Buffet Rule, Creating a Nobility of the Wealthy?
Lately I’ve been really intrigued by the so-called Buffett Rule. On the impact it would have on the US deficit – null – and on the impact it would have on future taxpayers -- profound. I can’t help but think how weird it is for somebody who has been (and still is) in the running to become the richest man on the planet to propose a steep tax imposition on people making more than a million bucks a year.
In fact, his 30 per cent tax on earned income would do nothing to curb, or contain the mind-boggling growth of his wealth. On the contrary, rather than diminishing it, the new tax rule would set it in stone. Here is why.
Buffett became rich by taking advantage of all the tax write offs and loopholes approved by U.S. administrations since the end of World War II. Not only that, but the tax rate at which he was taxed has been instrumental in not only the preservation of his wealth but also its growth. Now he is proposing to put an end to this shame.
But mind you, he already sits on top of about $50 billion of personal wealth. A doubling of his income tax rate–even a tripling–would do nothing to fill the gap separating him from the majority of Americans who -- if they lose their job or become ill -- have zero or less than a month of savings to rely upon.
What the Buffett Rule will do instead is to ensure that in the future, those hoping to join the ranks of the super-rich (like Buffett and his peers) will have to work much harder than Warren ever did. In fact, I’m not convinced that under such a scenario anybody would ever be able to amass the fortune Warren did, or with such ease.
The introduction of the Buffett Rule would elevate the kind of wealth he and his ilk possess to a kind of divine, God-given right. Like feudal nobility passed along from father–or mother–to offspring via birth.
An alternative story would involve taxes applied to assets, incrementally and up to 100 percent of their value in excess of a certain (agreed upon) threshold. Now, I bet, this would push people to invest, and to keep their money mobile, thus creating jobs and redistributing wealth. But this is just pol-fi (political fiction) because it would be real reform. Or wouldn’t it?
Now somebody may think that I am a fool. And they’re not totally wrong there. But if I am a fool I am in good company. Institutions like the Financial Times and some of America’s most read bloggers support a similar point of view. Here’s what they write:
“The Financial Times, in an editorial, noticed that the income tax increases Buffett suggests will barely apply to him, because most of his wealth is in the form of unrealized capital gains, which don’t count as taxable income or capital gains of the sort he proposes to raise taxes on. If anything, raising such taxes would actually improve Buffett’s position relative to the other wealthy people against whom he competes to acquire businesses.
It would also help him to achieve his longtime goal, as his wife Susan described it in her own Charlie Rose interview three months before her death in 2004, of being “the richest man in the world.”
The Financial Times suggested that in Buffett’s case, “shared sacrifice probably requires a wealth tax. Set at a modest 2 percent, he would owe about $1 billion a year, or 25 times his current taxable income.”