Warren Buffett has been all over the business press recently suggesting that the very rich, those on the Forbes 400 list, are taxed advantageously to the rest of the workforce. That it makes no sense that his tax bill as a percentage of income is lower than that of his secretary or housekeeper.
He is absolutely right.
It makes absolutely no sense that he, or I should pay a smaller percentage of our income than those who go to work 8 hours a day and have to save as much as they can to afford a vacation every year and stress out about whether or not they can pay their rent, mortgage or college for their kids.
Its also wrong that those who must live paycheck to paycheck find themselves paying the same amount of taxes on consumables as the super rich. That 8pct sales tax on life's basic necessities is real time cash out of pocket, a far greater percentage of income and much more expensive money than the federal taxes we pay the following April 15th.
I would be perfectly fine paying a higher percentage of income, both in federal income taxes and as part of a consumption tax on luxury items. If Warren wants to buy or build a yacht for a hundred million dollars. Nail him with a 10pct federal tax surcharge. If I want to buy a Gulfstream Jet for 40mm dollars. Nail me with a 10pct federal surcharge above and beyond current taxes. There are plenty of items, from jewelry to 100k plus cars to 10mm dollars or more first, 2nd and 3rd homes. If you can afford to buy these kind of goodies, and choose to, cough it up.
Will i avoid the Gulfstream or Warren the Yacht because of the surcharge ? Will I drive a used car instead of my new expensive Lexus Hybrid. Nope. You are rich when you know that money is no good unless you can enjoy it. No one on the Forbes 400 or near by is going to let a 10 percent more increase in the cost of a luxury item get in the way of enjoying the lives they have always dreamed of.
The perspective that Hillary Clinton is offering that 250k in annual earnings qualifies you as rich is not only ridiculous but its a huge disincentive to those who work their asses off every day and have accomplished a salary that rewards their hard work. It also will impact millions who can least afford it.
I will tell you who will suffer the most if a "tax increase for the wealthy" starts at only 250k. The 50 plus year old executive who has spent the last 25 to 35 years working his or her butt off to reach a 250k salary. The 60 year old executive who is already scared shitless that their job could be eliminated tomorrow and that they have not saved enough for retirement.
Is that who you want to impact Hillary ? Men and women who are approaching retirement already in fear of job security and their futures ?
Not a good idea.
Instead, go after those of us who are really rich.
I'm OK with paying either higher taxes at my level of income OR paying a consumption tax on luxury items that cost more than the 250k threshold that Hillary thinks is the level of income that defines rich. But my agreement to pay more taxes comes with a caveat.
Right now I hate paying taxes because I feel like I'm giving money to a known crack addict. However much you give, its not enough. They will buy their crack, get a short term high and soon be back asking for more.
The federal government , whether in Republican or Democratic hands is the same way. No matter how much you give, they are always asking for more, more, more. Always spending on the ridiculous, without remorse and without the ability to restrain itself. Just like a drug addict.
If you are going to raise my taxes, I want somethings in return.
Raise my taxes by 1 pct, by every 1 pct you cut federal spending. Your choice of raising taxes on luxury items, or on annual income of 10mm dollars per year or more. Cutting spending means the government needs to raise less which allows you to raise the income threshold on which you charge this "Forbes 400 surcharge"
And I want 1 more thing. I want transparency. The way the government publishes information on money it spends ,receives and owes is a joke. No one in this country has any real knowledge of how much our country really owes. There are so many hidden and unpublished liabilities that if our country were a public company, someone would go to jail.
The accounting data of this country is public domain information. There is no reason why it can't be published if not in real time on a government website, than at least quarterly. Money coming in . Money going out. Money that is owed to us and from us. It is currently being recorded somewhere , and someone has responsibility to collect it or pay it. So it can be published.
Then every quarter, our federal government can publish an Income Statement and Balance Sheet according to GAAP principles. It wont be perfect, but it will be a hell of a lot better than what we have today.
Without complete transparency, politicians will do what politicians always do. They find ways to play with our hard earned tax dollars and to put a lien on our current and future earnings, and that of our kids and grand kids just so they can get elected and re-elected. That's just wrong.
So if Warren Buffett wants the Forbes 400 Rich to pay more taxes, great. Than Warren also needs to ask the two candidates he is supporting to do the same thing he would ask of any company he is investing in, show him accurate , up to the minute accounting data with transparent information supporting every number.
When that happens the government can take more of my money if they need it. My guess however is that when the citizens of this country see how much we really owe and where the money is being spent, and the short and long term implications of our politicians spending like addicts, they may start voting for those who respect the value of a dollar.
Will your candidates agree to this Warren ?
I also have one more tax suggestion that I think will create so many jobs in this country that it really wont matter what else our politicians do.
If we really want to stimulate job creation in this country, take the same approach to small business with fewer than 25 employees that we take to Internet taxes. Outlaw them.
No taxes of any kind on small businesses with fewer than 25 employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings
The only taxes they would collect and remit are sales taxes, the employee's portion of payroll taxes and of course they would still file personal income taxes on their individual earnings.
Today to start a business today is so frustratingly tax and paperwork burdensome that it requires hiring experts on taxes ,state and local filings just to get started. That is more of an impediment than trying to actually make the business work as a going concern. It also pushes businesses underground so that they can operate on a cash basis and away from the tax collector. I would rather have entrepreneurs think twice about their 26th employee than whether or not they think its worth the hassle to start up a licensed business.
Those are my ideas. I have no illusions that any could actually happen.
UPDATE: For some reason some people seem to confuse the Luxury Tax of 1990 which put surcharges on minimal pricing thresholds of 10k for jewelry, 100k for boats and 25k for planes with what I am suggesting.
Thresholds that low are not what I had in mind when i offered a 100mm dollar yacht and a 40mm dollar jet as examples. For those who would rather conclude rather than ask, lets just say that nothing with a cost of under 10mm dollars would be subject to a surcharge. . And I will remind everyone that I would only support this IF government spending was reduced and transparency was introduced. For some shocking reason bloggers who have linked to this post don't seem to comprehend the whole of the post.
Warren Buffett , Taxes and the Presidency
Recent Posts
- NBA Agents and High School Kids (5/18/2008)
Reader Comments
(Page 2)22. Note to the advocates of the "simpler" flat tax--- the complexity in the tax code is NOT in the tax rates or bands, rather it is in the DEFINITION of INCOME. Many advocates of the flat tax end up with a system that only taxes wages and salaries, thereby exempting from taxation anyone who can restructure their income to avoid "salaries".
The 25-employee businesses that would pay no taxes.... they could be paper artifices -- 100 of them would cover a rather large enterprise of 2500 employees -- never underestimate the creativity of legal minds when weaseling out of a tax is concerned!
Posted at 11:58PM on Dec 11th 2007 by Bill
23. Poster #11 is confused Ron Paul's platform. There will still be taxes, just not the income tax. Also he doesn't want to use the "inflation tax" because he wants to return to the gold standard which will prevent the government from being able to print money at will to pay for programs for which they could not justify taxes.
Mark, I'm curious what your thoughts are about Ron Paul. You say that you would like the size of the government to shrink and it seems that Ron Paul is the only candidate who would try to shrink the government.
Posted at 12:02AM on Dec 12th 2007 by Bruce
24. Hey Mark, It all sounds good but people vote with the pocket.Mr Warren, with all due respect knows how to talk and when to say it. Hes a genius no doubt but like any other guy with a lot of money or even a little could care less about who dies in wars or what happens to the little guy. That was proven in the last election. Anyone who believes different is either naive or totally stupid. Its a nice fantasy though. Thanks for the thoughts
Posted at 12:47AM on Dec 12th 2007 by Frankie from Lawnside
25. It's the thought that counts right Mark. :}
Posted at 3:22AM on Dec 12th 2007 by Vicky
26. The real question for me, is what can I do to create change? There seems to be no one that represents what you are talking about.
Posted at 10:14AM on Dec 12th 2007 by brandon goldman
27. Mark - all of your ideas sound good, but the problem is that anytime you tax or don't tax specific groups of people, someone else (usually the little guy) has to pick up the bill. If you tax luxury items and two less jetstreams are sold, who gets hurt? It's not the owner of Boeing, it's the 3 mechanics he had to fire. You can apply this same principle to almost every one of your other ideas. The bottom line is that we need a fair and simple tax system that is applied equally to all people, no matter how rich (or poor) they are. Whether it's the Fair Tax or a straight flat tax, the most important features are equality and simplicity.
Posted at 10:48AM on Dec 12th 2007 by Marcus
28. Well said.
I like your small business idea so much, I am printing this out to give to my boss. She doesn't read your blog, but she employs fewer than 25 people, and the burden on her is outrageous. Part of my job is to cut the checks for those payments; they are myriad, and they do add up.
Posted at 10:50AM on Dec 12th 2007 by Susan Lewis
29. I get a kick out of you rich guys so thoughtfully telling us how much more you would like to be taxed.
If Warren Buffett wants a death tax he should just will all of his money to the federal government. If you are frustrated with how the federal government is spending your money then set aside all of the money you would otherwise have extorted from you in our tax system and spend it effectively with charities as you see fit.
This is what freedom is all about...freedom to make choices about how you spend your money but please don't saddle the rest of us with your stupid ideas.
Posted at 11:00AM on Dec 12th 2007 by alex johnson
30. Mark Cuban for President!
Posted at 11:46AM on Dec 12th 2007 by Michael Martin
31. Mark,
I just want to thank you for being honest and real on this. Not everyday you hear a person with wealth talking so openly about how they know they are taxed at a lower percentage, knowing they can afford to pay the tax bill of 1,000 people who are on welfare.
I would like to know your opinion on something that has been bothering me and no one seems to catch onto this. The issue is freezing rates on sub-prime loans. In the current market, the future rates are projected to drop from the Fed several times in order to restart the economy, given the history of the Fed over the past 30 years. Yet we hear people like Bush and H Clinton talking about Freezing the rates at their current level, to help these people from having their homes foreclosed on. If that was the true goal, I would applaud them. However, since the rates are going down, these ARM loans should also be dropping, and the sub prime loan amount would also be dropping.
So instead of talking about a freeze, which only would help the banks maintain the current high rate, making them Billions over the life of the loan, they should be talking about setting an upward limit, yet allowing these loans to decrease as the Federal Rate decreases. WE DO NOT NEED A FREEZE!!!! These plans are not intended to help the consumers, these plans are only intended to help the banks maximize their profits in order to overcome the recent losses at the expense of people getting what they truly should; reduced payments according to their signed contracts.
So do you agree with my little rant?
Thanks again for being open and honest.
Posted at 12:04PM on Dec 12th 2007 by Kevin Kleinsmith
32. The debate gets focused around *income* tax. The rich like this because they have the bulk of investment income, which is not only taxed at lower rates but is not subject to medicare or social security taxes.
So, if you are lucky enough to inherit a million or so, you can live nicely on dividends and pay very little in taxes.
Posted at 12:07PM on Dec 12th 2007 by Eric
33. robert kiyosaki must be angry reading this post
Posted at 12:44PM on Dec 12th 2007 by Sam
34. "If Warren wants to buy or build a yacht for a hundred million dollars. Nail him with a 10pct federal tax surcharge. If I want to buy a Gulfstream Jet for 40mm dollars. Nail me with a 10pct federal surcharge above and beyond current taxes"
Let me add to what others have already said. This was tried in the 80s and was an unmitigated disaster!!
Thousands of blue collar works in the boating and aviation industries were thrown out of work. Companies with decades of profitable operation were forced out of business after sales dried up.
The rich were not 'punished' at all, it was the blue collar craftsmen who received a body blow from which many never recovered.
Our tax code needs a lot of work, if not total replacement with something better.
But singling out single products for punishment hurts "workers" the most.
Here's a suggestion: Why don't you raise prices on your products 10% and donate that money to the goverment? You are in the 'luxury' business, nobody really needs entertainment media.
Come back in a couple of years and tell us how your 'luxury' tax worked out for you.
Posted at 1:25PM on Dec 12th 2007 by Jim Howard
35. If Warren thinks he doesn't pay enough taxes; why did he give 1 billion to his buddy Bill Gates foundation and then take the tax write off? Why not just donate the money and not take the tax break if you think you're not paying enough taxes? Warren could have helped two of his favorite charities at the same time! Not to mention it seems hypocritical to be looking for tax breaks and then say you're not paying enough in taxes!
Posted at 2:19PM on Dec 12th 2007 by Matt
36. Mark- Please look at the effects of the 10% luxury tax from 1990-1992 as mentioned in other comments. The yacht industry, which is not to be confused with yacht owners, is run by a middle class sales force and skilled craftsman. The Luxury tax destroyed the lives of thousands of people for a decade. And contrary to what others here have said, boaters did not just buy them overseas, they simply did not buy yachts at all. That threashold for a new wealth tax would have to be on yachts $10-million and higher to not seriously damage the industry again. Keep up the good work.
Posted at 2:36PM on Dec 12th 2007 by JM
37. Unfortunately Mark, there aren't enough super rich people to make a dent. And let's say we get into this luxury tax thing... It's not just super rich people who buy yachts or Lexus hybrids. A lot of people stretch themselves to be able to afford nice things. And while you may be willing to pay an extra tax on such items, imagine being the yacht broker or builder. Do you think such a tax would be good for their business? They are probably hard working middle class people hoping to build and sell lots of yachts.
And another thing... Already, the top 20% of earners account for more than 50% of federal tax receipts. Do we want a society where most people don't pay taxes and still vote? I say no. I think the fairest system is a flat rate tax that treats income and capital gains the same, with a rebate or negative tax for earners below some level. And that level isn't driving a Lexus or watching HDNet on a 40" Sony.
Posted at 2:55PM on Dec 12th 2007 by Brad Hutchings
38. Mark,
Great post. I never thought much about this issue in this light. It isn't fair for those who can't afford basic neccesities 8% when that 8% could be a large chunk of their money.
I would love to hear your thoughts on the gift tax.
Posted at 3:05PM on Dec 12th 2007 by Stephanie
39. Mark,
"The 60 year old executive who is already scared shitless that their job could be eliminated tomorrow and that they have not saved enough for retirement."
I'm sorry, but if you are 60 and have a $100k+ salary and don't have anything saved for retirement, thats your problem.
My aunt worked at a bank for 27 years and retired while making $36,000 CDN a year at the age of 62. If she can manage to save up enough to do this, you can do it with a $100k a year salary.
If you don't consider people that make $100k a year rich, you need to reevaluate your views on rich and poor people.
If you have any job openings at HDnet for $60+k a year, let me know, I would be more than willing to work my ass off for it, I already work my ass off for much less!
That said, I agree that the taxation system is screwed in both the US and Canada.
Posted at 3:16PM on Dec 12th 2007 by Kray
21. Mark,
It would be interesting to have your opinion and break down for the Presidential hopefuls. I would like to hear an opinion from an obviously successful business man, which is an aspect that we all seem to agree upon. You could comment on which candidates have a plan to help increase the value of the dollar and help better run our country from an economical aspect.
Posted at 11:40PM on Dec 11th 2007 by Jake