A Minimum Tax for the Wealthy
By WARREN E. BUFFETT
November 25, 2012
Between 1951 and 1954, when the capital gains
rate was 25 percent and marginal rates on dividends reached 91 percent in
extreme cases, I sold securities and did pretty well. In the years from 1956 to
1969, the top marginal rate fell modestly, but was still a lofty 70 percent —
and the tax rate on capital gains inched up to 27.5 percent. I was managing
funds for investors then. Never did anyone mention taxes as a reason to forgo
an investment opportunity that I offered.
Under those burdensome rates, moreover, both
employment and the gross domestic product (a measure of the nation’s economic
output) increased at a rapid clip. The middle class and the rich alike gained
ground.
So let’s forget about the rich and ultrarich
going on strike and stuffing their ample funds under their mattresses if — gasp
— capital gains rates and ordinary income rates are increased. The ultrarich,
including me, will forever pursue investment opportunities.
And, wow, do we have plenty to invest. The Forbes 400, the wealthiest individuals
in America, hit a new group record for wealth this year: $1.7 trillion. That’s
more than five times the $300 billion total in 1992. In recent years, my gang
has been leaving the middle class in the dust.
A huge tail wind from tax cuts has pushed us
along. In 1992, the tax paid by the 400 highest incomes in the United States (a
different universe from the Forbes list) averaged 26.4 percent of adjusted
gross income. In 2009, the most recent year reported, the rate was 19.9
percent. It’s nice to have friends in high places.
The group’s average income in 2009 was $202
million — which works out to $97,000 per hour. Yet more than a quarter of these
ultrawealthy paid less than 15 percent of their take in combined federal income
and payroll taxes. Half of this crew paid less than 20 percent.
And — brace yourself — a few actually paid
nothing.
We need Congress, right now, to enact a minimum
tax on high incomes. I would suggest 30 percent of taxable income between $1
million and $10 million, and 35 percent on amounts above that. A plain and
simple rule like that will block the efforts of lobbyists, lawyers and
contribution-hungry legislators to keep the ultrarich paying rates well below
those incurred by people with income just a tiny fraction of ours. Only a
minimum tax on very high incomes will prevent the stated tax rate from being
eviscerated by these warriors for the wealthy.
All of America is waiting for Congress to offer a
realistic and concrete plan for getting back to this fiscally sound path.
Nothing less is acceptable.
Warren E. Buffett is
the chairman and chief executive of Berkshire Hathaway.
