Tax the rich - says billionaire Buffett

The mega-rich are not paying enough tax, government should stop "coddling" them and end their "extraordinary tax breaks". That's the view of Warren Buffett, right, whose net wealth of $80bn makes him the third wealthiest man in the world.
Buffett's opinion piece in this morning's New York Times is headlined "Stop Coddling the Super Rich" and it pulls no punches about "legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species".

And Buffett is particularly scathing of the "shared sacrifice" US politicians have asked for. "When they did the asking, they spared me," he says, going on "I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched."

Tax bill

He says his last federal tax bill was $6,938,744 – just 17.4% of his taxable income. And he points out "If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine." And he identifies the difference in taxes faced by the rich and the middle classes.

"The mega-rich pay income taxes at a rate of 15% on most of their earnings but pay practically nothing in payroll taxes. It's a different story for the middle class: typically, they fall into the 15% and 25% income tax brackets, and then are hit with heavy payroll taxes to boot."

He highlights the fact that in 1992 the top 400 highest-earning Americans had aggregate taxable income of $16.9bn, on which they paid taxes of 29.2%. By 2008 the top 400 earned $90.9bn – an average of $227.4m – but the rate of tax they paid had fallen to 21.5%.

Investment

Buffett suggests a tax rise on all those earning over $1m a year, with a further rise on all those earning $10m or more. And he's pretty dismissive of the argument that says this will lead to a drop in investment, reminding readers of when tax rates for the rich were "far higher" in the 1980s and 1990s.

"According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends," he says. "I didn't refuse. Nor did others. I have yet to see anyone shy away from a sensible investment because of the tax rate on the potential gain."

Buffett's comments that the US government should "get serious about shared sacrifice" will resonate on this side of the Atlantic too as David Cameron continues to peddle that "we're all in this together" line. But this writer is not entirely convinced we'll be hearing from, say, Sir Philip Green any time soon.