Multibillionaire Warren Buffett shook up the tax reform debate this weekend, publishing an op-ed in The New York Times in which the Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) chairman and CEO argued that high earners in the U.S. pay too little tax, and that Congress should fix the problem by establishing two tiers of extra taxation for million-dollar-plus earners.
According to Buffett, a rate of "30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that" would be appropriate. Buffett did, however, differ with President Obama's plan to repeal tax cuts for householders earnings more than $250,000, suggesting that a cutoff of "$500,000 or so" would be more appropriate.
According to Buffett, high-income earners in the U.S. currently earn, on average, "a 'wage' of $97,000 per hour, based on a 40-hour workweek." Yet "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."
As the billionaire observed: "It's nice to have friends in high places."
On tax reform more generally, Buffett opined: " Our government's goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. -- levels that have been attained over extended periods in the past and can clearly be reached again ... In the last fiscal year, we were far away from this fiscal balance -- bringing in 15.5 percent of G.D.P. in revenue and spending 22.4 percent. Correcting our course will require major concessions by both Republicans and Democrats."
Click here to read Fool analyst Morgan Housel's take on Buffett's piece.