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Warren Buffett said:SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”
Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.
Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.
So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.
With all due respect to Mr. Buffet, I think he's missing the point, and he's overlooking the vast majority of people who are "rich" (at least by my standards) but not "super rich". The super rich (as I think of them) are financially independent. They are going to be ok no matter what happens. If their tax rate goes up, it just means they'll pocket only $10M instead of $10.5M. (Or more likely they'll get their lawyers and accountants to figure out a way around the system so that they can still pocket $10.5M.) I really can't feel bad for them.
No, the vast majority of the "rich" aren't really that rich at all. I'm thinking of the small business owner who may be an S-corp. Maybe their company is grossing $300K. Maybe they are employing some people, they're working 80-hour weeks, and they're taking home less than $100K. Now the government comes in and says, "I still expect you to employ the same number of people, continue working 80-hour weeks, but you'll only take home $80K." Not gonna do it. These types of small businesses account for the majority of employment in the US, and to put a bigger burden on them will likely mean they'll not hire that extra person or lay off the one they recently hired or cut back on benefits, etc.
I would be much more comfortable raising the rates on millionaires, who can easily absorb it, but to penalize the very fabric of our employment system is asking for trouble.
That's encouraging, but all I ever hear from the news is that everyone is still fixated on the $250K number. Much too low imo.Buffett addressed this concern quite reasonably by suggesting that the cut-off point be raised, so that it is not overly burdensome on American small business owners.
No, the vast majority of the "rich" aren't really that rich at all. I'm thinking of the small business owner who may be an S-corp. Maybe their company is grossing $300K. Maybe they are employing some people, they're working 80-hour weeks, and they're taking home less than $100K. Now the government comes in and says, "I still expect you to employ the same number of people, continue working 80-hour weeks, but you'll only take home $80K." Not gonna do it. These types of small businesses account for the majority of employment in the US, and to put a bigger burden on them will likely mean they'll not hire that extra person or lay off the one they recently hired or cut back on benefits, etc.
I'm with you. It can't accomplish anything. Even if a tax were applied to all the multi-millionaires sufficient to bring in, say $100B, that's virtually *nothing* compared to $15+ trillion. It's gotta be all politics.I'm still not sure what this tax hike is meant to accomplish. It's as much a "downpayment" on the debt as much as a $100 bill is a downpayment on a mortgage. And this all assumes that the debt is a problem to begin with.
A couple bits in contention:
The marginal rate changes needed to reduce $100K ordinary income by $20K would be near double what they are today. A top marginal rate of 70% is way too high even for most Keynesians.
$300K gross in general means a 1 person, or perhaps 2-3 person entity at most, and it would be quite rare for the owner to take home anywhere near $100K. Most of the time, the $300K point is where folks are deciding whether to hire their first employee... which is usually an expense of of $50K-100K which also substantially reduces their tax liability.
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