Omaha investor Warren Buffett has complained for years that he and his fellow billionaires don't pay enough taxes, and Monday he detailed his exact federal tax bite.
“My friends and I have been coddled long enough by a billionaire-friendly Congress,” Buffett wrote in an op-ed article for the New York Times, aimed at the new deficit-fixing supercommittee formed by Congress. “It's time for our government to get serious about shared sacrifice.”
Buffett proposed that the committee cut federal spending but first raise taxes on people making more than $1 million a year, plus an additional increase on those making $10 million or more a year. In 2009, 236,883 people reported income of more than $1 million, and 8,274 people reported income of $10 million or more.
As for himself, Buffett's 2010 federal income and payroll tax bill was $6,938,744. That's 17.4 percent of his taxable income, which would total about $40 million.
His tax rate is about half of the average 36 percent paid by the 20 other people who work at his Omaha office, Buffett wrote. That's because they pay taxes of 15 to 25 percent on their incomes plus payroll taxes for Social Security and Medicare, and their employers also pay payroll taxes on their behalf.
Most of his income, and much of the incomes of most other “mega-rich” people, Buffett wrote, comes from dividends and gains on the stock market and other income that is subject to a 15 percent federal income tax rate, instead of the higher tax rates on wages and salaries.
High-income Americans have been getting bigger tax breaks in recent years, he said in the article.
Between 1992 and 2008, he wrote, the 400 highest-income Americans reported an increase in income from $16.9 billion to $90.9 billion, but a tax rate that fell from 29.2 percent to 21.5 percent. The 2008 figure puts the average income for those 400 Americans at $227.4 million.
Of those 400, all had capital gains on stock that were taxed at 15 percent, and 88 of them had no wages subject to payroll taxes.
The low rates on dividends and stock gains are intended to encourage investors to put their money at risk so that companies will have the capital to invest and create more jobs.
But, Buffett wrote, “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.”
Buffett said rich people are mostly “very decent people. They love America and appreciate the opportunity this country has given them. . . . Most wouldn't mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.”
Investors created more jobs in the past, when tax rates on investment profits were higher, than they do today with low rates, he said.
“Americans are rapidly losing faith in the ability of Congress to deal with our country's fiscal problems,” Buffett wrote. “Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.”
The 12-member supercommittee, created earlier this month, is supposed to recommend at least $1.5 trillion in deficit cuts by late November. The panel includes six senators and six representatives, evenly divided between Democrats and Republicans.
Buffett said the supercommittee should cut spending to reach its goal, but only after raising taxes on the wealthy as a form of “shared sacrifice.”
“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Buffett wrote, adding:
“These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It's nice to have friends in high places.”
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Democratic Reps. James Clyburn, Chris Van Hollen and Xavier Becerra will join Republican counterparts Dave Camp, Fred Upton and Jeb Hensarling. The Senate team includes Republicans Jon Kyl, Pat Toomey and Rob Portman and Democrats Patty Murray, John Kerry and Max Baucus. Murray, of Washington state, and Hensarling, of Texas, will be co-leaders.