“In a spirit of Thanksgiving,” as they put it, more than 400 U.S. business owners and professionals last week signed a petition circulated by a Boston group, Wealth for the Common Good, that called on Congress and President Obama to let tax cuts for high-income earners expire Dec. 31.
The cuts, implemented under President George W. Bush, are set to expire for all taxpayers, but efforts are under way to extend them. The petition signers say there should be no extension of the cuts for those with taxable incomes of more than $200,000 for individuals and $250,000 for joint filers.
Citing government estimates, they wrote that letting rates return to the high-30-percent range would raise “an estimated $700 billion over 10 years” to invest in “education, health, job creation, renewable energy, transportation,” and you get the picture.
The idea has support in some surprising places. “People at the high end – people like myself – should be paying a lot more in taxes,” the second-richest American, Berkshire Hathaway boss Warren Buffett, told ABC News in a program scheduled to air Sunday night.
The idea that money will “trickle down” from the rich to workers “has not worked the last 10 years, and I hope the American people are catching on,” Buffett said.
The Boston group is taking the case to the working rich at local levels.
“It’s damaging to the economy, both short-term and long-term, to continue the tax cuts for the top income rates,” especially for “unearned” investment income, petition-signer Joe Magid, owner of Gryphon Systems, a Wynnewood info-tech consultant, told me.
“Your hedge fund managers . . . they’re paying just 15 percent,” said Magid, while mid-six-figure incomes are charged more than twice as much. “That’s sort of insane.”
But don’t low taxes promote investment and job growth? “Ridiculous,” Magid said. “An ‘S’ corporation [that passes both income and losses on to shareholders, who then report income or losses in their individual tax returns] like my business, whatever isn’t spent to hire people and improve the infrastructure of my company goes to me, the owner, as personal income that I’m paying a lower tax on.
“That [incentivizes] me not to hire people. If the marginal tax rate on the 10-millionth dollar of my income is the same as on my first $1 million, I have no incentive to invest in my company. If I had to pay higher taxes it would be easier to decide I should invest more in my company and make more money.”
Magid cited a 2002 article in the Harvard Business Review by scholar Mark Buchanan, subtitled “Wealth Distribution and the Role of Networks,” that associates lower tax rates with greater wealth disparity, and vice versa.
“The bottom line is, if you tax work over investment, you concentrate wealth,” Magid told me.
“Hello! Look what’s happened in this country since [President Ronald] Reagan’s tax cuts.”
Magid is for low taxes on venture capital investments and other financing for early-stage companies. But why, he asks, should hedge funds and buyout-fund managers and other wealthy Americans be “subsidized” if they’re just “going to use the money for offshoring jobs” through foreign investments?
Steve Weinberg, who is the second-generation owner of National Foundry Products Inc., a Philadelphia manufacturers’ rep agency, says he signed the petition “out of a basic sense of fairness.”
The way Weinberg figures, “We have to invest in our future. I want to see our country succeed. If we don’t invest, we’re not going to succeed.
“In my work, I go around the world. I know what happens in countries where there’s no national infrastructure to support hardworking people.
“India is emerging. They’re moving in the right direction because they have invested in their national infrastructure. Meanwhile, we’re cutting back. It’s a moral decision, and it’s a business decision, and it’s wrong.”
Weinberg and Magid both admitted their own incomes haven’t always stayed above the $200,000 threshold in the recent recession.
And even in the low- to mid-six-figures, says Weinberg, “It’s hard to give more [in taxes]. If you send your kids to private schools, it’s easy to run up expenses. I have empathy.
“But we have to invest in education, in energy, in R&D. It makes more sense for people who are a little more able to make due to do their part.”