Judging the debate between billionaire Warren Buffet and billionaire Charles Koch about the fairness of the tax code

Before appearing on the Charlie Rose Show to explain his views, billionaire Warren Buffet wrote a detailed op-ed piece in the New York Times about why he believes the Federal income tax rates rates paid by the affluent (net of loopholes and offsets) should be significantly increased so that they become at least equal to those paid by families who make a lot less money. Here is part of his explanation:

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. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors. . . .

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

On what basis, you may be wondering, could anyone support a system that allocates the tax burden in such a fashion? The folks at the conservative magazine National Review have your answer. They have published a short piece called, “Koch Responds to Buffet’s Call for Tax Hikes,” with a fanfare (“To my knowledge, you’re reading it here first.”) So here in its entirety is multibillionaire Charles Koch’s response to Buffet:

“Much of what the government spends money on does more harm than good; this is particularly true over the past several years with the massive uncontrolled increase in government spending. I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.” — Charles G. Koch, Chairman and CEO, Koch Industries, Inc.

The glaring problem with Koch’s position — even if one accepts his factual assertions as true — is that it is an argument for smaller government, not an argument for keeping a tax system that favors the affluent over the middle class. You might agree with Koch that a smaller government is needed. Or you might not. Buffet doesn’t say what he thinks about it. Buffett’s point is simply that — regardless of what size of government that Americans choose to have — the burden of paying for it should be allocated fairly. The fiscal burden should not — as it does now — fall disproportionately on those who can afford to pay taxes least of all. If Koch has an answer to this, he has not given it.

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About Guy N. Texas

Guy N. Texas is the pen name of a lawyer living in Dallas, who is now a liberal. He was once conservative, but this word has so morphed in meaning that he can no longer call himself that in good conscience. Guy has no political aspirations. He speaks only for himself.
This entry was posted in Economics, Finance, Media, News, Politics. Bookmark the permalink.

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