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.