Want to sum up the United States' fiscal situation in a word? Warren Buffett did, or did so in 16 words to be exact, in a chat with The New York Times: "I'm paying the lowest tax rate that I've ever paid in my life," Buffet said. "Now, that's crazy."
Further, Buffett, the world's richest person as ranked by Forbes Magazine with wealth totaling $62 billion, also said the U.S. Government should increase taxes on the wealthy to help pay for the recently-passed bank rescue, which is designed to end the financial crisis.
Buffett's stance demonstrates that there is at least one person of high income and/or wealth (and probably many more) who believe upper-income groups should be paying more in federal taxes each year.
2001 tax cut generated large U.S. budget deficits
Buffett's view is also in stark contrast to the Bush Administration's philosophy and policy, which has prevailed for the decade and which argues that lower tax rates on upper-income groups will not only generate higher GDP growth, but also result in revenues high enough to close the federal budget deficit. It hasn't happened, said economist David H. Wang.
"Under the best economic growth circumstances, the Bush Administration's tax cut, assuming spending was held in check, would have narrowed the budget deficit to about $100 billion," Wang said. "But at the same time the Bush Administration's tax cut was passed, the federal government was increasing spending for the War on Terror, and later for the Iraq War, and other programs." The tax cut of 2001 substantially cut taxes on upper income groups, lowering the top tax rates of 39.6% and 36% to 35% and 33%, respectively.
The result has been predictable, Wang said -- deficits every year the Bush Administration formulated a budget, fiscal 2002-2009, with red ink rising as the U.S. economy slowed. The U.S. recorded a $161 billion deficit in fiscal 2007; a $407 billion last year, fiscal 2008; and is expected to run at least a $438 billion deficit this year, fiscal 2009, which began on October 1, according to the Congressional Budget Office (pdf).
However, this year's projected $438 billion deficit does not include the costs of the bank rescue and related programs, Wang said. These programs are expected to add at least $200 billion to this year's deficit, and could add more than $400 billion, he said.
Federal Budget / Economic Analysis: The bottom line -- taxes are going up on upper-income groups, and on just about everyone else. The new U.S. president and Congress can limit spending in some programs, but the costly bank rescue and related programs needed to end the financial crisis guarantee that the federal government will need much more revenue than even what the most optimistic economic growth projection would imply.
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Reader Comments (Page 1 of 2)
10-27-2008 @ 8:23PM
Richard said...
Mr. Buffett is free to pay more. The Treasury would be happy to take his check.
I, as someone who has just crossed a tax bracket (combined familial income), feel that I am paying enough.
If he feels it is important to do so, let him talk with *his* money - not tell me that I need to pay more.
10-27-2008 @ 9:31PM
Bob said...
Anyone who wants to can pay more taxes. The truth is they want to do all kinds of great things, only they want to use your money not theirs.
10-27-2008 @ 10:02PM
gil said...
i guess warren buffet makes a combined income of about $200,00 working hard and not requiring any assistance from the federal government and paying approx. $70,000 in federal taxes alone. Paying all their kids college costs,and attempting to be fically responsible investing in retirement accounts.
oh i am sorry, he is worth $62 BILLION.
Lets be careful not to include the obscenely rich with the hard working class of people in the 200,000- 250,000 range.
LETS BE CAREFUL WHO WE THINK THE RICH ARE.
10-27-2008 @ 10:22PM
finance guru said...
Warren Buffett is turning into a politician. This guy has great advice in this crazy market. www.crashmarketstocks.com
10-27-2008 @ 10:54PM
cazz said...
Just crossed, so the 3 cents on the dollar past a quarter mil is going to deeply impact your life. if you need micro loan to buy Quicken and make a budget let me know. I make less than you with kids, etc. But, I think I can help.
10-28-2008 @ 12:23AM
fairtaxer said...
We should abolish the IRS and instead tax Buffet's spending at the sales counter under The Fair Tax. The wealthy would pay more tax over the course of their lives than the poor who cannot afford it. No one's income should ever be taxed. It is an invasion of privacy and a violation of the way the Constitution was originally written.
10-28-2008 @ 12:26AM
Bob said...
Why don't those "many more" who believe that they should be paying more taxes, just go ahead and pay more? The gov't will gladly accept all the money they can get.
Most of the people who think higher taxes are such a great idea, either work directly for gov't at federal, state or local level. Or they contract to the gov't at some level.
Buffet and media types who espouse higher taxes should either put-up or shut-up. Show us your cancelled checks where you paid more than you had to,maybe then you won't look like such hippocrites.
Come on tax lovers admit it if you work in the public sector. But you won't, because then you will be seen for what you really are.
10-28-2008 @ 12:42AM
Ed said...
Thank you Warren. He hasthe right idea, but not the right answer. I would truly like to hear his take on the Fair Tax. I feel that it would allow all people to pay their fair share on what they earn not what they make. We need to change the way we are taxed in this country and I feel the Fair Tax is the answer.
10-28-2008 @ 1:17AM
Sean Shepard said...
He can pay more. They will take his check, which will be promptly wasted on some pork project, war, interest, bailout or bloated bureaucracy.
Of course, it's easy to say "raise taxes on me" once you've already got more than you know what to do with and especially if it will make it more difficult for others to accumulate wealth and challenge your dominance.
10-28-2008 @ 1:38AM
Gary R. Anderson said...
HEY WARREN ! Don't you know that there's a LAW against overpaying your tax??? OK, so your real rich and feel guilty, give all your employees a raise; fire your massive CPA firm that does your taxes, and spends more money finding loopholes than the tax is. Just send in the wad. I KNOW that Congress will find a wasteful use for it, and you can watch it get pissed away. You're NOT an American anymore, you're a Bolshevik, and we the proletariat. As for me, I just want to have taxes simple, controllable, and visible --like the FairTax. You wanna wash your conscience? Help us get rid of this IRS overlord.
10-28-2008 @ 2:45AM
Jeff5623 said...
Warren is right, richest people should be paying the most taxes
10-28-2008 @ 2:47AM
Jeff5623 said...
Nice Warren, we have seen my rich people trading plenty of stocks at surplusstock.com, who want to cut taxes further. well thats what we call shame.
10-28-2008 @ 4:24AM
wjeretidwell said...
Warren has gotten soft in his dotage. He like all the "feel guilty" crowd, made their fortunes avoiding taxes and now want to do something to atone for all they screwed out of their money, by having all the rest of us, who barely make it, pay more taxes to aswage their guilt.
The FairTax is definitely the way to stop the fall toward socialism. We only have a short time before we drown in debt, borrowing money to give to non achievers.
50 yrs of the war on poverty, has cost us 8 trillion and we still have more poor. maybe that is the war we should pull out of!
10-28-2008 @ 6:19AM
al coholic said...
I wonder if Warren felt the same way before he became filthy rich? As many above have mentioned, Warren can ease his concerns by opening up his wallet to the IRS any day that ends in "y."
10-28-2008 @ 9:59AM
Dave said...
Raising rates is not the answer - we need the Fair Tax to simplify the system. An efficient tax collection system would allow anyone to pay less but everyone would pay.
10-28-2008 @ 8:31AM
Dave Sibole said...
If the FairTax H.R. 25/S 1025 is enacted it would expand the base of payers into the federal coffers, bring back industry to this country which would increase employment and those give people more purchasing power which would increase federal revenue. If Mr. Buffet wants to charitably give to failing institutions it could probably be arranged.
10-28-2008 @ 8:47AM
Mike Ferris said...
I think it is great Mr Buffett wants to pay more in taxes. But my personal opinion is the FairTax, H.R. 25 & S 1025 will help him accomplish his goal when he buys his next car, plane, new home and next business suit. He will be paying the same as Joe the Plumber will when he buys his new pipe wrench. Now thats what I call FAIR.
10-28-2008 @ 9:38AM
landofthefree said...
If ever there were a time for the FairTax (HR 25/S 1025), this would be it! Instead of "economic stimulus checks", let people keep the money they make every week. Instead of a "bailout", relieve the tax burden on companies so that they can lower their prices to the consumers, who now have MORE money to spend, and watch our economy grow!
And what better way to "cut government spending" than to shut down the IRS. Why on earth would people be against *that*??? A tax system based on spending, instead of earnings, would be infinitely easier to administer, and save both the government *and* individuals millions in "costs of compliance".
Why does the government NOT like the idea of the FairTax? Because they lose their ability to monitor the financial lives of the citizens...
10-28-2008 @ 11:31AM
Jim Harper said...
Warren Buffett should lobby for the FairTax, House Bill HR25. Everyone would pay taxes on what they spend on new goods and services. The poorest citizens would get a prebate up to the poverty level so they would not be paying ANY taxes on their basic needs of food and housing. The wealthier citizens would spend more on goods and services and thus pay more taxes. If they choose to become miserly because they don't want to pay any taxes, their money would end up invested in the economy ( banks, stocks, bonds ) which would be good for U.S. growth. Warren Buffett certainly commands respect for what he is doing to help the economy now, and for his achievements in the investment world, but I believe his efforts would be better directed to the passage of the FairTax.
Jim Harper
Evanston, IL
10-28-2008 @ 12:32PM
ConservaChick said...
Joe Biden would certainly call Warren Buffett a patriot for his attitude, now wouldn't he?
As I'm sure he knows, Mr. Buffett is free to send all the additional money to Uncle Sam that he likes. As a matter of fact, anyone, regardless of income, is free to send a check for more money to the Federal or State government at any time. If that's how one wants to spend one's money, it's a choice that can be freely made at any time. That's the greatness of this country -- one may be a patriot in whatever legal way he/she prefers!
It is simply Communistic to suggest that everyone ought to conform to Buffett's and Biden's idea of patriotism. Did Mr. Buffett earn his over-abundance -- apparently in his estimation -- of wealth with such collectivist principles? I think not.
This country was founded on empowering individuals, not on tying a collection of individuals to the yoke of an overblown Federal government. As it stands now, this government spends taxpayer money like drunken sailors on shore leave. If Mr. Buffett wants to boost his funding of that spending spree, he is welcome to do so.
I, for one, will pay only what is necessary in taxes while working to elect representatives who treat the Federal budget like its their own household budget. Until they learn to cut expenses and do more with less, the way most citizens are doing now, Uncle Sam is getting no free "cost of living" raise from this taxpayer!