater than $1 million is still middle class in your definition.
It seemed like that paragraph you quoted was Buffet’s idea of what should happen now…It doesn’t say eliminating the Bush Tax Cuts would be akin what he suggested.
Nobody mentioned the Bush tax cuts until seascraper did, and the subject is Buffett’s column, which likewise did not specifically mention those tax cuts. He talks about a continuing, decades-long decline in the tax rates for extremely wealthy people, and the paragraph I quoted is indeed his idea of where to start.
I know, I was just trying to cut seascraper some slack. My bad. I understood the article, I understood the paragraph quoted was Buffet’s proposal/idea.
But, you knew that.
These folks are not going to go after their “bundlers” and the people that make most of the political contributions.
Obama could have done something (and something he said he was going to do in 2008) and did not.
The whole question about hurting those in the middle is just a now or later question. There are not enough people on the top- they have to come calling to those in the middle for funds.
Frankly, I don’t see much difference in making $250k a year and making $1M a year, with respect to income tax. If you’re bringing in a quarter mil in income pre tax, you’re not middle class. You’re rich. Congrats!
In addition to higher rates though, we need to start whittling back some deductions tailor made for the rich. How on Earth did Congress decide that mortgage interest deduction on a second home is appropriate? That’s just plain nuts. Want a vacation home? Sure. Don’t ask me to help pay for it. I’m sure there are others too — deductions for which the vast majority of the takings are done by those with high incomes. They don’t need the extra deduction. It’s a way to raise revenues in a progressive manner without increasing the actual tax rate.
and that’s how business is done.
Here’s what I truly do not understand.
I would LOVE to be in a position to pay increased tax rates on an income of $250 K, $1 M, or $10 M per year. I would LOVE to have that kind of income. I would not begrudge the higher tax rate. I would welcome the opportunity to give back to an economy that has been so generous to me.
The raw, venal selfishness of the anti-tax crowd nauseates me.
What adjectives, other than “raw, venal selfishness” is appropriate for someone in these income categories who opposes a higher tax rate?
What else is there to disagree with in my post?
For someone who earns in excess of $10 M per year, “can’t afford” really means “doesn’t want” an increased tax rate. And that shift from ability to desire is, in my view, what makes such resistance selfish. These taxpayers HAVE the resources. A great many of our taxpayers DO NOT have the resources.
It is time for those who can to lift some of the burden from those who cannot.