All you can eat Buffett

1:24 pm - April 12th 2012

by Dave Osler    

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Not many political fads to emanate from the US deserve to make an Atlantic crossing. But the principle of a so-called Buffett rule is something that the left this side of the pond should at least be talking about.

First enunciated in an op-ed piece in the New York Times last year, written by or perhaps ghosted for legendary investor Warren Buffett, the simple idea here is that millionaires should pay a minimum tax rate of 30%.

This week the call has embraced by Barack Obama, as part of his attempt to wrong foot his Republican rival in this year’s presidential race by depicting him as a creature of Wall Street rather than Main Street. Given Mitt Romney’s ‘I like firing people’ private equity background, this should not prove unduly difficult.

Moreover, Obama will be well aware that he does not have to deliver on the deal, as it will almost certainly be rejected by Republicans when it is tabled in the Senate next week. It’s a cheap shot, and I’m not saying that in a pejorative way, either.

Don’t get me wrong, a Buffett rule would not be my personal first choice of tax reform. I am sufficiently old school on these matters never to have accepted the arguments against sharply progressive income tax.

While I am mindful of the received wisdom is that any perceived reversion to Denis Healey-style soak the rich stance would be suicidal for Labour, I am not convinced this is the case.

Osborne’s recent move to slice the 50p top rate was clearly unpopular beyond the ranks of its beneficiaries, and François Hollande maintains a healthy second round poll lead in the French presidential contest despite his call for a 75% tax band for the very wealthy.

In this country, a 30% tax minima for millionaires would have the advantage of seeming fair to much of Middle England, not least because nowadays even some top end blue collar jobs put those that do them in the 40% bracket.

No doubt the Tories would oppose such a measure, leaving themselves vulnerable to ‘cabinet of millionaires’ accusations.

But best of all, even the Daily Mail who be hard put to denounce a policy supported by the president of the United States as nasty Bolshevism.

I fail to see what’s not to like on this one.

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About the author
Dave Osler is a regular contributor. He is a British journalist and author, ex-punk and ex-Trot. Also at: Dave's Part
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Reader comments

30% seems a little low.

2. Shatterface

Moreover, Obama will be well aware that he does not have to deliver on the deal, as it will almost certainly be rejected by Republicans when it is tabled in the Senate next week. It’s a cheap shot, and I’m not saying that in a pejorative way, either.

So Labour can embrace something they will likewise never be able to impliment because Obama is setting a precident.

Hey, why not promise us unlimited sex with Martian Princesses?

@ 2 shatterface

If people never voted for parties that did this kind of thing…. then they’d have nobody to vote for! Obviously it would be better if they had some, you know…actual policies…. but I’d rather see Obama back in the White House on the back of such a promise being one aspect of his platform, that Romney in there on the back of him reding the graphs from The Spirit Level the wrong way round.

Similarly in the UK, people can support the 50% tax rate, and higher taxes on the very rich… but it doesn’t mean they will vote Labour, any more than they previously voted LD just because they promised to increase tax which the polls at the time said people supported.

Maybe this is a gimmick, but it does resonate with huge swathes of voters who think there is something wrong with this picture when the super rich pay less in taxes (and often virtuall nothing) when the average Joe pays full whack.

We’re all supposed to be in it together after all, aren’t we?

Perhaps we should publish everyone’s tax returns as they do in Finland, Sweden and Norway too….? That’d make some interesting reading.

“I fail to see what’s not to like on this one.”

Me neither Dave. Elizabeth Warren, in her regular emails to subscribers, posted last night that “In 2009, there were 22,000 households making more than $1 million annually but paying less than 15% of their income in income taxes — and 1,470 paid no federal income taxes at all.” That’s atrocious.

On a side dish, who thought to call this post All you can eat Buffett. That job at The Sun will have to wait!

How do you really define “a millionaire”? Wealth or income?

Isn’t this very similar to what is currently being proposed, whereby a maximum level of tax avoidance will be set, so that those with high incomes have to pay more tax?

Elizabeth Warren (Massachusetts senatorial candidate) on Mitt Romney when asked if she understood the tax category that Mitt Romney was in:

“Yeah, actually, I think I do understand it, and that is that Mitt Romney pays fourteen percent of income in taxes, and people who get out there and work for a living pay twenty five, twenty eight, thirty, thirty three percent. I get it. Mitt Romney gets a better deal than any of the rest of us, because he manages to earn his income in a way that has been specially protected for rich folks. I think that’s wrong.”

This is the kind of thing Gideon and his mates don’t get (in spite of his professed shock recently when confronted with similar evidence of how the super rich get special treatment in the UK).

When a system is constructed such that people earning 30k, or 50k are paying hugely more as a % of their income than people earning 150k, 300k or some telephone figure salary, then it is time to change the system.

Surely this has to be discussed on a rate vs revenue basis. Embracing this measure any more than it benefits the average UK citizen is to put ideology over policy. I don’t care, any neither should anyone else care, if class X pay Y net taxation if their net benefit outweighs increasing taxation rates.

This wouldn’t be the same Warren Buffett who is leaving his estate to the Gates Foundation (tax free) would it?

Just to recap, this was the piece in the NYT last year about the taxes Warren Buffett is paying:

“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”

The comparison Buffett is making between the rate of tax on his taxable income and the tax rates paid by his employees really does highlight the point that he makes – as well as Bill Gates of Microsoft – that the low tax rates paid by the hugely affluent are grossly unfair. All credit to Buffett and to Gates for coming out on this. It’s no surprise that the Republicans are silent about this legacy from the tax cuts for the wealthy pushed through by the GW Bush administration.

Btw the Bill and Melinda Gates Foundation is a major source of funding for international research into eradicating Malaria and Polio. These are two incapacitating or killer diseases which largely afflict World3 populations which are largely neglected by big pharma companies because the potential markets for emerging drug treatments are reckoned to be too poor to yield sufficiently profitable returns to investment in research.

We need something because the current system is broken. The rich, and the corporates don’t pay a penny at the moment. Tax rates in the Us are at 70 year lows. But the rates are meaning less because of the loop holes.Trickle down is not working. Never did. The middle class grew out of the 50s and 60s and 70s.

Always makes me laugh when conservatives bang on about the 1950s in the US. Well top level tax rates where at 70%. But nothing will change until you take corporate money out of politics. The politicians have become whores to the corporations.

“Btw the Bill and Melinda Gates Foundation is a major source of funding for international research into eradicating Malaria and Polio.”

So its OK for Buffett’s estate to avoid all tax so long as the money goes to a cause of which you approve?

“So its OK for Buffett’s estate to avoid all tax so long as the money goes to a cause of which you approve?”

C’mon. Buffett – and Gates – are saying that they are paying too little tax and Buffett produced figures showing how the tax rate on his earnings is substantially lower than that paid by his employees. I agree with his concern and the inequity of the situation where the tax rates paid by the very rich are substantially lower than the tax rates being paid by the 99pcor so who are less well-off.

Buffett then makes substantial donations to the Bill and Melinda Gates Foundation knowing that the foundation is putting many hundreds of millions into researching diseases which mainly afflict World3 populations and which the big pharma companies neglect because they reckon the markets are too impoverished to generate sufficiently profitable returns for commercially motivated investment in research. The result of that neglect by the big pharma companies is untold misery for millions every year.

In that context, I certainly applaud what Buffett is saying and doing. Buffett made his wealth through astute portfolio investment decisions for long-term holdings of stockmarket securities. He has been very outspoken about the imperfections of financial markets so he can hardly be accused of claiming the markets are “efficient”. Indeed, his consistent success in making portfolio investments over decades implies a powerful criticism of the efficient market hypothesis.

Worth reading this to show the downstream effect of Buffett’s intervention on tax rates paid by the very wealthy in America:

Obama likely paid higher tax rate than Romney in 2011

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