Watch: Warren Buffett Calls For Tax Reform

Warren Buffett sat down with Tom Brokaw on "NBC Nightly News" last night to discuss his problems with the US tax structure. He described an informal poll of his office, where the average tax rate was 32.9 percent, compared to his 17.7 percent, citing that as evidence that "the tax system has titled toward the rich in the last 10 years." He also talked about hedge fund managers and the lower tax rates they enjoy. Watch:

From NBC, 10/29

Buffett prefers a progressive consumption tax system. Share your thoughts on that in the comments.

Comments

[gappytoofcondi]

If nothing else, the Alternative Minimum Tax should be adjusted for inflation. This would eliminate millions of taxpayers that fall into this trap. Congress should get off their asses to address this issue.

Also, the social security tax should be amended to allow higher wage taxpayers a choice. Either pay the FICA tax on all of thier wages and be allowed to receive SS benefits OR continue to be allowed no FICA deducted above the taxable thresholds and then NOT be able to receive SS benefits. This would help to eliminate the projected shorfalls in the year 2037.

[Annette]

Get rid of the cap on Social Security. It isn't anything except a give away to the rich. They should pay and be entitled to collect. They really are no different than the rest of Americans other than in some cases they came out of the right womb,were lucky,or smart. They still are Americans and entitled to the same benefits and should pay the same taxes. What would you do with the wealthy who are well off, opt to get out of social security and then become poor. Let them starve? No, they pay the same and get the same benefits.

[vippy]

If our economy is driven by consumer spending what happens when you don't pay the consumer's
a liveable wage? Seems to me they knew what was to come if they did that but went ahead anyway and did not keep the wages up like they did the CEO's paychecks. Now we see the results. Where is this going to - back to the days of slave labor ? And this the world over,
wherever the US had its touch.

[vippy]

Canada is preparing to give a 60 billion dollar tax cut - source FOX NEWS this morning!
Let the US follow now. Our spending has gotten
way out of control. All this earmarks and special interest should be outlawed.
let us get progressive. I am for the flat tax!

[madprophet]

I am Canadian, and you had best qualify that 60 billion dollar tax cut.

1. That 60 billion is over 5 years, so average 12 billion/year.
2. Canadian gov't budget is on line for a 14 billion dollar surplus this year, about the 9th annual surplus we have had consecutively.
3. We don't get involved in stupid wars (OK, we are in Afghanistan) that cost us untold amounts of money.
4. We don't run a peacetime (err...when was the last time the U.S. was not invading someone) military budget about 4% of our GDP.

We have a significantly different tax structure to yours, and a flat tax system is the last thing I would suggest it is.

You want to solve your economic and foreign policy woes? Allow a Canadian to be your president for 2 terms.

[MaciasJ]

Haha, excellent!

[therealredstateblues]

We could learn a lot from our friendly northern neighbors. Like how to mind our own business around the world, and how to take care of our "lesser" citzens better.

[Annette]

Sounds good to me. Any Canadian has to better than our current idiot in chief.

[johnnyjust]

Canada plays no significant role on the world's stage.

Insignificant.

America's hat.

[jfmxl]

Interesting talk. Mike Gravel is running right now and is picking up support among the... let's see... the "well off?"... for several of his policies, and for his personal integrity in particular.

Mike Gravel is a vociferous proponent of a consumption tax. Warren Buffet ought to investigate.

If Mr Buffet feels more comfortable speaking with someone else in his tax bracket, or lower according to the statement on "hedge fund managers", he can give Gregory V Chase a jingle.

That 27 year old is putting his money where his mouth is.

[Trevor51181]

I had never heard of him, but you seem to be correct. He is putting his money where his mouth is, and that's greatly appreciated.

[ResidentChimp]

If Buffett thinks the government deserves more of his money, all he has to do is give it to them.

[therealredstateblues]

Warren Buffet himself accounts for more than 2/3rds of the charitable giving among the wealthy. He is the legacy of Carnegie and Ford, both of whom gave over 50% of their income to charitable causes - during a time when there were no tax breaks for doing so.

warren is doing just fine in this regard - when are the rest of the uber wealthy going to live up to their obligation?

As Theodore Roosevelt famously said - the rich beneifit more from the privileges of a free society and therefore have a responsibility to contribute back to it.

[Trevor51181]

You can't blame Buffett for the ills of an entire coutnry. Buffett is doing his part.

[paixa3]

I admire Buffet. He is one of the very wealthy who gives to charities unrelentingly.

[Trittydi]

32% and no health care? They do better than that in Canada.
*

[tkondaks]

Yes, the highest marginal rates are pretty much the same in Canada as they are in the U.S. However, the big difference is that the higher rates kick in at much, much lower taxable income amounts in Canada than in the U.S.

[ResidentChimp]

Of course in Canada, if your wife has a difficult birth coming up they send her to Washington State. About forty a month.

[therealredstateblues]

Bulll - show me the evidence not some lame annecdotes. here we have a thriving bus industry taking people TO canada for drugs and health care.

[exflatlander]

And I had any students born in Canada (of Canadian parents iving in US) when I lived along the border because they would get top care for noting. The ederly ften returnd to Canada for the same reason. Call them what you will; they are no worse than Aericans who take advantage of both worlds, except these were middle class people.

[ih2005]

I was surprised to hear that Buffett preferred a progressive consumption tax. The FairTax Act (HR 25 / S 1025) qualifies. While many who are invested in the current income tax system seek to demagog the well-researched FairTax plan (1), FairTax's theoretical underpinnings have been professionally reviewed (2), and its acceptance in the professional / academic community continues to grow (3).
Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown (4) because of the hidden aspects of the current system that make political accountability impossible. Tom Frey, of the DiVinci Institute, foresees the coming collapse of the income tax system (5).
(1) http://snipurl.com/taxpanelrebutted (.pdf)
(2) http://snipurl.com/taxnotes_galerebut (.pdf)
(3) http://snipurl.com/econsopenletter (.pdf)
(4) http://snipurl.com/meltdowninprogress
(5) http://snipurl.com/incometaxcollapse
I concur with Buffett, that it's well past time to scrap the tax code ( http://snipr.com/scrapthecode ).

[tkondaks]

Thank you, ih2005, for some great articles on a very exciting proposal.

[martinchill]

the fair tax is smoke-and-mirrors.

it's all fancy proposals but not a workable platform. no one who talks about it kind REALLY say how it will REALLY work.

the devil's in the details.

[DallasNE]

I'm not sure that Tom Brokaw really understood what Warren Buffett was saying.

As for the progressive consumption tax, I want to hear more. How can a consumption tax be made progressive? I have long been opposed to a consumption tax precisely because it is not progressive. Convince me it can be made progressive and I am more than willing to listen.

[erinaceus]

Consumption taxes can be made progressive if you preferentially tax (or exempt) goods and services consumed by the rich (or poor). You could, for example, levy a tax on yachts, golf clubs, caviar, and mink coats; at the same time, you could exempt from taxes mass transit fares, soccer balls, bread, and (non-designer) clothing. The result would be more progressive.

[themodernleader]

Buffett seems to be the only economic liberal of public note. Most certainly, the Democrats would rather talk about the supernatural than talk about the issue of our unfair tax system and declining economic, financial system which is 95% of the ball game.
when a Country's leadership is so owned and controled that only a Predatory Capitalist, sated with wealth and, undoubtedly, filled with some guilt and shame, is the lone voice calling for a fair shake for the common citizen, there is not much else to be said about any hope of reversing our Nation's precipitious decline. Our present candidates for President need to think more about the people's interest rather than their own thirst for political power while studying our Republic's foundations and history.

[Annette]

And what makes you think he is filled with guilt and shame? He has been a liberal for decades. To generalize based on friedman, Ayn Rand,Forbes, Bush, Cheney and their ilk is incredibly stupid.

[scoobynooby]

Hmm I just can't help but smell a rat in there somewhere.

[OfficialA]

Buffett vigorousy opposed Bush's effort to undo the estate tax, as did Bill Gates. There's no rat here, but unfortunatey there's one in the White House.

[GhostofBillHicks]

Seems i can remeber a clip of Buffett commenting about Bushs new deal.Right after he was"elected"to office. The deal was to"give everyone who pays taxes,will get a refund"dea­l.Remember that one?
Anyway, Mr.Buffett,when asked about the refund/tax reduction thing his reply was:"your getting SCREWED"... an honest,no BS answer...i like that.

[OfficialA]

Howard Dean said the same thing in 2003-04. The one-time refund was simply the price Bushco paid to buy public complacency for huge and ongoing tax breaks for the wealthy.

[GhostofBillHicks]

agreed

[realitytrumpsbull]

Oh, let em eat overdue tax returns...

[zannamar]

Buffet is right. We should get rid of income tax and have a consumpton or sales tax. The more you spend the more taxes you spend. I bet it would help with all the credit card debt and encourage saving money.

[GreedyOldPsychopaths]

Two items:

First, the 16th amendment was ratified in 1913 and won popular support as a means to "level the playing field" between tariffs, sales, and property taxes paid by the vast majority of Americans and those making more than $4,000. That is, the federal personal income tax was originally designed to apply only to the richest 1% of the population as a means to equalize the tax levies.

Tax rates and brackets changed during the two world wars, however, most of the changes in WWI were repealed following the war. The same cannot be said for WWII. Also, the SC Justices made various rulings modifying use of the 16th amendment. But prior to WWII, less than 7,000,000 Americans actually paid federal personal income tax.

We need to reconsider the original rationale for the 16th amendment. It was intended to equalize tax load relative to total income for the top 1% incomes as compared to the average of the remaining 99%. It has mutated to become exactly the abomination which its original ratifying supporters abhorred, another unfair tax.

Second, let's close the loopholes in the tax structure for corporations. End off-shore tax shelters and corporate accounts. If you want to do business in the US, especially to sell product, then you should be reasonably expected to support OUR economy and system of governance.

This is not a diatribe about shaking money from the rich and corporations. Nor is it socialism. In fact, it's the diametric opposite. Income diversity should be reasonably expected. But with great privilege comes responsibility and accountability. Paying a fair share for those few members grossly benefiting from an economy that has 300 million participating members should be the expectation, not the exception.

[therealredstateblues]

Great post - economic fairness is NOT socialism - we need to continue to slay that myth

[martinchill]

flawed post - the 16th was never properly ratified.

scandals never cease.

[localman]

The 16th ammendment was never properly ratified.

http://www.givemeliberty.org/features/taxes/notratified.htm

Furthermore there is no law written anywhere that states that you must pay a tax on your income. The word income is not even defined in the tax code. When the late Aaron Russo interviewed Sheldon Cohen, in America: Freedom to Fascism, the IRS commissioner and author of the Tax Code Mr. Cohen could not name a law, but instead pussyfoots around the question and states that there is a law but only because it is enforced in the special tax courts.

link to interview

http://www.youtube.com/watch?v=nX-03Sf1wDo

link to interview of juror who found a 'tax cheat' not guilty due to the lack of a law being shown in court.

http://www.youtube.com/watch?v=0CcHgHeraZI

Don't listen to the MSM, the only good option coming up in '08 is Dr. Ron Paul. He has a voting record that stands for itself.

[sonofsamphm1c]

Flat Tax - I rather pay 17% flat tax than my
current tax rate.

Sorry, but it can't be that low. Well, unless you want to pay a fee to pee.

[therealredstateblues]

Don't be fooled by euphemistically so called "flat" and "fair" tax schemes. Any one who payed attention in econ 101 knows that these type of tax schemes are regressive taxes in disguise,

In fact the "fair" tax was devised by that nutty celebrity scientology cult as a way for their rich members to avoid taxation on their wealth

[jsarets]

I'm shocked to find that a lot of left-leaning folks believe that a flat tax is a progressive policy. In fact, some might say that the term progressive in its most narrow sense refers to a tax policy where rates are scheduled according to income or wealth.

Progressive tax policy is necessary because capitalism naturally redistributes wealth toward the rich. When done appropriately, progressive taxation is not a redistribution of wealth but rather a correction of the redistribution of wealth.

If the inequity gets out of hand, a progressive tax can overcompensate to restore a reasonable balance. Obviously a functional society has to reward productivity by creating rich people and therefore poor people. The key is to find the right standard deviation and skew that maximizes overall prosperity.

Yes, regulating the distribution of wealth is the job of the government even if you don't believe that the government should spending money on things like education and welfare. We should maintain a sensible distribution curve and allow the free market to dictate how individuals move along that curve. The market shouldn't dictate the shape of the curve itself.

[freebrew]

Good post.

The rich have the power of the purse. They control the wages and benefits of those who work. Those need to remain fair for a society to prosper.

Wages should not be taxed as income, it is a trade of time for money. There should, at the very least, be a deduction for that time as a cost of doing business. What is your time worth?

As for government, its function should be providing education and medical benefits for every citizen. As Kennedy said, that is our greatest defense. The Publicans have taken away our future by destroying our education system and making healthcare benefits available only to those that either work for a corporation or are independently wealthy.

[Trevor51181]

Bingo on the first paragraph. A flat tax, by definition, is not progressive.

The rest of what you said is correct as well, but that first paragraph seems to be very important in the discussion.