Pablo Martinez Monsivais/AP
Warren Buffett, July 18, 2011.
Warren Buffett, July 18, 2011. Pablo Martinez Monsivais/AP
Warren Buffett, the Oracle of Omaha and one of the world's wealthiest individuals, is well known in investment circles for his advice against trying to time the market.
But trying to time a political debate is an entirely different matter for the master investor.
Buffett has a New York Times op-ed that's getting much attention Monday. In it, he makes an argument that he has made for years, that the federal government should tax the superwealthy at higher rates because their rates are too low relative to those paid by other taxpayers.
What's different this time is the timing. Buffett is weighing in now because he wants to have an impact on the members of Congress' supercommittee as they prepare to decide how to reach $1.5 trillion in deficit reductions over a 10-year period.
Buffett argues that the supercommittee needs to be more ambitious in its deficit reduction and that higher tax rates on the superwealthy will help them get there.
Before offering his recommendation to Congress, Buffett attempts to take the wind out of the sails of congressional Republicans' argument that higher tax rates on the wealthy would harm job creation:
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn't refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation.
But Buffett doesn't only take on conservative dogma but that of the liberal variety, too. He clearly wants to see reforms to entitlement like Medicare, Medicaid and Social Security:
Job one for the 12 is to pare down some future promises that even a rich America can't fulfill. Big money must be saved here.
He doesn't spend much time on entitlements, however. He's mostly trying to get congressional Republicans to move off their vow to not increase taxes:
The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice.