On August 15, Warren Buffet wrote a stunning Op-Ed piece in the New York Times. The piece was titled “Stop Coddling The Super-Rich”, and has caused a firestorm of backlash from the super-rich and their supporters. Those who agree with Buffet are ecstatic.
Buffet begins by bringing up the call by America’s so-called leadership for Americans to engage in “shared sacrifice”. Then he announces that he and his fellow super-rich citizens have been exempted from the call to sacrifice. He claims to have talked to his “mega rich” friends and that none of them are feeling the pain that the rest of us are being asked to feel.
Buffet described three ploys used by the super rich in their investment and tax avoidance strategies:
First, if the super rich individual works as an “investment manager”, their income is classified as “carried interest”, which is taxed at a rock bottom 15%.
Next, they can own stock index futures for an extremely brief time, measured in minutes, but get the same 15% tax rate that long term investors get.
Buffet describes his own tax bill. He paid $6,938,744 in income and payroll taxes, which sounds like an enormous sum. That that payment only represented 17.4% of his taxable income. Compare this to the range of tax rates for other people in his office: the range was from 33 to 41 percent, with an average of 36 percent!
The person who is in the 15 to 25 percent bracket still has to pay additional personal payroll taxes, while the super rich do not usually have to pay payroll taxes on their own behalf.
Buffet calls for the Congressional “Super Committee” to do two things. First is to cut down on the grandiose spending items that America cannot afford now or in the foreseeable future.
The second recommendation is to raise the tax rate for those making over $1 million in income, and to include dividends and capital gains income.
The third recommendation is to raise the tax rate even more for those making $10 million or more.
But Buffet misses the point entirely by not advising that the super committee consider the other tax perks and federal revenue that go to the super rich.
First are the Federal subsidies for corporations that are making record profits.
Second are the tax loopholes that allow tax-free offshore income and a host of other tax dodges.
Third are the missing taxes on opportunistic gains that oil and gas corporations have made by running up prices through speculation and competitive bidding.
Fourth are the tax breaks for corporations that either hoard stimulus money, send jobs to other countries, or fail to use the money to actually stimulate the economy.
Fifth, the committee need to put the will and needs of the people ahead of the will and needs of the corporations. The imbalance, undue influence, and more than hint of corruption is an international embarrassment that threatens the state of the nation.
Finally, much more needs to be done to rein in fraud, waste and abuse in Federal contracting that has gotten out of control after 30 years of a privatization spree that seems to have no end.