Jim Terry
Mr. Buffet's dilemma, not enough taxes?
By Jim Terry
The president, in his jobs speech the other night, cited Warren Buffett's article last month in the New York Times urging the government to extract more taxes from him and other rich guys.
Buffett and his rich friends don't have to wait on Washington to raise their taxes. If Buffett feels he should pay more taxes he should fire all his highly paid accountants and file a simple tax return declaring all his income as ordinary income.
I am not aware that Internal Revenue Service or the US Tax Code requires anyone to take advantage of deductions and special treatment of income which legally allows an individual to lower his tax liability. As Buffett says, "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." The operable word is 'allowed.' No one forces these guys to take these government deals.
Take a guy named Joe, a restaurant manager earning $90,000 per year with a $160,000 mortgage. He may take a standard deduction or he may itemize deductions. He may use whichever method he chooses and no federal law requires him to choose the method. Joe may leave money on the table if he takes a standard deduction. But if Joe wants to avoid detailed record keeping and paperwork by filing a simple return, that is his choice even if he pays higher federal taxes.
Buffett went further to say, "These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us..." Does Buffett think we are goons. Buffett has showered blessings on liberal politicians to the tune of about $120,000 over the years. Would he have us think he was paying those politicians to not shower blessings upon him?
The interesting contrast in Buffett's take on special treatment of income versus the president's view enunciated in his speech-Buffett never mentions loopholes while the president mentioned the "L" word several times and once stated, "I'll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington. By eliminating pages of loopholes and deductions..."
If pages of loopholes exist, it is because Washington politicians, such as Obama, have a habit of passing multi-thousand page bills without reading what they pass. Remember what Speaker Pelosi said about Obamacare? "We have to pass this bill to see what is in it." Loopholes exist in our tax laws, for they are omissions in the laws that some clever lawyer finds. Loopholes exist in contracts, city ordinances, treaties and almost anything involving humans. Most of what is referred to as loopholes in our current tax system, however, are deliberate treatments of income passed into law by the congress-those blessings Buffett says are showered on him.
In his article, Buffett justifies his call for higher taxes on rich guys by complaining that while he paid federal taxes at a rate of 17.4%, many of his employees paid at rates of 33% to 41%. Perhaps he should allow his employees to use his tax accountants or provide them some tax planning services.
Buffett wants to depend on the same political system which gave him his special blessings to tax him at a higher rate instead of choosing to voluntarily pay more taxes. He makes an argument for what President Obama has said in the past, that rich people are stingy.
Congress' Joint Committee on Taxation issued a report earlier in the year which revealed that 51% of American households paid no federal income tax in 2009. The report also said that 30% of American households received money from the government as a result of the current tax laws.
It is a shame that tax avoidance is the way Americans, businesses and individuals, have come to live their lives, but it is no wonder. In 1934, the federal government received $434 million in revenues from individual income taxes. The IRS estimates that in 2013 Americans will pay $1.7 trillion in individual income taxes. In 2007, that figure was $1.16 trillion. To give this some perspective, the US, population increased about 2.5 times from 1930 to 2010, yet the revenue to the government from individual income taxes had a multiplier of 3,900.
Time for new old ideas
In 1972 I worked for a candidate in the newly created 24th Congressional District of Texas. The district took in parts of Dallas and Tarrant Counties and all of Denton County. It was a rip- roaring campaign with eight Democrats and five Republicans vying for the seat.
The Democrat lineup, much more colorful than the Republican group, consisted of: a Texas state senator who held the filibuster record; a rancher who later spent some time in a federal penitentiary on drug charges; a former Dallas city councilman who was on and off of law enforcement radar; several bankers and the ultimate winner, a local tv weatherman who served two undistinguished terms to be defeated in his third run by a local tv newsman.
My candidate, the Republican nominee Courtney Roberts, a young Navy veteran, student council president and classmate at the University of Texas at Arlington. Since 1972 was the first year eighteen year olds were allowed to vote and several major universities resided in the district, Roberts was hoping those young college students would sway the election by sending one of their own to Washington. We found out eighteen year olds don't vote.
The Democrat presidential candidate that year was George McGovern. He had proposed a $1,000 payment to each American as a kind of stimulus. He quickly withdrew that plan after much criticism from Democrats.
Candidate Roberts proposed a flat tax of 10% on all income. He was not the first nor the last to propose a low flat tax rate.
According to a report from the Bureau of Business & Economic Research of the University of New Mexico, personal income in the United States in 2007 was $11.9 trillion. Roberts' tax rate would have brought in $1.19 trillion to the federal government that year. That is slightly more than the actual revenue of $1.16 trillion received in 2007 by the federal government from individual taxpayers.
We have tried hybrid versions of McGovern's stimulus proposal of forty years ago in the form of tax rebates and tax credits to individuals. When Barrack Obama ran for office, he said he wanted to make a fundamental change to our country. Instead of continuing his class warfare strategy, how about a fundamental change in the tax law. Perhaps the time has now come for Mr. Roberts' proposal of forty years ago. The president should show some boldness and propose a simple one rate tax of 10% on all income and see what happens.
© Jim Terry
September 14, 2011
The president, in his jobs speech the other night, cited Warren Buffett's article last month in the New York Times urging the government to extract more taxes from him and other rich guys.
Buffett and his rich friends don't have to wait on Washington to raise their taxes. If Buffett feels he should pay more taxes he should fire all his highly paid accountants and file a simple tax return declaring all his income as ordinary income.
I am not aware that Internal Revenue Service or the US Tax Code requires anyone to take advantage of deductions and special treatment of income which legally allows an individual to lower his tax liability. As Buffett says, "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." The operable word is 'allowed.' No one forces these guys to take these government deals.
Take a guy named Joe, a restaurant manager earning $90,000 per year with a $160,000 mortgage. He may take a standard deduction or he may itemize deductions. He may use whichever method he chooses and no federal law requires him to choose the method. Joe may leave money on the table if he takes a standard deduction. But if Joe wants to avoid detailed record keeping and paperwork by filing a simple return, that is his choice even if he pays higher federal taxes.
Buffett went further to say, "These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us..." Does Buffett think we are goons. Buffett has showered blessings on liberal politicians to the tune of about $120,000 over the years. Would he have us think he was paying those politicians to not shower blessings upon him?
The interesting contrast in Buffett's take on special treatment of income versus the president's view enunciated in his speech-Buffett never mentions loopholes while the president mentioned the "L" word several times and once stated, "I'll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington. By eliminating pages of loopholes and deductions..."
If pages of loopholes exist, it is because Washington politicians, such as Obama, have a habit of passing multi-thousand page bills without reading what they pass. Remember what Speaker Pelosi said about Obamacare? "We have to pass this bill to see what is in it." Loopholes exist in our tax laws, for they are omissions in the laws that some clever lawyer finds. Loopholes exist in contracts, city ordinances, treaties and almost anything involving humans. Most of what is referred to as loopholes in our current tax system, however, are deliberate treatments of income passed into law by the congress-those blessings Buffett says are showered on him.
In his article, Buffett justifies his call for higher taxes on rich guys by complaining that while he paid federal taxes at a rate of 17.4%, many of his employees paid at rates of 33% to 41%. Perhaps he should allow his employees to use his tax accountants or provide them some tax planning services.
Buffett wants to depend on the same political system which gave him his special blessings to tax him at a higher rate instead of choosing to voluntarily pay more taxes. He makes an argument for what President Obama has said in the past, that rich people are stingy.
Congress' Joint Committee on Taxation issued a report earlier in the year which revealed that 51% of American households paid no federal income tax in 2009. The report also said that 30% of American households received money from the government as a result of the current tax laws.
It is a shame that tax avoidance is the way Americans, businesses and individuals, have come to live their lives, but it is no wonder. In 1934, the federal government received $434 million in revenues from individual income taxes. The IRS estimates that in 2013 Americans will pay $1.7 trillion in individual income taxes. In 2007, that figure was $1.16 trillion. To give this some perspective, the US, population increased about 2.5 times from 1930 to 2010, yet the revenue to the government from individual income taxes had a multiplier of 3,900.
Time for new old ideas
In 1972 I worked for a candidate in the newly created 24th Congressional District of Texas. The district took in parts of Dallas and Tarrant Counties and all of Denton County. It was a rip- roaring campaign with eight Democrats and five Republicans vying for the seat.
The Democrat lineup, much more colorful than the Republican group, consisted of: a Texas state senator who held the filibuster record; a rancher who later spent some time in a federal penitentiary on drug charges; a former Dallas city councilman who was on and off of law enforcement radar; several bankers and the ultimate winner, a local tv weatherman who served two undistinguished terms to be defeated in his third run by a local tv newsman.
My candidate, the Republican nominee Courtney Roberts, a young Navy veteran, student council president and classmate at the University of Texas at Arlington. Since 1972 was the first year eighteen year olds were allowed to vote and several major universities resided in the district, Roberts was hoping those young college students would sway the election by sending one of their own to Washington. We found out eighteen year olds don't vote.
The Democrat presidential candidate that year was George McGovern. He had proposed a $1,000 payment to each American as a kind of stimulus. He quickly withdrew that plan after much criticism from Democrats.
Candidate Roberts proposed a flat tax of 10% on all income. He was not the first nor the last to propose a low flat tax rate.
According to a report from the Bureau of Business & Economic Research of the University of New Mexico, personal income in the United States in 2007 was $11.9 trillion. Roberts' tax rate would have brought in $1.19 trillion to the federal government that year. That is slightly more than the actual revenue of $1.16 trillion received in 2007 by the federal government from individual taxpayers.
We have tried hybrid versions of McGovern's stimulus proposal of forty years ago in the form of tax rebates and tax credits to individuals. When Barrack Obama ran for office, he said he wanted to make a fundamental change to our country. Instead of continuing his class warfare strategy, how about a fundamental change in the tax law. Perhaps the time has now come for Mr. Roberts' proposal of forty years ago. The president should show some boldness and propose a simple one rate tax of 10% on all income and see what happens.
© Jim Terry
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