Senator Claire McCaskill (D-Mo.) was impressed. “It was interesting to see someone who is such an aggressive capitalist, who believes so much in our capitalist system, saying we’ve got the scales way too heavily toward people who are very, very wealthy.”
Buffett repeated a point he made in October 2007 to Tom Brokaw on NBC News, that his effective tax rate is significantly less than his lower paid co-workers.
Buffett disclosed that he paid a 16.5 percent tax rate on all his income in 2008 because the tax rate on capital gains and dividends is 15 percent. Meanwhile, a Berkshire Hathaway employee earning between $33,000 and $83,000 must pay a 25 percent federal income tax rate.
Wealth for the Common Good is researching a campaign for 2010 to eliminate the tax preference for capital gains and dividend income. Our proposal would be to tax all forms of income the same. We’d love your perspective on this. Should income from capital gains be treated differently? If so, why?
Sometimes you can’t declare victory until the other side concedes defeat. That’s what happened Monday in the decade-long struggle over the future of the federal estate tax, our nation’s only levy on inherited wealth.
The coalition of corporate lobbyists and wealthy families, including the U.S Chamber of Commerce and the National Federation of Independent Businesses, dropped their long standing call for complete abolition of the tax, shifting their lobby resources into weakening the law.
A Bit of History on the Tax
Wealthy families, including 18 dynastic families such as heirs to the Mars candy family fortune, had spent millions in lobbying funds to save billions in future taxes.
For over a decade, opponents of the estate tax attempted to confuse the public about who really paid the tax. They called it a “death tax” on everyone, when it applied to only a small sliver of multi-millionaires and billionaires, less than two percent of taxpayers
In the late 1990s, they ran advertisements and a media campaign claiming the estate tax was the death of the family farm. In 2001, Pulitzer Prize winning journalist, David Cay Johnston, exposed this as a sham. His investigative reporting found not a single case of a farm having been lost because of the estate tax.
Proponents of repeal found a friend in President Bush, who included a phase out of the estate tax in his 2001 tax plan. Over the ensuing decade, the amount of wealth exempted by the tax rose from $1 million to $3.5 million ($7 million for a couple) and the rate was cut from 55 percent to 45 percent. At this current level, only one in 200 taxpayers will owe any estate tax.
Advocates for retaining the estate tax have pointed out that it raises significant revenue (a $1 trillion over the next 15 years) from those most able to pay. It provides an incentive for the wealthy to give to charity and places a brake on the concentration of wealth and power –which corrodes democracy.
Bill Gates Sr., the father of the founder of Microsoft, called the estate tax “a fair tax” and a “mechanism for wealthy people to pay back the society that created the fertile ground for wealth creation.” Warren Buffett testified before Congress that “dynastic wealth, the enemy of meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.”
If Congress takes no action this year (an unlikely scenario) the estate tax will expire next year, 2010, but only for one year. The entire 2001 tax law sunsets on January 1, 2011, with the estate tax reverting to a $1 million exemption and 55 percent rate. This gives advocates of keeping the tax enormous leverage in holding the line against gutting the law.
Celebrate and Get Back to Work
The anti-estate tax lobby is now shifting its considerable resources toward raising the wealth exemption to $10 million and reducing the rate to 35 percent. This additional tax break for multi-millionaires would cost over $100 billion over the next ten years.
President Obama has signaled his support for retaining the estate tax at its current $3.5 million level, while indexing it for inflation. Congress will likely act this fall to continue the existing law for one year, taking up permanent estate tax reform in 2010.
There is a real risk, however, that anti-tax forces will rapidly coalesce around a proposal to permanently raise the wealth exemption and gut the law. The same wobbly Democrats who axed the public option out of health care reform — Sens. Max Baucus, D-MT, Blanche Lincoln, D-AR and Ben Nelson, D-FL — are all likely votes for a bad estate tax bill.
Progressives are pressing to ensure the House of Representatives holds the line to a reasonable reform of the estate tax. Some members, like Rep. Jim McDermott, D-WA, have introduced legislation to lower the wealth exemption to $2 million and establish a graduated rate structure, with higher rates on inheritances over $10 million.
In 2003, anti-tax activist Grover Norquist confidently predicted the demise of the estate tax. He characterized the movement to retain the law a “dead fish.” “They’re embarrassing,” he told the Washington Post. “They’re flipping around like that stupid fish in the boat.” Yesterday he told Bloomberg News that his coalition, Americans for Tax Reform, was working to get the best possible deal because “this Congress is not going to abolish the death tax.”
The dead fish swims again.
Published on 27 September 2009. Linked from Enough blog.
By Tyrone Boucher
I recently got a chance to co-facilitate a workshop designed by Wealth for the Common Good (they’re organizing rich people to fight for fairer tax policy) about wealth, taxes, and inequality. It was an awesome workshop and gave me the chance to a) get very in touch with how totally ignorant I am about basically anything having to do with taxes (and learn tons preparing for the workshop) and b) agonize over some frustrating political questions that I still don’t know how to think about.
So here’s the thing: the entire U.S. tax system is set up to maintain and increase incredible, horrifying wealth inequality. Income tax is hardly progressive; work (income from a paycheck) is taxed at a much higher rate than wealth (income from investments); inheritance taxes are minimal and under attack from rich conservatives who believe that freedom means the freedom for really rich people to get really REALLY rich. Learning the details of all of this stuff is enraging and really illustrates how tax policy is a major contributing factor to all the forms of structural violence and inequality that we fight against.
So what’s the solution? Wealth for the Common Good has a campaign to make rich people pay more taxes, which seems like a good idea. I obviously don’t believe that anyone should be allowed to accumulate massive wealth even in the best of times; right now, in a recession that’s causing widespread poverty and cuts to already insufficient public resources everywhere (here in Philly, we just barely avoided passing a “Doomsday” budget that would have resulted in the layoff of 3,000 city employees and forced the closing of every single public library in the city), taxing the rich more seems like an important and obvious thing to fight for.
Except, the government already has lots of money, and is using it for war. And occupation. And policing and incarceration, and a long list of other things that are incredibly objectionable. Money for public services has been scarce since Reagan - not for lack of funds, but because cutting social spending (and privatizing everything) is a basic tenet of neoliberal capitalism. People aren’t fighting universal healthcare because the government can’t afford it; they’re fighting it because anything resembling a social safety net has been practically criminalized.
I get that taxation is essentially the only real mechanism for wealth redistribution that exists in our current structure. But I guess when I talk about wealth redistribution (the involuntary kind, not philanthropy), I’m more thinking about socialist revolution - not directing more money towards the federal government of an imperialist superpower.
The tax system does seem like an important (and often overlooked) target for economic justice struggles - I’m just having a hard time wrapping my head around the contradictions. Will the fight to get rich people to pay slightly more in taxes have a major effect on wealth disparity that will impact other things in positive ways? Are there other ways to accomplish the same goal of reducing wealth disparity that don’t also fund the military and police? How does a campaign around tax policy intersect with critiques of capitalism and imperialism?
Is there a simpler (or more complex) way of thinking about taxes and economic justice that is less fraught with political ambiguity?
Two members of our team, Alan Preston and Alison Goldberg, were in San Francisco last week to participate in this year’s Tides Momentum Leadership Conference. Alan was invited to give a brief overview of Wealth for the Common Good’s mission and our first campaign to reverse the Bush-era tax cuts on high-income households. And here he is…
Editor’s note: There are over 250 lead signers for the petition, not 250,000! But we’re working on it.
Published 10 September 2009. Linked from TheHill.com
By Alexander Bolton
Warren Buffett, the renowned investor and the world’s second richest man, told Senate Democrats that wealthy Americans need to pay higher taxes, giving Democrats something to mull as they address healthcare reform and soaring federal deficits.
Senate Democrats met with Buffett for more than an hour over lunch Thursday, peppering him with questions about the economy, said lawmakers in attendance.
“He said rich people are not paying enough taxes,” said Sen. Claire McCaskill (D-Mo.). “It was interesting to see someone who is such an aggressive capitalist, who believes so much in our capitalist system, saying we’ve got the scales way too heavily toward people who are very, very wealthy.”
Buffett told lawmakers that because of the cuts to the capital gains tax passed under former President George W. Bush, he pays taxes at a lower rate than some of his company’s employees.
It is an argument the investor has made before. Buffett said he paid a 16.5 percent tax rate on all his income because the tax rate on investment dividends and long-term capital gains is only 15 percent.
By contrast, a single employee at Buffet’s firm, Berkshire Hathaway, who earns between $33,000 and $83,000 must pay a 25 percent federal income tax rate.
Sen. Ben Nelson, a centrist Democrat from Nebraska, said he wasn’t sure whether Buffett’s chat would embolden his colleagues to raise taxes.
“I don’t know that people will move toward tax increases,” he said in reference to healthcare reform funding. “Tax is still for a four-letter word, and I think there are other ways to pay for this than raising taxes.”
In 2003, Congress cut the capital gains tax from 20 percent and created a separate 15 percent tax rate for dividends. Before then, dividends were taxed at the ordinary income rate, which is 35 percent for top earners.
Both tax cuts are due to expire at the end of next year.
Senators were eager to hear from the famous “Oracle of Omaha” as they struggle to solve the nation’s economic woes, which have helped drive Congress’s approval ratings to new lows.
Buffett told lawmakers that the long-term economic outlook of the nation was strong but declined to predict when the recession would end.
“People wanted to know what was going to happen in the next six months and he said, ‘I can’t tell you,’ ” recalled one participant.
Buffett told lawmakers that improving education and ensuring broad opportunity would help the nation grow economically over the next decade, but what most perked up some ears was what he had to say about taxing the rich.
Sen. Byron Dorgan (N.D.), chairman of the Democratic Policy Committee, who invited Buffett to the lunch, said colleagues wanted to hear the wisdom of an economic genius who draws 30,000 people to Berkshire’s annual meeting in Omaha, Neb. Buffett has met with Senate Democrats several times over the past few years.
“There were a lot of questions about the economy and his assessment of financial regulation,” said Dorgan.
Buffett shared with lawmakers his “common-sense approach to capitalism,” said one attendee.
He told lawmakers that they should overhaul the nation’s financial system in a way that allows investors to do well but also imposes a sense of responsibility on Wall Street.
Buffett supported President Barack Obama during the 2008 presidential election but has since criticized some of the president’s policy proposals. Earlier this year he called a cap-and-trade proposal to limit greenhouse gas emissions a “regressive” tax.”
Buffett has also urged Democrats to scale back their policy agenda to focus on fixing the economy.
The billionaire investor called the Employee Free Choice Act a “mistake.” The legislation, which would overhaul labor laws, is a priority of unions and many liberal Democrats.
But Buffett and Senate Democrats put aside their policy differences on Thursday to focus on the nation’s sluggish economy.
He gave a pep talk to some lawmakers who are wondering if the nation’s best economic days are past.
“He’s a real optimist and thinks this is a great country and our best days are ahead of us,” said Senate Majority Leader Harry Reid (D-Nev.).
One lawmaker who attended the meeting said that Buffett gave the audience a lesson on the economic history of the world, touting the U.S. system as one that unlocks individual potential, striking a contrast with totalitarian countries that limit economic freedom.
Lawmakers said it was refreshing to hear a positive assessment of the nation’s economic system after listening to months of criticism from the left about capitalist excess and the inability of markets to self-regulate.
Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, said the cap-and-trade proposal did not come up.
Many senators saw their own portfolios shrink as stock markets plunged over the last year, and no doubt would have liked to hear some personal stock advice from the market guru.
But Buffett said lawmakers didn’t invite him to ask for stock tips.
“They didn’t ask for any, they must have known how my recent ones worked out,” said Buffett, who has lost about $25 billion in wealth because of the recession, according to Forbes.com.
He declined to otherwise comment on his discussions.
Our colleagues at Citizens for Tax Justice have just released another stellar report, this time comparing the net effects of the Bush tax cuts with the cost to enact the House Democrats’ health care proposal.
How much did the Bush tax cuts cost the country between 2001-2010? $2.5 trillion.
How much would health care reform cost if it were phased in between 2010 and 2019? $1 trillion.
And here’s the kicker: 52.5% of the Bush tax cuts went to the wealthiest 5% of taxpayers.
These tax cuts will be fully enacted by the end of next year. After that, Congress and President Obama will have to decided whether to let them expire, extend them or repeal them altogether.
Which is to say, this is the moment for us to have a meaningful public debate about the need to rebalance our tax code.
This week the Connecticut legislature passed a controversial budget that included an income tax increase on couples making more than $1 million and single filers earning $500,000 a year. (Read more about it here.)
Naturally, the initiative had its share of opponents. But it also won support from residents — among them, a group of upper-income taxpayers.
Just before the budget vote came to a head, several of those supporters presented an open letter to the governor and lawmakers. The letter was organized by Better Choices for Connecticut Coalition and many members of Responsible Wealth. Here’s an excerpt:
“As upper-income residents of Connecticut who treasure the quality of life in our state, we believe that Governor Rell’s proposed budget cuts unnecessarily limit the State’s ability to maintain public structures and human services that are vital to keeping Connecticut strong and vibrant [...]
Part of the solution to the budget crisis lies in asking those with more resources to pay higher marginal rates. Progressive tax brackets are being used in many of Connecticut’s neighboring states and are an important means for establishing fairer, more reliable state revenue [...]
As upper-income Connecticut State taxpayers, we are willing and able to share in the solution to our state’s budget crisis.”
This letter — and these outspoken taxpayers — fosters precisely the kind of dialogue Wealth for the Common Good is trying to promote. Local, state and federal budgets are tenuous as our nation starts to recover from the economic crisis that peaked one year ago. To move beyond these challenges, it’s true: We all have to share in the solution — in a fair and equitable way. Kudos to Connecticut for taking a step in that direction.
