In an Op-Ed piece published Sunday in the New York Times, Warren Buffett asked the government to raise his taxes. “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet,” he writes, “we mega-rich continue to get our extraordinary tax breaks.”
Buffett cites his federal tax bill from last year, which was $6,938,744 but only 17.4% of his taxable income. “That’s actually a lower percentage than was paid by any of the other 20 people in our office,” says Buffett, who is the chairman and chief executive of Berkshire Hathaway (NYSE:BRK.A). “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,” writes Buffett, who pins payroll taxes as the culprit. “The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes.” Meanwhile, the middle class usually spend between 15 percent to 25 percent on their income as well, plus “heavy payroll taxes to boot.”
Buffett notes a gaping flaw in the argument that higher tax rates for the wealthy would hurt job creation: “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.” In 1992, the 400 Americans reporting the largest income had an aggregate taxable income of $16.9 billion and paid 29.2% of that in federal taxes. In 2008, the richest 400 Americans’ fortunes climbed to $90.9 billion but they paid a rate of 21.5% in federal taxes. And most of that tax money was in federal income tax, with 88 of the 400 in 2008 reporting no wages at all, and paying no payroll taxes, despite reporting capital gains.
Buffett doesn’t think that the “mega-rich” would mind contributing more, with many having already pledged most of their wealth to philanthropy. So as twelve members of Congress take on the job of rearranging the country’s finances, Buffett hopes the debt super committee, after cutting spending that not even the rich can afford, will look at increasing tax revenue. “I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.”
At the same time, Buffett says households making more than $1 million a year should have their rates raised on taxable income in excess of $1 million, which would include dividends and capital gains, while those making $10 million or more should have an additional rate increase. “It’s time for our government to get serious about shared sacrifice,” concludes Buffett.