Warren Buffett has what will surely be a much talked about, much blogged about and much emailed op-ed in the New York Times today, calling on Congress to stop “coddling billionaires” and raise taxes on the super rich. Obviously there are elements to Buffett’s piece which are superb. It is very rare that someone outside of the Congressional Progressive Caucus talks seriously from a loud microphone about raising taxes on the rich. It’s even more rare when that person is taken seriously and not a left wing class warrior.
Buffett goes after the fundamental unfairness which taxes working at a higher rate than investing. Buffett also points out that while there were higher tax rates on the rich, the economy created far more jobs. Lower tax rates haven’t helped with job creation – they’ve only assisted the consolidation of wealth into fewer and fewer hands. These are all important arguments to be made.
But when it gets down to prescriptions, here’s what Buffett has to offer:
Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.
Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
He doesn’t offer specific recommendations for how large increases in brackets of $1 million and $10 million would be. Presumably they’d be large, but without him being explicit, it’s hard to imagine large numbers being attached to this idea. Most politicians just don’t want to tax their multi-millionaire peers at a particularly high rate.
What’s worse, though, is without explanation Buffett buys into the deficit hysteria and presumably the accompanying push by deficit fetishists to cut social spending. I have no idea why Buffett thinks large, dramatic cuts to the deficit will pull the economy back from the brink, when the underlying reason for taxing the rich at a higher rate isn’t simply one of “shared sacrifice” but one of giving government the ability to do more, bigger things at a time when there is hesitance to use the power of deficit spending. Increased revenues allows for infrastructure spending, educational investment, and a shift to green energy sources. These, in turn, will create the jobs we need to get the economy on track.
“Share sacrifice” is undoubtedly a step better than the current system wherein wealthy elites are running up the score in the class war and forcing poor and working class Americans to give up their economic security on the alter of deficit reduction. But a better framework would be one which doesn’t actually put any significant burden on the people who the economic downturn already hurts the most. The unemployed, the under-employed, the homeless, and struggling homeowners have already lost tremendously through this recession. Asking them to give up their unemployment benefits, their social support benefits, the quality of their children’s schools and their roads is absurdly unfair. So no, Buffett is wrong. We don’t need “shared sacrifice” – we need wealthy elites to be held accountable for crashing the economy and siphoning off trillions of wealth from poor, working, and middle class Americans. Yes, part of that should be through significantly higher taxes for millionaires and billionaires, for hedge fund managers, and people who don’t work but instead live off of returns on their investments and the investments of their great-grand parents. But this should not come alongside cuts to the Big Three social safety programs, nor any other government program which gives Americans the ability to lift themselves up and improve the quality of their lives.