| Relentless |
07-31-2009 04:29 PM |
It's strange how the barely rich equate high taxes on the top 1% with themselves. Warren Buffet has PERSONALLY paid more in taxes than most of the 1% combined. In 2003 his company paid 2.5% of all corporate taxes paid in the US... TOTAL.
Some people see a strong country, a well funded military, a healthy populace, an educated citizenry and the rest of the things taxes pay for as more important than their next car or webmaster toy.... including the guy paying more taxes than anyone in the last couple decades... :2 cents:
Quote:
Warren Buffett's Tax Fetish
Vahan Janjigian, Forbes Growth Investor 05.01.08
It may seem a bit odd that Warren Buffett, one of the greatest capitalists the world has ever seen, resides firmly in the liberal camp when it comes to tax policy.
Buffett favors higher taxes on both income and wealth. His writings call for higher income taxes at the corporate level and more progressive income taxes at the personal level.
In his 2003 letter to shareholders, Buffett stated that Berkshire was about to make a $3.3 billion tax payment, or 2.5% of all corporate taxes paid to the U.S. Treasury that year. Buffett said Berkshire was "among the country's top 10 taxpayers." Buffett also made a strong--but perhaps unintentional--case for tax simplification. He said Berkshire's tax return for the previous year (2002) totaled 8,905 pages.
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By 2006, Berkshire's federal tax burden had grown to $4.4 billion. Its tax return that year amounted to 9,386 pages.
The government is no doubt grateful that Berkshire pays so much tax. Berkshire's shareholders, however, should be at least a little concerned. As Buffett said, Berkshire's federal tax bill amounted to 2.5% of all taxes collected in 2003. But Berkshire made only 1.2% of total corporate income that year. In other words, Berkshire appears to be paying much more than its fair share of taxes.
Yet Buffett seems proud that Berkshire generates so much money--and so efficiently--for the government. And although he thinks individual taxpayers carry too much of the overall tax burden, in a Washington Post op-ed dated May 20, 2003, Buffett took the Senate to task for passing a bill that would have eliminated individual taxes on dividend income.
Buffett argued that the bill would benefit no one but the rich. Although Berkshire pays no dividends, Buffett pointed out that if the dividend tax were eliminated and Berkshire were to implement a $1 billion dividend, he personally would receive $310 million tax free. He said this would drive his personal tax rate all the way down to 3%.
Despite the Senate's efforts, taxes on dividends were not eliminated. However, when President Bush finally signed the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum tax rates on dividends and long-term (i.e., longer than a year) capital gains were both lowered to 15%.
Those like Buffett who oppose lower taxes on dividends ignore the fact that dividends have already been taxed at the corporate level. This is the "double taxation" investors and economists often complain about. Many economists argue that corporate income should be taxed only once. If corporations pay the tax, individuals should not have to pay an additional tax. However, if individuals pay the tax, then corporations should not pay a tax in the first place.
Berkshire's directors made a wise decision not to pay a dividend in 2003. Unlike interest payments on debt, which are tax-deductible, dividend payments must be made from a corporation's after-tax income. Therefore, if Berkshire had paid a dividend in 2003, there would have been absolutely no effect on its $3.3 billion tax bill. However, by paying a dividend, Berkshire would have forced its shareholders to pay an additional tax. If for some reason they really wanted to return cash to investors, it would have been better to initiate a share repurchase. Although the shareholders would have been taxed on their gains, the tax would have been less onerous than if they had received dividends.
Unlike income taxes, the estate tax is based on wealth. Liberals refer to it as the "wealth tax." They argue it is right for the government to confiscate wealth from those who have substantial estates soon after they pass on. After all, as the argument goes, the privilege of living in America is what made them rich in the first place. Instead of simply passing on their wealth to the next generation, the wealthy should be forced to relinquish a large chunk of their treasure to the government once they die.
This kind of thinking equates wealth to luck. Those who think this way believe luck is the most significant factor explaining the difference between the rich and poor. Even Buffett credits luck for much of his success. He says he was lucky to have been born in America and even luckier that "I came wired at birth with a talent for capital allocation."
Conservatives, on the other hand, refer to the estate tax as the "death tax." They object to the government confiscating someone's estate simply because he or she died. They point out that wealth is what is left over after taxes have been paid. It would be wrong to tax that wealth over and over again. Conservatives stress that a death tax punishes hard work and frugality, and encourages wastefulness and spendthrift behavior.
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In addition, conservatives argue that wealth is not always liquid. Some of it might be in stocks and bonds, but a good chunk might be invested in hard assets that are needed to run a business. Taxing wealth could force the business to shut down because it has to sell assets to raise cash to pay the government. Conservatives say it would be wiser to allow the heirs to continue running the business. The government, after all, will get its due by taxing the income the business produces.
Nobel laureate Milton Friedman was a vocal critic of the estate tax. He called it an immoral tax that punishes virtue, discourages saving and encourages wasteful spending. He even questioned its value as a source of revenue for the government. He argued that the government spends more money each year trying to collect the tax than the tax actually brings in.
Singer Pat Boone, who also serves as spokesman for the 60 Plus Association, even went so far as to accuse Buffett in The Washington Times of personally benefiting from the estate tax. He said Berkshire had purchased a business that profited from selling estate tax insurance. This kind of insurance policy makes sure that heirs have enough money available to pay the estate tax without having to liquidate assets.
Several members of the megarich class, including Buffett, George Soros and William Gates, Sr (Bill Gates' father), opposed efforts by the Bush administration in 2001 to eliminate the estate tax. Gates testified in Congress and expressed concern that eliminating the estate tax would reduce charitable donations.
Although there is little empirical evidence linking charitable contributions to a motivation to avoid taxes, giving away your fortune before you die is one sure way to avoid the estate tax. In 2004, The Wall Street Journal suggested to Buffett that he should make sure his money would go to the government if he felt so strongly about the need for an estate tax. The Journal challenged him not to take advantage of the loophole in estate-tax laws by donating his wealth to a foundation before his death. However, as everyone knows by now, this is exactly what Buffett did when he pledged to give $31 billion to the Bill & Melinda Gates Foundation and another $6 billion to foundations run by his children.
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