Warren Buffett: Higher Taxes Please

Warren Buffet in a New York Times op-ed yesterday said that rich people should pay more in taxes. Buffett points out that he paid 17.4% (or $6.9 million) in taxes last year. The reason Buffett is in a low tax bracket is because nearly all of his income comes from capital gains (buying and selling stock) which is taxed at a much lower rate than ordinary income (wages from a job). Warren Buffet claims he doesn’t mind paying higher taxes. Interesting that Buffett doesn’t voluntarily paying his highest marginal tax rate of 35%. In fact if Buffett felt really patriotic he could make a gift to the U.S. Treasury Department to pay down the United States national debt. I have a feeling Buffett isn’t going to be making a gift any time soon.

Our tax system is extremely progressive. The top 1% (people making $380,000 and up) pay an average tax rate of 23.3% this is higher than any other bracket. Meanwhile the average tax rate for the bottom 50% is a mere 2.6%. In addition to this, the top 1% of taxpayers are paying 40% of all income taxes. This percentage has only been increasing since 1980 not decreasing. The top marginal rates since 1980 have also decreased. If politicians wanted the top 1% to pay “more of their share” of income taxes all they would have to do is lower the marginal rates.

No doubt Buffett is probably one of the best investors of all time. However, I find it surprising that someone with an economics degree from Columbia doesn’t understand demand for anything slopes downward the higher it is priced including taxes. If Buffett was really serious about paying his fair share he would voluntarily pay more in taxes. Buffett can say how he wants to pay more in higher taxes, but until he voluntarily does so it’s all talk. Talk, rhetoric, and blame are all great tools for politicians. Blame in fact is an unlimited resource.