Showing posts with label Warren Buffett. Show all posts
Showing posts with label Warren Buffett. Show all posts

Thursday, November 29, 2012

Let Warren Unburden Them

Warren Buffett's recent opinion piece seen in many papers and online over the last few days is a fine example of how completely ridiculous the Right is in regards to federal government tax policy. He begins with an anecdote.

Suppose that an investor you admire and trust comes to you with an investment idea. "This is a good one," he says enthusiastically. "I'm in it, and I think you should be, too." Would your reply possibly be this? "Well, it all depends on what my tax rate will be on the gain you're saying we're going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent." Only in Grover Norquist's imagination does such a response exist. 

Only in all their imaginations does such a response exist. I can say with near certainty that anyone on the Right that says they do this or has known people to act in this fashion is lying. As Mr. Buffett has said many times previously, people invest to make money. Government tax policy doesn't enter into it.

And facts are facts...

Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent -- and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. 

Never did anyone mention taxes as a reason to forgo an investment opportunity I offered. Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation's economic output) increased at a rapid clip. The middle class and the rich alike gained ground. 

They both gained ground because there was less inequality. The money that was used from the higher tax revenues paid for investments in infrastructure and education (the GI Bill, for example). This, in turn, led to a higher skilled labor force and an economy that was robust and innovative. This is not the case today.

The group's average income in 2009 was $202 million -- which works out to a "wage" of $97,000 per hour, based on a 40-hour workweek. (I'm assuming they're paid during lunch hours.) Yet more than a quarter of these ultrawealthy paid less than 15 percent of their take in combined federal income and payroll taxes. Half of this crew paid less than 20 percent. And -- brace yourself -- a few actually paid nothing. 

This is how money has been transferred upwards as Stiglitz mentions in "The Price of Inequality."

So what does Warren think should be done about this?

We need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy. 

And what will the result be?

Our government's goal should be to bring in revenues of 18.5 percent of GDP and spend about 21 percent of GDP -- levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won't stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America's debt stable in relation to the country's economic output. 

I agree and, as Warren notes, this will involve major concessions by the Right and the Left. All sides in this debate have signaled a willingness to bend so I do have some hope.

And what about that figment of the Right's imagination who is overly obsessed with "uncertainty?"

In the meantime, maybe you'll run into someone with a terrific investment idea, who won't go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him. 

 Maybe I should send ol' DJ from TSM to Mr. Buffett...hee hee...:)

Thursday, August 18, 2011

Fact Checking Warren

Here is Politifact's piece on Warren Buffett's column from this week. Plenty of data and facts to examine...if you are willing, of course.

People Invest To Make Money

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 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.

We hear a lot of garbage from the right about how higher taxes will lead to lack of investment and job losses. These same people lapse into their ridiculous hubris and assume that anyone left of center doesn't know anything about how business works. They do, of course, despite all evidence to the contrary. The above quote is from someone who knows business a great deal more than most and has the wealth to prove it. Before I get to who it is, let's take a look at some more facts from his recent piece.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent 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.

So, their taxes have gone down and their wealth has gone up.Why they are bitching is a complete mystery. Why people who make 40K a year are proxy bitching for them is borderline insanity.

Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains.

Hmm...Nikto and I have been saying the same thing.

So who is the author who has clearly and factually related this information? It's Warren Buffett, one of the three richest men in the world.  Now, given that he is a shining example of success in the world of investments and business as well as knowing a thing or two about jobs, it follows logically that we should heed his advice: let's stop coddling the super in right fucking now.

If we are going to make spending cuts, we have to follow with an overhaul of how we collect revenue. That means no more subsidies, tax shelters for the wealthy, and the end of the Bush tax cuts for the wealthy. In short, a complete overhaul of the tax system. This is what has to be done to seriously address the issue of our debt and prop up the overall health of our economy.

The time for make believe and managing fantasies is over. We need to destroy the bizarre myths that the right have created regarding taxes. They must be exposed as the catechisms of true believers that they are and have no place in reality. They are holding us back from fixing our country and propelling us in a positive direction towards the future.