Warren Buffett’s tax idea would cover a week of spending
Warren Buffett is known as the Sage of Omaha for a good reason: his outstanding ability to find profitable investments that took him from a small portfolio owner to one of the richest people in the world.
Recently, he used his formidable reputation to suggest in the New York Times, Financial Post and an interview with Charlie Rose on PBS that the U.S. government should raise taxes on the 400 super-rich, who in 2008 together earned $90.9 billion and paid only on average 21.5 percent of it in taxes. That is lower than the average percentage paid by most middle-income Americans.
Buffett justifies his proposal on the grounds that the present tax system is unfair, parroting the mantra of tax-addicted interventionists and socialists everywhere. He said “It will not be pretty” in response to Rose’s question about what he thinks would happen in the United States if the present unfairness continues and unemployment remains high. What does he mean? Will there be riots in the streets or the proletariat rising to shed its shackles?
Buffett correctly notes that the proposed tax increases will do little to alleviate the present fiscal problems of the United States. If taxes on the super-rich were raised so that they paid not the present 21.5 percent but 50 percent of their incomes, revenues from the top 400 earners would go up by $26 billion (one half of $90.9 billion minus the present $19.5 billion). Since this year alone, the U.S. federal deficit will be around $1.4 trillion, or $3.8 billion a day, the new revenue would cover less than seven days of deficits.
The numbers are even worse for total federal spending. In 2010, that amounted to $3.6 trillion or $9.7 billion a day. Buffett’s new taxes up against that would be gone in just 2.7 days.
Tax hikes, as the CBO has said, would mean less economic activity and less incentive to work. Not to mention tax hikes would be adverse to economic growth. In short, you can’t tax your way to prosperity. But that won’t stop President Barack Obama and Democrats from playing up class warfare whenever it’s convenient.
H/T: Doug Mataconis