Goes there a billionaire more without honor in his own class than Warren E. Buffett?
Not unless it is Steven L. Rattner, the rich financier and investor who directed the restructuring of the U. S. auto industry in 2009.
Buffett and Rattner refurbished their status as pariahs among the One Percent and the Republican Party this week by writing yet again that the well-to-do are not paying their just share of taxes and the expense of civilization.
In another op-ed essay in The New York Times, Buffett offered his solutions for avoiding the fiscal cliff, which were to adopt President Obama’s plan to restore the 2000-era income tax rate on those earning more than $250,000 (Buffett would make the threshold $500,000), impose a minimum tax of 30 percent on very rich Americans who use the tax code to avoid taxes, and cut federal spending back to 21 percent of GDP, the level at which America functioned prosperously in the past.
Rattner, the chairman of a big Wall Street investment firm who writes economic advice occasionally for The New York Times, wrote another the same day advising Congress to raise the tax rate on capital gains and dividends for the well-to-do to 28 percent, which would still be below the tax rate now paid by halfway-prosperous wage and salaried employees. That was the tax rate on capital gains and dividends during the great economic boom of the ’90s, and it would shrink the budget deficit by more than $300 billion over the next decade without deterring investment one iota, in Rattner’s mind.
Both pieces appeared as the president, Congress and the outlying players gear up for the final negotiations on avoiding sizable tax increases, spending cuts and repudiation of the federal debt, all of which will occur after the first of the year if nothing is done.
The debate engendered by the two moguls’ class-defying ideas — you would like to think, anyway — also may affect the manufactured crises in a number of state capitols, including Arkansas’s, where rejuvenated Republican majorities are setting out in the new year to slash state income taxes and force a reduction in state services to children and the needy.
If anyone should be a soothsayer, wouldn’t it be someone like Buffett? Or Rattner, who founded one of the most successful private-equity firms (the sort where Mitt Romney made his fortune) and ran big investment banking operations during their good days?
Buffett’s wisdom gets more attention because he is either the richest or second richest man in the world and he is the shrewdest investor of all time. It should count for something because all the hullabaloo over spending and taxes is about the effect any step will have on investors. Will they decide to invest, make more money and create jobs because the government takes a little less of their profits in taxes, and will they refuse opportunities to make more money if the government will take a trifle more of the profits than it now does?
History should have settled the questions long ago. High marginal tax rates never deterred investment and low ones never stimulated it. That is the record nationally, and it is also the invariable story in Arkansas.
Buffett said that between 1951 and 1954 when the capital gains tax rate was 25 percent (now it’s 15 percent) he sold securities and did well. From 1956 to 1969, when the top marginal rate on income was 70 percent (it is now half that), he was accumulating a fortune as a fund manager and never once had anyone mention taxes as a reason to forgo an investment he offered.
“So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under mattresses if — gasp — capital gains rates and ordinary income rates are increased,” he wrote this week. “The ultrarich, including me, will forever pursue investment opportunities.”
He posed a simple hypothesis that ought to be directed at every proponent of slashing capital gains taxes, including the legislative hearing rooms at Little Rock. If an investor you trust comes to you with an investment idea and says he is in it and thinks you should be, too, would your response be, “Well, it all depends on what my tax rate will be.” If the tax rate is a little high would you say you would rather leave your money in your savings account earning a quarter of 1 percent?
But the attacks on Buffett for such notions don’t deal with the logic. He has been raising hackles since 2006, when he calculated that his secretarial and clerical employees paid 33 percent of their income in federal taxes while he paid only 19 percent on his $48.1 million net income. He said it was an immoral tax system.
Critics attacked Buffett for not voluntarily giving the treasury a big part of his wealth rather than encouraging the taxing of other billionaires and for not giving the government 85 percent of his holdings in 2006 rather than bequeathing it to five foundations to fight disease in the Third World.
Meantime, the clamor for lowering or eliminating taxes on capital gains and dividends and cutting other taxes ramps up in Little Rock. The arguments approach the ridiculous. The Arkansas Democrat-Gazette suggested editorially that if Arkansas would just slash its income tax rates hordes of people would quit their jobs and the sunny climes in California to move to Arkansas and create a boom. I’m not kidding.