Warren Buffett wrote an op-ed piece in The New York Times and I would suggest that it?s a must-read. It was titled, ?Stop Coddling the Super-Rich.?? Here are his key points:
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1. The poor and middle class are fighting (for us) in Afghanistan and most Americans are struggling financially right now. Shared sacrifice means that the wealthy need to pay more in taxes.
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2. It doesn?t make sense that money managers have their income classified as ?carried interest? and pay taxes at capital gains rates.
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3. Buffett?s tax bill was 17.4% of taxable income. The rate is lower than the other 20 people in his office. Salaries are taxed more heavily than investment earnings.
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4. Last year, approximately 80% of tax revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15% on most of their earnings, but pay practically nothing in payroll taxes.
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5. Tax rates for the rich were far higher in the 1980s and 1990s. People don?t refuse to invest because of higher rates. Buffett said, ?I have worked with investors for 60 years and I have yet to see anyone ? not even when capital gains rates were 39.9% 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.?
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6. Nearly 40 million jobs were created between 1980 and 2000 (when we had higher rates). We?ve had lower rates and lower job creation since 2000.
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7. In 1992, the top 400 Americans had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2% on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion ? a staggering $227.4 million on average ? but the rate paid had fallen to 21.5 percent.
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8. Payroll taxes for those 400 were inconsequential. In fact, 88 of the 400 in 2008 reported no wages at all. Every one of them reported capital gains.
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9. The new 12-member deficit panel is charged with putting together a plan that reduces the deficit by at least $1.5 trillion over ten year. But, it?s vital that they do much more than that.
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10. The first job for the twelve is to pare down some promises that even a rich America can?t fulfill.
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11. Buffett would leave rates for 99.7 percent of taxpayers unchanged. He would also continue the current 2% reduction in the employee contribution to the payroll tax.
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12. There were 263,883 households making more than $1 million in 2009. Buffett would immediately raise their rates (including their rates on dividends and capital gains). There were 8,274 who made more than $10 million in 2009 and they should pay an even higher rate.
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13. Government needs to get serious about shared sacrifice.
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My Thoughts:
Amen brother. We need more wealthy citizens to stand up with Buffett. He?s not simply saying higher taxes (so spare me the hate emails) ? he also says that we need to make significant cuts.
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I agree with Buffett that most of us tend to completely discount what others do and maximize our own importance. The idea of military service (regardless of whether you agree or disagree with our wars) is one of the best examples.
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With all that said, even if we taxed the $90 billion at an extra 10%, we would simply bring in another $9 billion. While that?s just the top 400 earners, the point is that we?re not going to just be able to tax the rich and solve our problems. Much of Buffett?s point (in my opinion) goes to the idea that we can?t just impose changes on the middle class and lower class. It?s bad for society. Everyone has to feel some of the pain.
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My one major disagreement with Mr. Buffett is that I completely disagree with the 2% reduction in payroll taxes. I could be swayed to go along with it if we cut what we were going to pay in benefits (prior to agreeing to lower taxes). But, to cut the amount going into Social Security while maintaining our promised benefits is a pretty powerful kick of the can down the road.
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Source: http://leedsonfinance.com/2011/08/15/buffett-and-the-super-rich/
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