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Money, Money, Who’s Got the Money?…

17 Aug

Warren Buffett wrote an op-ed piece for The New York Times on August 14 in which he suggested members of a new congressional “supercommittee” looking at ways to balance the budget to “raise rates immediately on taxable income in excess of $1 million, and even more for those making more than $10 million.”

President Obama immediately agreed with Buffett’s argument. Mitt Romney immediately disagreed, trotting out the old Vaudeville act that high corporate tax rates is the primary motivator for businesses either not hiring or sending jobs overseas (this has also been said about minimum wage laws and employee health insurance benefits). You could remedy this, of course, with tax breaks that benefit those companies that invest in American jobs but who has time for that?

Romney had to say something but he’s on shaky ground contradicting Buffett. It’s not like the guy made his money starring in action movies or kicking field goals. He most likely knows a thing or two about the financial world. Romney’s entire campaign is that the country needs a president with both experience and proven results in the private sector. Buffett’s success in that area makes Romney look like the assistant manager at the local Shop Rite.

Of course, Romney’s position was the epitome of rationality compared to Michele Bachmann’s, who openly and unabashedly attacked Buffett at a campaign event in (of course) South Carolina — to borrow from “Kiss Me Kate,” GOP primary campaigns “open in South Carolina/We next play Texas/Then on to 1950/Lots of closeted gays in 1950!/Our next attack is illegal immigrants/That stingy, dingy menace…”

“We also believe, unlike Warren Buffett, that taxes are high enough already,” said Bachmann … “I have a suggestion. Mr. Buffett, write a big check today. There’s nothing you have to wait for. As a matter of fact the president has redefined millionaires and billionaires as any company that makes over $200,000 a year. That’s his definition of a millionaire and billionaire. So perhaps Mr. Buffett would like to give away his entire fortune above $200,000. That’s what you want to do? Have at it. Give it to the federal government. But don’t ask the rest of us to have our taxes increased because you want to have a soundbyte. We want to have real job creation in this country and that’s what we’ll stand for as fiscal conservatives.”

We might claim that taxes are “high enough” already but evidence — such as our crippling debt — might demonstrate otherwise. This brings us to the two separate views of how the U.S. taxpayer relates to the national budget deficit. There is the conservative view that the government is an employee of the U.S. taxpayer. In that scenario, it’s inappropriate for an employee to demand a raise just because he’s behind on the car payments for his Mercedes and, worse, has a $200-a-day cocaine habit that might result in his dealer breaking his legs if he doesn’t pay him on time. His employee’s debts aren’t his issue. But the country’s debts are our issue. They have a direct impact on us and our way of life, and thus stating “our taxes are high enough” is in many ways tantamount to saying that you’ve paid American Express more than enough already even if your credit card is maxed out.

However, Buffett is not suggesting everyone’s minimum payments be increased in order to reduce the credit card balance — just those in the best position to do so. The vast majority of our debt is attributible to our imperial presence in Iraq and Afghanistan (by the way, it’s wise to consider what caused the fall of the British empire). As Buffett points out, it’s usually the poor and middle class who sacrifice the most in blood for these wars. It would then be in the spirit of “shared sacrifice” for the wealthy to chip in more to pay for the tanks.

Bachmann should know that Buffett has already written a “big check.”  She also ignores the actual substance of Buffett’s editorial when she talks about the “redefinition” of “millionaire” and “billionaire.”

Buffett did not suggest no one could make more than $200,000. President Obama has said he wants Bush-era tax cuts for those individuals making more than $200,000 and families making more than $250,000 to expire after next year. But those people would not have to hand over every dollar made over $200,000, just a higher percentage of that income. And, if the Bush-era tax cuts expire, they’d have to hand over a higher percentage of money made on the stock market.

In 2009, roughly 2% of U.S. households had reported taxable income of more than $250,000. They earned 24.1 percent of all income, and paid 43.6 percent of all personal federal income taxes. Here again we have two separate views on wealth in the U.S. One side believes it’s unfair that 2% of households would earn 24% of all income. While the other side believes it’s unfair that those who earn just 24% of all income should pay almost half of all taxes.

Bachmann would “prefer to lower tax rates for the rich and broaden the tax base, making more Americans pay tax. Currently, nearly half of Americans – those at the lower end of the economic spectrum – do not pay income tax.”

If that’s the case, Bachmann is actually running on a “higher taxes” platform — just one that she would deem more equitable and, curiously enough, would affect more of her potential voters than Buffett or Obama’s proposal would. The only problem is that Americans at the bottom of the income ladder are arguably “too small to fail” — increase their taxes and you don’t cut into disposable income, you cut into basic survival. You might be able to reduce expenses in the former category (less iPods) but in the latter category (food, rent), you are less flexible, so then you might wind up running up debt, which would benefit credit card companies and banks (all those interest rates! All those fees!) and would result in healthy profits and bonuses for the executives at those companies who I’m sure will create jobs or re-invest in the economy or whatever else it is they do that makes things so neat for the poor.

 
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Posted by on August 17, 2011 in Capitalism

 

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