Warren Buffett - What's his Agenda?

Warren Buffett, that affable billionaire who marches to the beat of his own drum, said that the government needed to stop coddling the super-rich. (original NYT op-ed piece here, but it's on the NY Times website so if you've run out of free clicks this month or don't want that liberal rag showing up in your browsing history, stick with CNN)

He's right, of course. As I've explained time and again in this blog, the wealthy are paying a lower income tax rate than they've paid in decades and yet we've got the largest deficits in our history. It doesn't take a genius to put two and two together and understand that raising the tax rates would close the deficits.

Buffett doesn't even call for something particularly radical. He suggests a new tax on those making over $1M/year on anything over $1M/year. And an additional tax on anything over $10M/year. And he means anything. He'd tax capital gains at the same rate as income. It's all income for these super-rich. In fact, 88 of the 400 richest Americans in 2008 reported no income at all. Everything was a capital gain. For that they paid 15% tax.  That's less than their limo drivers, chefs, personal trainers, or butlers likely paid. That also means they paid 0% in social security, Medicare, or unemployment insurance taxes, which is less than everyone in America who worked an hour "on the clock" in 2008.

Fiscal conservatives, by whom I mean the staunch apologists for corporate greed, have so captured the narrative for taxation that some of the early responses to Buffett's piece have ranged from the tired canard that corporate taxes in America are higher than anywhere else to shrill cries from the great unwashed masses on facebook. The following gems are plucked from some friend's walls:

Buffett is being disengenious. First, if he wants to pay more he can go to the treasury's website and write a check. The government happily accepts any money sent its way. Second, a large part of his income is from capital gains and dividends. He pays "only" 15% of that income but that is on top of the 35% corporate tax he already paid on that money as a shareholder. Third, he isn't admitting that social security is tilted in favor of the poor. He is paying ss tax on only the first $100k or so because that prevents the gov from having to pay a correspondingly huge benefit.

you should look up data on the break-down of US tax revenue and who pays what, all too easy to lay everything at the feet of the 'super-rich'

To the Forbes op-ed, there's not much to say. Very few corporations pay full taxes thanks to things like tax deductions for corporate jets and accounting tricks that allow a company like ExxonMobil or GE to hide virtually all of their profits overseas. This is a typical example of the defense of greed by the corporate media. Remember, Steve Forbes ran for the GOP presidential nomination ... twice. He's anti-tax, anti-regulation, and anti-government. No surprise here.

The facebook comments from the gallery are a bit harder to understand except that they clearly represent the successful media campaign against a taxes by influential power pedaling ideologues like Grover Norquist and his ridiculously named Americans for Tax Reform. Nordquist doesn't seek tax reform. He seeks tax evisceration. He seeks to end the government's ability to perform any tasks not deemed vital by Grover Norquist and his corporate overlords.

I guess what's so surprising in all of this is that most opinion polls show that most Americans support higher taxes on the wealthy. It's got a clear majority of voter support and yet any time someone comes out and actually calls for this common-sense reform to the tax code, the usual suspects and their blind followers bring out the claims that it is variously: unfair, unAmerican, wealth redistribution, and won't work.

All are false.

It's not unfair. 

Wealthy Americans benefit far beyond most of us from the security, infrastructure, and well-trained workforce provided by the American government. Therefore, there is no reason why they shouldn't pay taxes proportional to that benefit.

It's not unAmerican. 

Over the past century the top marginal income tax rate has ranged from 35% (today) to 91%. For most of the past century (including during the longest sustained era of growth in our country's history - 1945-1973), the top marginal income tax rate was over 70%. Buffett doesn't explicitly state how high he thinks the tax rate should be on these $1M and $10M income groups, but even if the rate were raised to say 40% on $1M-$9.9M and 50% on $10M+, this isn't particularly high given historic norms.

And the "unAmerican" thing is bullshit anyway. What's "American" is whatever the American people prioritize as necessary for the continued governance of our country. Without special interests running our government you can be sure that the top tax rates would have been raised long ago.

It's not wealth redistribution. At least not in the direction assumed.

Wealth is now more concentrated at the top than it's been since the Gilded Age (1865-1893). Real wages among the bottom 90% have been nearly flat for a decade. If wealth is being redistributed, it's being redistributed upward with ever increasing tax loopholes for the wealthy while the rest of us are stuck paying income taxes on our ever less valuable paychecks. So yes, wealth is being redistributed, but it sure as hell isn't trickling down.

It will work (better than the status quo).

I'll leave the refutation of this myth to Mr. Buffett himself:

To those who argue that higher rates hut job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation. 

Granted this is a blunt instrument comparison, but it's the only evidence we've got. An era of sustained longterm job growth accompanied high top marginal tax rates. A subsequent era of low top marginal tax rates results in negligible job growth. The message, of course, which is so hard for many people to see through their biases, is that the top marginal tax rate is unrelated to job growth. So raising taxes on the wealthy won't create jobs directly - but it will narrow the budget deficit and help get our country's finances in order. It won't require us to make such enormous cuts to social safety nets that help prevent the further erosion of the economic security of the working class.

I guess it should be unsurprising that a super-rich guy asking for higher taxes would be met by such resistance from the corporate media, but by any measure Warren Buffett represents everything a wealthy American should be. He's innovative, speaks his mind, and puts the best interests of his country above his own selfish motivations. Of course, I would argue that Mr. Buffett simply has a longer term view of the opportunities presented by the American economy.

The recent recession has decimated the American middle class and with it the spending power of the largest portion of our economy. If we really want a sustained recovery and continued growth in the American economy, the best way to accomplish that is by creating jobs (the federal government is responsible for approximately 25% of the GDP - so cuts in federal spending result in job losses) and protecting the safety nets available for the middle class. Deep cuts to social security, Medicare, Medicaid, and jobless benefits will cripple our ability to consume the goods and services necessary to continue growing the economy. It's a vicious circle.

Given how terrible our recovery has been and how fractious our politics have become, the big question is, "Why not give it a shot?" If raising taxes on the wealthy closes the budget gap and the rest can be made up with reforms to entitlements and cuts in military spending, why not? If a more fiscally responsible government can help create and retain jobs through continued spending, why not?

The answer, of course, is because all of this is not about doing what's best for the country. It's about winning an ideological war against progressive gains in the 20th century. Never forget. Corporatists hate protecting workers. It costs them money in their own narrow world view.

All Out War

It's impolite to admit it, but we're at war. I'm not talking about Iraq, Afghanistan, or even Pakistan or Yemen. I'm talking about at war with ourselves. We have a domestic battle going on. And again, I'm not talking about red states versus blue states or the intellectual elites versus the mama grizzlies. I'm talking about class warfare. 

Conservatives call it "redistribution of wealth", and they're right. There's an effort by liberals in this country to redistribute the wealth. There's a reason for this. A sound reason. For the past 30 years the wealth has been redistributed in the opposite direction. 

Senator Bernie Sanders (I-VT) in this youtube video from the Senate floor, lays out the facts of this case in much more clear terms than I can hope to recreate here so I'll let the gentleman from Vermont stand on his own. 

Highlights (I'd argue they are lowlights):

- In 2007, the top 1% of Americans earned 23.5% of all income in the United States, up from just 8% in mid-1970s. 

- This top 1% earned more than the bottom 50% of all Americans combined. 

- The top o.1% (1/1oth of 1%) earns 12¢ of every dollar made in the United States.

- Between 1980 and 2005, 80% of all new income went to the top 1%. That leaves 20% for the remaining 99%.

- Wall Street executives largely responsible for the financial crisis are now earning more than they made before the bailout.

- We have the most unequal distribution of income and wealth of any developed country on earth. 

- Some in Congress have come out in support of $700B in income tax breaks over the next 10 years to the top 2% of earners. This would result in an average $100,000 tax break to each person in the top 2%. 

- Eliminating the estate tax would cost $1T over the next 10 years and that break would go virtually entirely to the top 3/10th of 1%.

- Our trade policy has resulted in the loss of millions of jobs earning livable wages in exchange for cheap goods overseas and higher corporate profits. 

- In 2009 ExxonMobil made $19B in profits, paid $0 in taxes, and received a  $156M refund from the IRS. 

All of these are verifiable facts. Not opinions. 

So at a time when our economy is in distress, we have sustained high unemployment, our federal budget deficit is growing daily through a combination of increased outlays to help the poor and unemployed and decreased tax revenue,  a substantial number of our leaders think it is sound policy to extend tax breaks to the top 2% of earners and eliminate the estate tax altogether, providing a $1.7T windfall to these highest earners over the next 10 years.

So we're clear, the extension of tax breaks to the wealthy represents just a 2.8% increase in their top marginal tax rate. This means they pay the same as everyone else on all taxes in all lower brackets. Only once they exceed $200,000 in taxable income as an individual or $250,000 as a couple do they pay an additional 2.8% of their income over those thresholds in taxes. The GOP is claiming this is necessary to create economic growth. These tax breaks have been in place for nearly 10 years. Where's the growth? It's a myth. It's a fiction. It doesn't work. We need the tax revenue to cover expenditures for the poor, the elderly, and the infirm. 

This is part and parcel to an assault on the working and middle classes by the moneyed elite in this country. It began under Ronald Reagan and it has continued under every president since, Republican and Democrat alike. Only now, under President Obama, has there been any pushback whatsoever against this systematic financial rape of the American people, and the resulting hue and cry from the wealthy and their shills has been shouts of "Socialism!", "Communism!", "It's a war. Like when Hitler invaded Poland in 1939!" All this when President Obama's policies and the Democrat-controlled Congress have been largely business friendly. His Justice Department has not pressed charges against a single Wall Street executive for defrauding investors. The financial reform law falls far short of what is likely necessary to avoid future bubble/burst cycles. The health care reform law does not actually capitate expenditures for healthcare. 

It's clear why this state of affairs exists. These moneyed interests own Congress. Their campaign contributions and political action committees trade treasure for power. Politicians who dare to stand up to these forces do so at their own peril. Wall Street, which had backed President Obama overwhelmingly in the 2008 election, poured their millions into Republican coffers in 2010. Apparently the president was too critical of their excesses and their payback was to support his opponents. No matter who wins the elections, the American public, at least the 98% or 99% of us who don't hold the purse strings, lose. 

You'll find this is a common topic for me to discuss. I've hesitated to call it war for a long time, but that's where we are. We have a choice. We can either continue to accept the status quo or we can stand up for egalitarian principles in which our interests are given equal weight to those with loads of cash.