In an op-ed piece in the New York Times today, the Billionaire investor Warren Buffett has called on Congress to change the tax code to more appropriately reflect the income rates of the richest Americas. This plea might seem strange coming from the world's third richest man, but after hearing his arguments it doesn't seem strange at all.
Mr. Buffett points out that tax rates on the rich have been falling and are considerably lower then they were in the 1980's and 1990's. He says there is no basis for the Republican argument that higher taxes on "job creators" -- a Republican synonym for "rich people" -- stifles job growth. Citing the fact that in those two decades job creation was considerably higher then it has been in the past ten years, when the income taxes on the mega rich were lowered. So what really is the difference? Well Warren Buffett who has 50 Billion dollars (that's billion, with a "B"!) pays the lowest tax rate out of everyone that works in his office, including the secretaries. Where Mr. Buffett pays 17.4 percent of his taxable income, others in his office pay anywhere from 33 to 41 percent in income taxes.
Part of the problem, as Mr. Buffett explains it, is that he makes money with money. Meaning he pays a considerable amount less on income made from investments than he does on income derived from payroll. For the rest of us, that means that if most of your income comes from your salary than you pay a much higher percentage on your total income than super wealthy investors.
"Last year about 80 percent of [the government's] revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes," the Oracle of Omaha says.
To add a bit more perspective, almost a quarter of the 400 richest Americans reported no wages at all with all of their income coming from investments.
Mr. Buffett's plan calls for a tax increase that would only affect the 2.3 richest Americans while actually cutting payroll income taxes on the middle class.
The issue of raising taxes has been a no-go for Republicans for years. But with the congressional deficit reduction "super" committee charged with reigning in America's budget issues, can they ignore someone of Warren Buffet's stature?