Warren Buffett spread out his 2010 tax return for Charlie Rose last week, showing the TV interviewer $62 million in adjusted gross income, taxable income of $39.8 million after deductions and a $6.9 million federal income tax payment.
That's a 17.4 percent tax rate, the lowest among the 21 employees at Berkshire Hathaway Inc.'s Omaha office and an example of the federal government "coddling" the rich, Buffett said in a New York Times column that called for raising taxes on those making $1 million or more a year.
The column sparked broad discussion about raising taxes on the rich — or anyone — as part of the government's effort to reduce the federal deficit. During the Rose interview, Buffett touched on other subjects, including his successor, his family's financial struggles in the 1930s, the future of the U.S. economy and troubles in the European Union.
Buffett made it clear he favors government spending cuts as well, including reductions in so-called entitlement programs such as Social Security and Medicare — spending promises he said the government can't keep. "I think getting rid of promises that you can't keep is important," Buffett told Rose.
He said government leaders made a "terrible mistake" not adopting the budget recommendations last year by a committee headed by Alan Simpson and Erskine Bowles that listed a combination of short-term and long-term spending cuts and tax increases. "Both sides were afraid to touch Simpson-Bowles. I mean, it made too much sense."
Buffett, who turns 81 at the end of this month, received $32,680 from Social Security last year and said the government shouldn't be paying him. "It's deposited in my bank account every month without even me knowing about it."
He donates more than $1 billion a year to the Bill & Melinda Gates Foundation and deducts charitable contributions from his taxable income. The amount he can deduct each year is limited, so he has a charitable carry-forward of about $10 billion. "I don't think I'm going to use it up."
Buffett said the economy seems to be recovering overall, noting that his 70 businesses "are doing better quarter by quarter by quarter, except those tied to housing." He expects the economy to recover during 2013 but added:
"I would say there's only two things that could cause me to be wrong on that, in my view.
"... People lose so much faith in government to handle things that they ... talk themselves into a huge funk in this country, and the second thing could be if somehow the troubles of Europe spilled over here."
Buffett said the solution to government debt problems in Europe is uncertain because the members of the European Union share a common currency and "gave up the right to print their own money. That was a huge, huge decision. I hope the United States never does it."
The U.S. economy has weathered much worse times than today, he said, noting that the Dow Jones Industrials Average hit a high on the day in 1930 that he was born — 242 — but in the next few years fell to 41.
"That's like the present Dow going to 2,000," he said, from its recent 11,000 or so. "You know, my dad lost his job. We had the Dust Bowl here and everything. We're living six times better than that now. The American system works."
Buffett criticized Republican presidential candidates who, during their recent debate in Iowa, all raised their hands to signal that they would reject a deficit-reduction plan that raised taxes but cut spending by 10 times as much.
"That was pathetic," Buffett said. "I mean, listen, I like Republicans. I mean, if you got Democrats on some core issue to them, they'd probably do something just as silly. But ... they take that attitude, they are really saying ... 'The country be damned, I want to win this primary.'"
Berkshire Hathaway has taken advantage of recent declines in the stock market, he said. "I like buying on sale. Last Monday (Aug. 8), we spent more money in the stock market buying than any day this year, you know."
Buffett also said Berkshire's board of directors has agreed on a person to succeed him as CEO, although that name may change as the years go by.
"I mean, there's no reason to have the board of directors start thinking about who the CEO should be the day after the present CEO leaves," he said. "I mean, they've neglected their job if they do that."
The simplistic response to Buffett's tax-the-rich proposal was "He can send in more money if he wants," but other published reactions covered a wide range.
Conservative and Republican groups generally criticized his ideas, saying the wealthy already pay a disproportionate share of taxes and higher taxes on this group would harm job growth.
Two progresssive political organization, Moveon.org and Rebuild the Dream, are looking for 200,000 signatures on an online petition to Congress, saying "I stand with Warren Buffett. It's time for Congress to stop coddling the super-rich and make them pay their fair share."
Other published comments:
» "Raising capital tax rates will not make the super-rich pay their 'fair' share; it will encourage capital flight, driving factories and innovation abroad. The rich will still get their high returns, but U.S. workers will have fewer jobs and lower wages." — Jeffrey Miron of Harvard University, CNN.
» "Buffett, whose $45 billion fortune ranks him second on Forbes' list of richest Americans, is perfectly positioned to counter the destructive notion that taxes can never be raised, even when they're at historic lows, as they are today." — San Jose (Calif.) Mercury News editorial.
» "Right now, our silence is consent to the status quo of budget cuts and unequal sacrifice. We need millions of ordinary citizens to speak up. And to complement this, we need tens of thousands of our nation's business leaders and wealthy individuals to speak out." — Chuck Collins, Huffington Post.
» "It is time that the government started to get serious about shared sacrifice. In fact, it's way past time. And guess who isn't sharing in the sacrifice. Try, the bottom half of workers in America, who pay no federal income tax at all." — Bernard Goldberg.
» "This entire discussion is a good example of why we should junk the corrupt, punitive, and unfair tax code and replace it with a simple flat tax." — Dan Mitchell, Biggovernment.com.
» "He is totally wrong about this. Editorial pages should stop coddling him by running his op-eds." — Arnold Kling, Library, Economics and Liberty.
A pair of 'givers'
Miami physician Phillip Frost has another Omaha connection besides his company's pending offer to buy Securities America Financial Services of La Vista.
In April, about the same time Securities America went up for sale, Frost and his wife, Patricia, signed the "giving pledge," the nonbinding agreement to donate half of their fortune to charity. Buffett and fellow billionaire Bill Gates started the pledge in June 2010 and so far have 69 signees.
According to the Miami Herald, Frost developed and sold two major pharmaceutical companies, Key Pharmaceuticals and IVAX, and heads OPKO Health, another drug company. His wife is a retired elementary school principal.
Both have been active philanthropists in southern Florida. Earlier this year they announced a $35 million gift toward building a new Miami Science Museum.
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