Obama and the Buffett Tax

In his speech to Congress earlier this month, President Obama jabbed at our tax code. "Right now, Warren Buffett pays a lower tax rate than his secretary -- an outrage he has asked us to fix," he said. "We need a tax code where everyone gets a fair shake and where everybody pays their fair share."

He's referring, of course, to Buffett's New York Times op-ed last month, when the Berkshire Hathaway (NYSE: BRK-B  ) billionaire pointed out that his tax rate was about half that of rank-and-file Berkshire employees. "My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice," Buffett wrote.

Tomorrow, Obama is expected to do just that, proposing what's being called the "Buffett Tax," effectively ensuring that those making more than $1 million a year have a tax rate at least equal to middle-income workers.

There are no details on how the plan might work -- and Obama isn't expected to outline specifics tomorrow. But here are three things to keep in mind.  

How much revenue would it raise?
Buffett has said in the past that a main reason for fixing the discrepancy between his tax rate and middle-income workers is simple fairness. But if we're talking about raising revenue to lower deficits, how much might such a plan bring in? Hard to say. In an interview with Charlie Rose, Buffett hinted that a similar plan could raise $550 billion over 10 years, but it's very difficult to project these things accurately, particularly when there are no specifics.  

Whom would it hit?
Our tax code is still largely progressive up until the very top:

Source: IRS, 2009. Top-400 data from 2007.

The vast majority of those making more than $1,000,000 probably wouldn't see much change from the Buffett Tax, because their tax rates are already above those of middle-income workers. It's not until you get to the extreme top, such as the top 400 filers, before average rates regress. In 2007, the top 400 tax filers had an average income of $344,000,000, taxed at an average rate of 16.62%. That was less than the average tax rate paid by a household making $100,000 a year.

Can it pass?
In this Congress, I don't think the plan stands a chance of passing. One side of the legislature has made it clear that no tax increases are politically feasible. The Buffett Tax is likely to go down as a symbolic gesture highlighting what many see as a flaw in our tax code, but it's unlikely to become law anytime soon.

What do you think about the idea? Sound off below.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Follow him on Twitter, where he goes by @TMFHousel. The Motley Fool owns, and Motley Fool newsletter services have recommended buying, shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 18, 2011, at 2:05 PM, slayrjj1 wrote:

    I don't feel our country's indebtedness should be held hostage by a bunch of politicians that are worried about "tax increases being politically feasible". It's time the wealthy pay an equal share of their tax burden. It's already been proven that by letting them pay less, does not mean they will reinvest it back into the economy and create more jobs. It's shown that they will continue to horde their money and figure out ways of keeping more of it. Thus the divide between the rich and the middle class will continue to widen at such drastic rates that middle class will eventually become extinct. Hail to the Fools that bridge that divide and grab their share of the riches.

  • Report this Comment On September 18, 2011, at 2:24 PM, Rachekc wrote:

    We are constantly lied to by the politicians. People believe that the wealthy aren't paying their "fair share". When in fact the wealthy already carry most of the tax burden. If politicians were really serious about paying down the debt they would lower the tax rate and require everyone to pay taxes, even the 47% that don't pay any taxes. In many states those 47% even file a tax return and get money back. All it is, is another redistribution of wealth. I honestly do not believe Obama is doing anything to help this country, he is only trying to advance his far left, socialist agenda.

  • Report this Comment On September 18, 2011, at 3:21 PM, zymok wrote:

    Sure, let's treat tax the very wealthy just like we do middle income Americans.

    According to the CBO, the middle quintile has an effective individual income tax rate of 3.8%, while the top quintile has an effective rate of 16.3% (as of 2001), including payroll taxes. As noted above, the top 400 earners have an effective rate of 16.6%. So lets cut those top rates down to about 4% or so, and make millionaires pay the same effective rate as middle America.

    (source for effective rates: http://www.cbo.gov/ftpdocs/53xx/doc5324/04-02-TaxRates.htm#t...

  • Report this Comment On September 18, 2011, at 3:43 PM, TMFHousel wrote:

    Why are you using 2001 tax data?

  • Report this Comment On September 18, 2011, at 3:48 PM, TMFHousel wrote:

    and why only look at income tax rather than total federal tax?

  • Report this Comment On September 18, 2011, at 4:36 PM, ETFsRule wrote:

    Obama has officially entered campaign mode... and Campaign Obama is a brilliant strategist - completely different from the president we've seen for the past 2 1/2 years.

    The GOP will certainly oppose this new tax, but it's going to cost them a lot of political capital (even moreso than their opposition to his jobs plan).

    This was a shrewd, calculated move - proposing a tax that would only affect millionaires. A brilliant political strategy.

  • Report this Comment On September 18, 2011, at 4:39 PM, zymok wrote:

    I used 2001 data because that's the latest that was contained in the CBO report, and I doubted the numbers changed all that much between then and now. I looked at income tax because that was the data provided for the top 400 earners. Just trying to compare apples to apples, nothing nefarious.

  • Report this Comment On September 18, 2011, at 4:45 PM, TMFHousel wrote:

    The numbers have changed considerably since 2001 due to tax cuts and a change in income composition ( far more income from dividends and cap gains among higher earners). the data for top 400 earners is total tax, not income only.

  • Report this Comment On September 18, 2011, at 6:12 PM, zymok wrote:

    Morgan,

    The source for the rate for the top 400 earners that I'm looking at is:

    http://www.irs.gov/pub/irs-soi/07intop400.pdf

    Since this data is taken from 1040 forms, it presumably includes capital gains, dividend, and other income tax. It does not (as nearly as I can tell) include any assessment of excise taxes. (It also does not include payroll taxes, but that's obviously not significant for these earners).

    The CBO report gives effective tax rates for all federal taxes (including excise taxes) and for income taxes. The latter appears to be all federal taxes except excise taxes, i.e. payroll, income, capital gains, and dividend taxes, and so is directly comparable to the effective rates for the top 400 earners.

    This is why I compared those numbers. Granted, the terminology is not necessarily clear, but I think these are comparable metrics.

    As for the effective tax rates changing since 2001, this source:

    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

    has data up to 2007. In that year, the effective individual income tax rate of the middle quintile was 3.3%, down slightly from 2001, while the rate for the top quintile was 14.4%, down about a point from the 2001 value. These are pretty minor changes for this comparison.

  • Report this Comment On September 18, 2011, at 6:25 PM, TMFHousel wrote:

    The chart above shows all federal taxes from all sources. Further, looking only at income tax rates for lower income workers is quite incomplete, as payroll taxes make up the majority of their tax burden.

    For the top 400, average dividend income increased from $5 million in 2001 to $24 million in 2007. Average interest income increased from $7 million to $27 million, and capital gains increased from $86 million to $228 million. Wages and salary, however, haven't changed much. Again, the overall composition has shifted. Factor in Bush tax cuts, and the comparisons are night and day. A lot has changed since 2001.

  • Report this Comment On September 18, 2011, at 7:18 PM, 40milesperhour wrote:

    Yes people below the poverty line 20% of Americans get some of there taxes paid back and still find it hard to put food o the table. The next 20% pay there fair share while the top 10% get tax breaks too only hoard there money and create zero jobs if people making over just 100,000 a year started spending more that alone would add a millol jobs. Don't. For one second suggest people that are out here suffering sould pay the same as someone with a vacation house.

  • Report this Comment On September 18, 2011, at 8:21 PM, whereaminow wrote:

    --------> What if there really was none of the wealth redistribution you cry about?

    There would be a whole lot more desperate people looking to bust your head for your money while your back's turned. <----------

    1. This quite the twisted view of humanity. The greatest killer, enslaver, and thief in world history is the state. Now, we can say with 100% absolute certainty that if the state does not get its loot, it will come to your door and crack your skull, shoot your dog, slap your wife and kids, and haul you off to a cage. That is observable in this world

    2. But let's give you the benefit of the doubt. The state is all loving and all knowing (kinda like God, and always broke, just like God), while the barbarian masses desperately quibble over every scarce resource, just one step away from wiping out all in a battle of all against all. (No fear mongering whatsoever in your comment, right?)

    Does that, in itself, justify using the state to coerce the rest of us to pony up, jjust so this nightmare that you keep having doesn't come true? Of course not. Violence is the last refuge of the incompetent. If we can see one thing for certain it is that the welfare/warfare state is built on violence. It's built by the minds of the incompetent.

    So why not use voluntary means to create the society you think is best? Advocate that we help each other out. Advance voluntary solutions. And you know what, maybe not every single 6,000,000,000 persons will go along with you. But you could just say, "we'll that's ok" because it's a mental sickness to think you can change the world all by yourself for the better by using violence. It's a megalomaniacal narcissism that drives the welfare/warfare state.

    David in Qatar

  • Report this Comment On September 18, 2011, at 8:26 PM, zymok wrote:

    Morgan,

    First, my numbers included payroll taxes. I was very clear about that.

    Second, the composition of income is irrelevant. The question here concerns the tax paid on such income. The source of the income does not affect the payer's effective tax rate.

  • Report this Comment On September 18, 2011, at 9:25 PM, zymok wrote:

    Clarification: I know different sources of income are subject to different tax rates. I mean that the effective tax rate simply depends on total income and total taxes paid.

  • Report this Comment On September 18, 2011, at 9:26 PM, wolfhounds wrote:

    Actually Morgan, the composition of income is highly relevant. The sole reason Mr. Buffet (according to his own statements) pays a 15% marginal tax rate is the tax code. Wages, interest income, net rental income, currently are taxed at progressive tax rates. Dividends and capital gains, until the end of 2012, are taxed at a maximum of 15%. Buffet chooses not to take salary, but rather generates income from the lowest taxed items.

    People in the multimillion taxable income bracket have always taken advantage of the code to lower taxes. If dividends and capital gains for these people are taxed at top marginal rates, they can either shift to tax exempt income or buy a general partner's stake in an MLP or similar entity.

    Those that think this is a smart campaign ploy to put Republicans on the spot may not work. They can counter that the the whole tax code is so broken that the only way to make it fair is restructure it. Of course, that isn't likely either. In the end, the only thing that matters is a plan that creates permanent job growth. Fiddling with the tax code over the last 40 years hasn't done that.

  • Report this Comment On September 18, 2011, at 9:36 PM, skypilot2005 wrote:

    “But if we're talking about raising revenue to lower deficits, how much might such a plan bring in?”

    Want to lower deficits? How about shelving Obama Care?

    Did Mr. Buffett having anything to say about that?

    Sky Pilot

  • Report this Comment On September 18, 2011, at 9:39 PM, TMFHousel wrote:

    <<Actually Morgan, the composition of income is highly relevant.>>

    This is exactly what my comments above state. I think your comment is directed at zymok.

  • Report this Comment On September 18, 2011, at 9:50 PM, TMFHousel wrote:

    <<First, my numbers included payroll taxes. I was very clear about that.>>

    Sorry if there was confusion, but your comment states: "According to the CBO, the middle quintile has an effective individual income tax rate of 3.8%, while the top quintile has an effective rate of 16.3%."

    That does not include payroll taxes. From your link, the relevant table is "total effective federal tax rate," not "effective individual income."

  • Report this Comment On September 18, 2011, at 10:30 PM, zymok wrote:

    Wolfhounds,

    See my clarification that immediately follows the post you are referring to.

    Morgan,

    The effective individual income tax rate includes payroll taxes. To quote the report:

    "Individual income taxes are distributed directly to households paying those taxes. Social insurance, or payroll, taxes are distributed to households paying those taxes directly or paying them indirectly through their employers."

    It's in a footnote to the tables.

  • Report this Comment On September 18, 2011, at 10:35 PM, zymok wrote:

    Morgan,

    As I look at the table again, I see you're right. The total rate is appropriate to use. So the very wealthy should only get a 1% reduction or so.

  • Report this Comment On September 18, 2011, at 10:37 PM, lsbunker wrote:

    It's sad to see comments in this forum boast the same petty, self-important tone that plagues Washington. You all should be ashamed! The Perrys and Kerrys and Gores of this world are damaging enough, but to have free-market thinking players wallow in such low-life political rhetoric is depressing!

  • Report this Comment On September 18, 2011, at 10:46 PM, wbyd777 wrote:

    I love when people say that dividends are "only taxed at 15%." Let's continue to casually ignore that the owners of that business (ie. the shareholders) have already paid corporate taxes on that money and the 15% delta is ADDITIONAL and DOUBLE TAXATION. But sure, let's ignore that and keep showing how "the rich" (I love generalities!) are avoiding taxes by simply referring to their personal income tax rates. We will just ignore that if most of your income comes from dividends that, between the business you own and your personal taxes, you are effectively paying taxes in excess of 40-50%........it makes for a much better article and political point and it is easy to confuse the masses about it.

    Yeah, and this comes from a guy who makes <$500 a year in dividends.....

    I actually do think that dividends should be taxes at a higher rate for individuals. I just think that corporations should not pay any taxes on money they provide as dividends.

    I know there are other ways that have been claimed that "the rich" (they DO sound like evil people, don't they?) use to reduce their taxes. I am not addressing those, because I do not fully understand them, but let's not bring up dividends any longer, unless you decide to include the taxes that owner has already paid as part of the business he owns.........but then I think you would find that that tax rate is likely more than anyone's fair share........

  • Report this Comment On September 18, 2011, at 11:00 PM, rando101 wrote:

    Why do we have to raise the tax rate of the Rich? why not lower the middle incomes tax rates to below 16.62%. Then everyone will be paying their fair share.

  • Report this Comment On September 18, 2011, at 11:03 PM, zymok wrote:

    Isbunker,

    If I have been petty and self-important in this discussion, then I apologize. It was certainly not my intent, nor do I interpret any of the comments here as such. Indeed, I hold Morgan Housel in the highest regard and have learned much from him. Had I not, I would simply have ignored his post.

  • Report this Comment On September 18, 2011, at 11:31 PM, richardrollo wrote:

    (Sigh), Same old same old (AMT.) This is all chump bait. The income tax when it was first devised was only supposed to apply to millionaires. But, there are never enough millionaires. Aleksandr Solzhenitsyn once pointed out that after Lenin had murdered the Tsar, the Tsarina, and their children, it became much easier for Lenin to murder the ordinary people of the USSR. And so the politicians in this country, finding that there were not enough millionares began taxing the ordinary people especially the small businessman. The only job Buffett and Obama care about is Obama's job. Warren? Are you listening? As a special favor to all of us, stick to investing and forget about politics. You are just making a buffoon of yourself.

  • Report this Comment On September 19, 2011, at 1:05 AM, mighty88 wrote:

    I believe you, the goverment have given a chance for the wealthy and their business by lowering

    and not raising their taxes but as I see it the

    more you give them this right the more they

    layoff workers and won't hire unemployed

    people.. So what is the reason for not

    taxing them at all. The common man have enrich this business and people in the past, and still

    won't help to lift this economy and unemploy

    masses, so be it, let them be tax.

  • Report this Comment On September 19, 2011, at 2:12 AM, LL1932 wrote:

    Any way you look at it, the tax code needs a major overhaul. It should be fair, balanced, devoid of loopholes, simple and easy to understand.

    If this were the case, people would more likely be happy to pay their taxes and enjoy the benefits America is capable of offering.

  • Report this Comment On September 19, 2011, at 4:57 AM, CaptainWidget wrote:

    A flat tax would fix this whole messy really quick...

  • Report this Comment On September 19, 2011, at 5:52 AM, sgt1917 wrote:

    True fairness doesn't mean increasing the taxes on the ultra-wealthy.

    True fairness would be that every working American with an income pays the exact same percentage of tax.

    Beyond that, taxes don't need to be increase. Government size and influence is far too large and needs to be reduced, which will result in lower taxes.

  • Report this Comment On September 19, 2011, at 5:57 AM, dbtheonly wrote:

    Capt.

    The "flat tax" concept has been discussed fully before, and has multiple major problems. The very short version:

    1. Does it apply to "earned income" or does it include dividends & capital gains?

    2. Does it apply to inheritances?

    3. Does it apply to business profits only or total income?

    4. A set percentage (whatever it is) disproportionately impacts those at the lowest end, given that there is some minimum needed to survive. i.e. taxing $1700 from someone making $10,000 will have a much greater impact than taxing $17,000 from someone making $100,000.

    5. For good or ill the current tax code has encouraged people to act in certain ways. There will be massive dislocations when mortgage interest, or education expenses are no longer deductible.

    The issue was fully debated back when the income tax was being established 100 years ago. No doubt "Dave" in Qatar will accuse me of being intellectually dishonest for not providing a citation; but I don't really view it as important. Go to the Congressional Record of the time if you choose.

  • Report this Comment On September 19, 2011, at 7:46 AM, devoish wrote:

    "A set percentage (whatever it is) disproportionately impacts those at the lowest end, given that there is some minimum needed to survive. i.e. taxing $1700 from someone making $10,000 will have a much greater impact than taxing $17,000 from someone making $100,000". - dbtheonly

    Unless that flat tax exceeds 60% or goes higher, and those tax dollars are used to provide services to all Americans poor and rich alike, such as water, roads, medicare, retirement. You know, the stuff we are working to get, but not getting paid enough to have.

    Best wishes,

    Steven

  • Report this Comment On September 19, 2011, at 8:35 AM, rando101 wrote:

    Government is good and Corporations are evil!

    its all about fairness. Its not fair unless the Government (IE Obama) is spending your money.

  • Report this Comment On September 19, 2011, at 9:20 AM, kirkydu wrote:

    President Obama is mostly right here.

    Since 1982 the increase in national wealth is roughly equal to the increase in national debt. About 5/6 of that increase in wealth has gone to the wealthiest 1% of the population.

    It is common sense that those who have benefited the most from our borrowing and consumption should pay for a good portion of the nation's debts.

    Before I get blasted by a tea partier, yes, we need to flatten spending too. Absolutely we do. That has to be part of the bargain. That is part of shared sacrifice.

    And preemptively for anybody who says raising some taxes will cost jobs, get real. If you truly believe that silly idea, explain why higher taxes worked under President's Clinton and Reagan. Also, explain why President Reagan saw the need to have cap gains rates equal to income tax rates.

    Either/or will not work. We must do both, flatten spending and tax the very wealthy at rates that the middle class already pay.

  • Report this Comment On September 19, 2011, at 9:54 AM, troym72 wrote:

    Its not billionaire individuals that Congress should be targetting. Its corporate USA that pays the least of its share of the tax burden. Just last month Rowen (RDC) reported quarterly income of just over 400 million dollars with an "effective tax rate" of 4% after deductions and subsidies from the government. GE corporation profits millions per quarter and pays a 0% tax rate. This is just two examples of legal tax evasion provided to corporation by congress that is rampant in the United States. We could cut 100 billion from the deficit if we just asked "large" corporations to actually pay their supposed 35% tax rate. We are a country run by bureaucrats and corporations. We are not free. We are slaves of the pigs in Washington who finance their campaigns with bribes from their corporations and the ultra rich.

  • Report this Comment On September 19, 2011, at 10:34 AM, wintermaxim wrote:

    Ummm... (mostly @Rachekc):

    What' wrong with the wealthy carrying most of the tax burden AND paying at correct % rate for their income tax bracket?

    I'm sure everyone would LIKE a tax loophole that's tailored to their situation.

    But how is allowing those who can pay to have these written into law to do so a good thing?

    The same argument applies to corporations.

    It's not that they're breaking the law by paying 0 tax.

    It’s that they paid to pervert the law in their favor.

    It’s equally valid to change the same law right back (provided congress isn’t too busy counting campaign contribution money).

    Removing the monkey wrench from machinery that existed for decades without it is not socialism.

    Helping the needy is a core virtue of humanity, expressed in every religion.

    If you are reading this board, this is not a tax on you, your children or your grandchildren.

    Please don’t let well-funded campaigns tell you otherwise.

  • Report this Comment On September 19, 2011, at 10:50 AM, dbtheonly wrote:

    Devoish, Steve,

    You're absolutely right. Americans receive numewrous benefits from the Government. I'll toss in "socialist" (free) fire & police protection.

    My point was mere that there is a minimal amount one needs to survive "comfortably" in the US. I don't know where that line is but it's out there somewhere. A "flat tax" will, of necessity, kick some people from above that line to below it. Okay says Steve Forbes, we'll start the tax at $25,000 so no one gets kicked below the $20,000 minimum expense level. Well then, is it fair to tax a DINK family making $25,000 the same as the sole bread-winner for a family of 4? Tax deductions based on number of children? Okay but that's what we call personal exemptions. What about an additional deduction for being over 65 or blind? (& why are the deaf left out here?) It's already in the tax code.

    Which goes to explain why they decided against a flat tax back in 1913.

  • Report this Comment On September 19, 2011, at 10:55 AM, mdk0611 wrote:

    1. The AMT was established in 1969 to theoretically "get" the 150 (roughly) millionaires who paid no income tax. Where did that end up? Ironically, the super rich are rarely impacted by the AMT. It's the upper middle class in high tax blue states that are most likely to get whacked. So now we are getting AMT2.

    2. What does Warren Buffett have to do with the 35% tax rate? Most of his income is 15% qualified dividends and capital gains.

    3. Changing the rules with respect to charitable contributions is essentially robbing Peter to pay Paul. All studies show the result is a reduction in total giving. Guess who will be expected to make up the shortfall? Except that there will be a "bureacracy tax" assessed as all those program revenues make their way through government. This is as much about government control as it is about taxation.

    4. Why is Bowles-Simpson still being ignored?

  • Report this Comment On September 19, 2011, at 11:05 AM, wrxman wrote:

    Here is the deal. If you cut entitlements which on the surface seems relatively harmless, but then you have an increased poverty level, leading to more burden on our schools, hospitals, and civic associations. A problem that will continue to get worse. Less education means less hope, more crime, coming to a suburb near you as menial jobs trickle out of the inner cities. Only the rich can afford to live in the best areas in urban centers across the country. "Reaganomics" had it's place, but that theory is no longer viable in a global economy. If we all want to be relevant as a country, it's time the richest people chip in and help bail out our failed system of capitalism. Don't get me wrong, I am all for capitalism, but with checks and balances. Our healthcare system is failing us, and social security is in need of repair.

    The deficit we have incurred made these people very rich at the expense of the taxpayer. They need to pay up, and now is the time. I am willing to bet the richest CEO's have all benefited from the very pro-deregulated banking system, tax loopholes in farming, oil production, and defense spending contracts. Pay up people, patriotism isn't just for the poor that have no alternative only to join the service and fight an illegal war in Iraq, that helped put many CEO's in Washington and Texas on the Forbes 500 list. The Carlyle Group should pay off the whole deficit, their agenda has helped bring us to this point. Then when we start heading back to a more balanced economy, job creation, increased GDP production, taxes will ease gradually to increase spending, by companies on R&D, in areas like a green agenda, we can't follow China, we must lead China in that area. Come On Let's Get It Done!

  • Report this Comment On September 19, 2011, at 11:22 AM, mdk0611 wrote:

    Holy overstatement, Batman!! wrxman says the deficit made "these" people very rich at the expense of the taxpayer? I have news for you, those people pay a majority of the taxes. And the small business owners who spent decades building a successful business would either snicker or become outraged at your allegation that their success was a result of a "fixed" system.

    And don't be fooled, they are the true targets when it coimes to revenue. The "Buffett Tax" will barely dent the deficit, as there just aren't enough of them for it to be material.

  • Report this Comment On September 19, 2011, at 11:34 AM, wrxman wrote:

    They're the "true targets" for sure, because these "oober" rich companies have many loopholes that the rest of us don't have. Government subsidies start at the top and then trickle down. I think if the oil companies paid the taxes they should without all the tax breaks, that would be a start.

  • Report this Comment On September 19, 2011, at 12:27 PM, loat98 wrote:

    @ mdk0611

    Agree with your 4 points. The first 3 relate to the need for a comprehensive tax reform. The beginning of the tax reform is addressed by #4 - the Bowles-Simpson proposals. The real question - Why does the administration and congress refuse to address Bowles-Simpson?? It may not have all the answers but IMO it is a better start than anything than the administration or congress has proposed to date.

  • Report this Comment On September 19, 2011, at 12:50 PM, wolfman225 wrote:

    This whole circus has much less to do with taxing the rich so they pay their "fair share". Multiple studies have shown that there are simply not enough "rich" to provide the revenue claimed (how else does ending tax breaks for "millionaires and billionaires" end up applying to those making more than $200K?). Instead, it's all about political power, wealth, and influence. With an unhealthy dose of pandering to mans' most base instincts thrown in for good measure.

    It's all in who gets to decide what behavior/which businesses & industries should/should not be rewarded with tax breaks and "refundable credits" that apply even in the absence of any tax owed. As long as people accept the notion that the financial and personal behavior of the general population can/should/needs to be influenced via the tax code we will never be free of the political machinations that forever keep the process of taxation the tangled web it is.

  • Report this Comment On September 19, 2011, at 1:04 PM, tttucker wrote:

    It's amazing to me the amount of idiocy that abounds on this topic. Taxes are set up to fund operations, not get even. Why is it that revenue is always talked about with the approach that it must be raised? People, government spends what it takes in and then some. If you think raising taxes will help reduce debt, you do not pay attention to how our government operates. We have a spending problem. "Raising" revenues will only compound the problem. And the politicians think statically, not dynamically. They look at X and Y. If you craft a tax policy to punish the achievers and producers of this country, you risk a chance that revenues will actually go down. But to make a simple point, if you are screaming "Fair Share" and think of the wealthy as evil, go do your homework and find out what quintiles of our people pay what percentages of the total revenues collected. Shame on Warren Buffett. We need more money in the private sector, not in the hands of our politicians.

  • Report this Comment On September 19, 2011, at 1:35 PM, wolfman225 wrote:

    ^ +1rec to tttucker.

  • Report this Comment On September 19, 2011, at 2:26 PM, tttucker wrote:

    If it is all about fairness, let's lower the tax rates so that secretaries pay the same amount as their employers, regardless if it is income or capital gains taxes. Then, whatever deficit we have from expenditures to revenues, it will be the government's responsibility to find the spending cuts. They can create a super blue ribbon committee to find the cuts. Then everyone would be on the same level.

  • Report this Comment On September 19, 2011, at 2:30 PM, aggie9711 wrote:

    I think I need to stop reading Morgan's comment-bait...

    Anyways..

    I listened to Geithner today in the press conference. They still have no plan, just a vague principle of "fairness" or "justice" or whatever that Congress should follow to make sure the "fortunate" people "pay their fair share" (50% of income tax revenues is not fair enough?). This is simply a ploy to allow them to blame the other side when they inevitably don't pass his "plan". The only way to get parity in effective rates on all income is to ratchet up the cap gains and dividends taxes, which ends up giving you the opposite result (higher rate = less revenue).

    http://www.investors.com/NewsAndAnalysis/Article.aspx?id=584...

    Quoting:

    "In 1977, when the capital gains tax was 39.9%, realized gains amounted to less than 1.57% of GDP. From 1987 to 1996, when the capital gains tax was 28%, realized gains rose to 2.3% of GDP. Since 28% of 2.3 is larger than 39.9% of 1.57, the lower tax rate clearly raised more tax revenue.

    From 2004 to 2007, when the capital gains tax was 15%, realized gains amounted to 5.2% of GDP. Since 15% of 5.2 is larger than 28% of 2.3, the lower tax rate again raised more tax revenue.

    "

    Side note, Buffet's salary is only $100,00 per year, I wonder how close that is to his secretary's? I'd bet if you compared apples to apples (i.e. his earned income to hers, and his cap gains rate to hers), it wouldn't appear so skewed.

  • Report this Comment On September 19, 2011, at 2:54 PM, tnk4800 wrote:

    Start here: Scrap the existing tax code, Eliminate all deductions, exemptions and write off's.

    Implement a 10% flat tax on all incomes up to $1,000,000,

    Corporations must pay a minimum 20% tax. on all sales income. However, allow companies to invest and write off the remainder of sales up to 65% if the companies invest in education, job training, retraining and job creation, research, product development and innovation if done here in the USA;

    End the deptartment of education.

    However create ivestment incentives for businesses to invest profits to fund all education programs for Math and Science,English, writing, as well as learning other languages, Computer, sofrtware, IT cyber security, craft, technical trades, health care, medicine.and business support services.

    Implement, 100% breakfast and school lunch program. The school program can only serve completly balanced meals as recomended by Mayo Health care.

    Schools must Stop all sales of sodas drinks, sugar or diet, as well as stop sale of candy, gum and carbo snacks.

    Ban all the above in food stamp sales too.

    Food stamps can be used to pay for Milk, Meat, fish, fruits,vegetables, whole grain bread and and recommended cereals No processed meat or food.

    End the department of labor. Drop minimum wage, create national right to work. End collective bargening in all government or national interest related jobs.

    End all public pensions. replace with Social Security and IRA.

    Implement 100% complete Health Care for everyone, One plan for everybody, no exceptions,no cadilac plans. Health care must be modeled after and administerred and directed by Mayo, Johns Hopkins, Boston Womens, Cleveland Clinic systems. Implement "best practices" Lean Six Sigma, continuous improvement, patient centerred, wellness, health improvement humane care program.

    All hospitals must create urgent and preventative care clinics that treat everyone.

    However Emergency rooms are for Emergency's, life threatening events and accidents.

    Legalize and regulate production of marijuana and distribution of needles. Tax the hell out of it.

    All Smokers, alchoholics, drug users not in a recovery program pay a 50% of treatment either with money or personal service.

    business that sell cigerettes, alchohal and drugs that threat health must pay the other half of health care premium that covers the cost of medical treatment of people that use their products. No exemptions.

    End all wars now. Bring the entire military home now.

    Only deploy troops over seas to equal levels that does not exceed the level of troops of any other country in NATO.

    Employ the entire military to defend all the borders, sea and air ports, eliminate drug and conterfit imports, protect all communication sytems, cyber space, power and water. supplies.

    Employ the military in all emergency and disaster situations to fight all fire's, assist in storm recovery, police all streets.

    Social security 100% for everyone that provides and includes, shelter, food, drugs and transportation.

    CEO's, Board of Directors for corporations, owners and directors and managemt of business are completly personally responsible for all profits and losses and conduct of their companies. Life improsoment for all fraud, sieze all assettes of offenders.

    Reform all tort laws, eliminate frivolous law suits by making lawyers pay directly for all cost of a lost case.

    Wall street must pay all cost if they lose any money on a clients investments.

    End minimum wage, establish national right to work. Out law collective bargening in all government and national interest employment.

    Eliminate government pension programs, except for the President.

    Allow every one 20% contribution to Roth type 401k IRA contributions and 33% for business if owners.create sustainable jobs.

    Eliminate capital gains tax on savings and retirement investment returns.

  • Report this Comment On September 19, 2011, at 3:08 PM, antianarchist wrote:

    The rich don't pay "their fair share"? Seriously? They pay close to, if not over 50%, of the nation's revenues.

    This is not a "shrewd" political tactic by the administration, it is simply more of the same class warfare which we have seen the last couple of years.

    Would you consider "hoarding" wealth buying yachts, homes, luxury items, entertainment, traveling, etc? All of that "rich folk stuff" creates numerous jobs for numerous individuals....and this is with the assumption that the "greed heads" simply "hoard" their wealth.

    "tttucker" is correct that this debate is NOT about increasing revenues, it is about "getting even" and "punishing" the society's achievers and earners. Further more, this assault will not even be successful in punishing said achievers, instead this class warfare tactic will only punish those small business owner's who file their taxes as personal income. Why? Because the exuberantly wealthy can afford to lobby for MORE tax loopholes, more tax shelters/offshore accounts, and/or simply leave the country. JFK AND Reagan understood these simple principles. This NOT a partisan issue. Only the idealistic, gullible, and naive believe they can achieve "fairness" through the U.S. schizophrenic tax code.

    If you truely wanted to raise revenues (and not simply "get even" with the evil rich), lower the marginal rate and eliminate most of the loopholes and deductions.

    I cannot believe that on a trading/investment site, there are so many envious Bolsheviks looking "to get even". If you want "fairness", move to Venezuela or invest in Cuba where at a moment's notice the gov't can kindly seize your assets and give them away. You'll sleep better at night.

    My advice for Buffett? Stop utilizing loopholes and deductions designed to protect seniors citizens' retirement funds, and pay the billions in back taxes his companies owe. Only then can Buffett have any moral authority to lecture the rest of the "greed heads" on paying "their fair share".

  • Report this Comment On September 19, 2011, at 5:13 PM, prginww wrote:

    Great articial by antianarchist By a wwII Vet.,Our great leader--the tree swinging Socialistic HATES 5O% of the people that pay taxes. Just look at the numbers that do not pay taxes. To Mr Buffet why the hell are you trying teach Obama any thing. Look at his back ground, he has screwed up this country so bad that it will take 15 years to straighten out. I WILL NEVER SEE THE RSULTS. GOOD LUCK TO THE YOUNG PEOPLE.

  • Report this Comment On September 19, 2011, at 5:32 PM, ledm wrote:

    Why does everyone spout what is "fair" Life isn't fair. I would have loved to be a millionaire. I am not, so do I think that because I don't have millions of dollars, those that do should be punished because it isn't fair? That is rediculous! I think there are a few ways we can at least begin to get rid of the debt.

    1.Do away with income tax. Why should Americans be punished for making money. They should be rewarded. If there is no income tax, we will spend more money. That way the government can impose a 40% sales tax on all items deemed "not necessary" Necessary items such as certain foods, (healthy ones) would not be subject to this large tax.

    2. Pass a bill that Congress MUST be able to pay for a government program before they sign it into law. I can't believe this hasn't been done before.

    3. Legalize marajuana and prostitution. The argument for keeping these illegal is that they invite illegal pimps and drug cartels into the country. If these items were legal, pimps would no longer exist because prostitutes would not be afraid to report them to the authorities. Cartels would no longer have such a foot hold because marajuana would be legal and taxed... and I mean hugely taxed. Prostitues could get off the streets because they would be able to work out of houses. The government could tax that as well and mandate that every pristitute be thoroughly examined and tested. They could even have those board of health "Grade A" signs you see in restaurants.

    If these three things were allowed to happen, the nations debt would be gone within a few years.

  • Report this Comment On September 19, 2011, at 7:05 PM, tttucker wrote:

    Ah....some level-headed talking going on. This was my first thought when I read through some of the threads, "I cannot believe that on a trading/investment site, there are so many envious Bolsheviks looking "to get even....." Right On!!!!! Capital gains taxes is a SECOND tax. It is taxes on money that had been previously taxed in some form or another before it was invested. BTW, I know many people that have bought a house, lived in it for so many years, then sold it at a profit and rolled it over into another house. Is that a loophole or is that a legal maneuver used by way of the tax law. Just curious. Some of these very same people are wanting to soak the rich and raise taxes....hmmmmm.

  • Report this Comment On September 19, 2011, at 8:35 PM, skypilot2005 wrote:

    On September 19, 2011, at 9:20 AM, kirkydu wrote:

    President Obama is mostly right here.

    "Since 1982 the increase in national wealth is roughly equal to the increase in national debt. About 5/6 of that increase in wealth has gone to the wealthiest 1% of the population.

    It is common sense that those who have benefited the most from our borrowing and consumption should pay for a good portion of the nation's debts. "

    The top 1% pay over 20% of the taxes. It looks to me like they are paying their way, now.

    This is not a serious proposal by the President. He is just starting to get in "Campaign Mode".

    The greedy rich vs The Democrats.

    Morgan is a smart guy. I am surprised he fell for it.

    It looks like the Republicans are going to walk right into the trap.

    I am not surprised. Most politicians I've met do not appear to be very smart.

    Sky Pilot

  • Report this Comment On September 19, 2011, at 11:01 PM, CaptainWidget wrote:

    <<Capt.

    4. A set percentage (whatever it is) disproportionately impacts those at the lowest end, given that there is some minimum needed to survive. i.e. taxing $1700 from someone making $10,000 will have a much greater impact than taxing $17,000 from someone making $100,000.

    5. For good or ill the current tax code has encouraged people to act in certain ways. There will be massive dislocations when mortgage interest, or education expenses are no longer deductible.>>

    Obvously, that's why flat tax with both

    A) a large personal deduction, and

    B) identical corporate and personal rates

    will solve both problems. The last thing the government needs to do is keep proping up misallocation with tax breaks. The flat tax is the only intellectual honest way to tax income. Everyone gets the same personal deduction to ensure a basic quality of life, and everyone pays the same tax rate on taxable income.

  • Report this Comment On September 20, 2011, at 7:12 AM, dbtheonly wrote:

    So Capt,

    You're including a personal deduction, like the current personal exemption, in your "flat tax" proposal? You're not going to penalize people for having babies. Okay but you've now got another line on your tax form.

    1. How much did you make?

    1a. Multiply by .17

    2. How many of you are there?

    2a. Give Social Security Numbers.

    You ignore the question about Unearned Income.

    You are willing to knock another 20%+ off of housing prices. Okay.

    College Education is a misallocation? Okay, that's your opinion.

    I see where antianarchist calls people Bolsheviks. Unwarranted, I see them more as Wobblies. There's a huge difference.

  • Report this Comment On September 20, 2011, at 7:42 AM, dbtheonly wrote:

    realtechwiz,

    Thank you for your service. My parents served in the war against Hitler. Thank you for helping shove Naziism back into the sewer out of which it crawled.

    But , "Our great leader--the tree swinging Socialistic ..." could easily be seen as a racist comment. Would you say the same about a white President?

    And, Did you go to school on the GI Bill? Get a GI (or VA) loan on your house? Please be careful about what you call Socialist.

  • Report this Comment On September 20, 2011, at 11:31 AM, johanngalt wrote:

    I've seen an awful lot of use of the term "shared sacrifice" here- tell me, what exactly is "shared sacrifice"? Is the person who does not work at all, yet enjoys a cell phone, satellite TV, food, lodging, and child care- all paid for by the taxpayer- "sharing" the sacrifice of the "millionaire" who leaves for work at 6 a.m. everyday and returns home at 7 p.m.?

    Note- all of the above amenities are provided to the "poverty-stricken". If you don't think so, just do the smallest bit of checking yourself- talk to someone on food stamps, or drive by public housing. Satellite dishes abound.

    Anyway, this "shared sacrifice" stuff is pure political, dishonest b.s. Every well-off person/ family I know work their behinds off, sometimes 6-7 days a week. That's how you get ahead.

    Sure, I understand there are those in financial need, and unjustly so- but these are NOT typical. Further, that's why we are the most charitable nation in history.

    "Shared sacrifice" my Aunt Sass.

  • Report this Comment On September 20, 2011, at 11:44 AM, INoFoolin wrote:

    The super-wealthy and S&P 500 Multinationals have used their money to pay lobbyists to 'fix' the tax code to pay less than "fair" taxes, and we have been borrowing money from the Chinese to finance it.

  • Report this Comment On September 20, 2011, at 1:41 PM, beechtree1 wrote:

    I think, that the important question to ask here is:

    How does one spent $344,000,000? If the money's spent to create and spread wealth then I think the

    private sector rather than government's better equipped to handle the money. But if this money's

    spent on vanities of heads of bankrupt investment

    establishments, and such like, whose arrogance and greed has blinded them to their incompetency, then

    I say tax them more; and even then, for the likes of

    them, more is never enough.

  • Report this Comment On September 20, 2011, at 4:37 PM, CaptainWidget wrote:

    ,,,So Capt,

    You're including a personal deduction, like the current personal exemption, in your "flat tax" proposal? You're not going to penalize people for having babies. Okay but you've now got another line on your tax form.

    1. How much did you make?

    1a. Multiply by .17

    2. How many of you are there?

    2a. Give Social Security Numbers.

    You ignore the question about Unearned Income.

    You are willing to knock another 20%+ off of housing prices. Okay.

    College Education is a misallocation? Okay, that's your opinion.>>>

    It's not like you're presenting some new and unique critiques of the flat tax. These have just already been answered. The personal exemption is a flat number, and you can claim it on all dependants as well. Your tax form would be the size of a post card. SS, income, tax burden, minus personal deduction, minus dependants deductions, net tax burden. If you're curious, listen to this.

    http://www.econtalk.org/archives/2007/04/rabushka_on_the.htm...

    Anything can be misallocated if the price is wrong...

  • Report this Comment On September 20, 2011, at 6:03 PM, Melvinwayne wrote:

    Everybody pays 9% fed tax. Right off the top. If not enough, take a nationwide vote during presidential elections, to raise it 1%. Max of say 10%--forever. Live within our means.

  • Report this Comment On September 21, 2011, at 3:04 PM, jargonsays wrote:

    It is critical that we protect the wealthy from burdensome taxation! They will fire us from our jobs and flee the country in anger. Truth is, we should not be taxing them AT ALL, and we should - in fact - be giving the wealthy additional money so that they can create MORE jobs for us. Can't you people see this?

  • Report this Comment On September 23, 2011, at 11:17 AM, JohnDimitri wrote:

    “But if we're talking about raising revenue to lower deficits, how much might such a plan bring in?”

    Want to lower deficits? How about shelving Obama Care?

    Did Mr. Buffett having anything to say about that?

    Sky Pilot

    YES. MR BUFFET JUST SAID WEVE HAD HUGE DEFICITS EVEN BEFORE OBAMACARE. TURNS OUT WE ALSO HAD RECESSIONS AND MASSIVE CREDIT PROBLEMS AND STOCK MARKET DECLINES. GO FIGURE.

  • Report this Comment On September 23, 2011, at 11:19 AM, JohnDimitri wrote:

    Why do we have to raise the tax rate of the Rich? why not lower the middle incomes tax rates to below 16.62%. Then everyone will be paying their fair share.

    Because we have a huge deficit and the middle class isnt gonna give up its programs like medicare and social security without a fight simply so the wealthy can have 2 BMWs instead of 1.

  • Report this Comment On September 23, 2011, at 12:14 PM, pmagnier wrote:

    My understanding is that Warren Buffet was talking about the very wealthy, not the averagely wealthy.

    It's not about getting even, it's about fairness.

    It's also about raising money.

    It makes sense to tax people who are undertaxed.

  • Report this Comment On September 23, 2011, at 1:52 PM, bblover wrote:

    I think it would be even more edifying to see an analysis of those in the top tax bracket who earn more than 50% of their income from investments including, in addition to effective tax rate, how many households fall into this category and how much income the group has. I think the data would show that even households with much lower incomes than the top 400 whose income is mainly from investment income are paying a significantly lower tax rate than those who are working for their income.

  • Report this Comment On September 23, 2011, at 9:14 PM, spendley wrote:

    For the most part, the very wealthy are the very wealthy because they are driven, ambitious and committed. A tax increase wouldn't make much difference in their behavior. They will still want to make money, they will still invest, and if there is need, they will still hire people. Corporations too will hire regardless of tax considerations when they need to hire. (For the last two years, even with low tax rates, they have been hoarding cash out of fear and not hiring, but that's another story).

    Do we really think that the ueber wealthy will petulantly sit on the sidelines with arms crossed, pouting while life goes on just because their tax rates returned to what they were once before? Do we believe that they won't be motivated to succeed just because they will pay more? No way. I think wealthy people like O'Reilly who complain about not being motivated are disingenuous.

    I already pay a lot in taxes. My current goal is to pay $1 million in taxes because that means I made $2 million. I'm OK with paying it because I do think we all have a responsibility to our society (schools, roads, the deserving poor and disabled, police, fire, etc.). I think that is what Warren is trying to say. I have no intention of slowing down nor of cutting back on staff. I've built it into my business plan to expect higher taxes, and if I need more people, I will hire them.

  • Report this Comment On September 24, 2011, at 12:51 AM, mictra03 wrote:

    Let's be realistic here: taxing the rich WILL NOT solve the problem. What will solve the problem is we need to reduce unemployment, but more importantly, reduce underemployment. The tax rates from the 1990s and 2000s worked when more people were working. How you can get the people back into the workforce centers around what jobs are considered "sustainable" where the US may need to retrain its workforce. Jobs in health care, government services, long-term construction, etc. are where the people need to look.

    Corporations that don't do these things are artificially inflating their stock prices because of the quantitative easings done by the Fed. If you don't believe it, look at the stock prices of any given company between 2008 and 2011 and notice when stock prices went up, the Fed was knee deep in a QE round. Once QE2 ended on June 30, did the prices of stocks go up or did they come back down? You're going to see the cost of borrowing money to keep corporations afloat spike, which is why corporations aren't investing in jobs in America. If they have to borrow money at higher rates to stay afloat when inflation hits big time (say late 2012, early 2013), and they need the money to pay its employees or else lose their jobs as CEOs because the company fails, it should start to make sense that corporations are planning for a whopper of an economic event and they are just squirreling away their cash reserves for long-term survival.

  • Report this Comment On September 24, 2011, at 3:21 PM, PHarlow244 wrote:

    Increasing taxes on the "rich" will solve nothing. Increasing capital gains taxes will hurt many like myself who has made and reinvested my gains for the future. More capital gains taxes would hurt my <$200,000 income family much more than it would Warren Buffett and his crowd.

    I am sick of Buffett and seriously considering selling my BRK.B after it comes back.

    We need a fair tax and yes everyone should pay. (Even if it $1.00)

  • Report this Comment On September 24, 2011, at 11:26 PM, wjcoffman wrote:

    (1) Institute term limits on congress and senate. The president has them. Many states have them.

    (2) Eliminate their benefits-for-life.

    (3) Eliminate their fringe benefits.

    Many jobs have no sort of retirement benefits or health care or barber shop or gym or multiple offices or . . . Why do the people that are paid from OUR hard earned tax dollars swim in benefits that smack of some sort of royalty?

    What happened to service to your country? They all subscribe to let our country serve them.

    (1) and (2) are the first steps towards solving the mess these self-serving politicians have created!

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