TIP Academy
EXECUTIVE SUMMARY
Most rich people would be grateful to have lower taxes, but not Warren Buffett. He is one of the richest people in the world and believes that people like him should pay more taxes.
- An average taxpayer has a higher tax rate as wages are subjected to income, payroll, and other federal taxes, compared to wealthy individuals whose dividends and capital gains are taxed at relatively lower rates.
- Warren Buffett believes that rich people should pay more taxes.
THE RICH ARE PAYING LESS IN THE WAY OF TAXES
Low tax on dividends and capital gains give the low rate to rich people. They are taxed at 15% and they don’t have payroll taxes.
Meanwhile, there are more than 80 million actual taxpayers who pay 33% on the average. Average taxpayers have a higher tax rate because their primary source of income is coming from wages that are subjected to income tax, payroll tax, and other federal taxes. Payroll taxes account almost as much as revenue of the government as the income tax.
WARREN BUFFETT: TAX THE RICH
By reducing taxes, economic expansion and growth will take part. People will create more jobs if they are not paying much tax. If people are paying a higher tax, they won’t make many investments.
Buffett suggests that tax rates for 99.7% of taxpayers should remain unchanged, and the 2-percentage-point reduction in the employee’s payroll tax should continue. But the government should raise the tax rate of those earning more than $1 million a year, including earnings from dividends and capital gains.
THE BUFFETT RULE EXPLAINED
In 2011, President Barack Obama proposed a tax plan that includes the “Buffett Rule”. The Buffett Rule suggests that people earning more than $1 million a year should pay 30% minimum tax.
This proposal aimed to grant a fairer tax system that removes the tax burden on the middle-class and it was heavily influenced by what Warren Buffett said in this interview.
FULL TRANSCRIPT
HOW MUCH SHOULD TAXES BE?
Most rich people would be grateful to have lower taxes, but not Warren Buffett.
In one of his interviews with The New York Times, he said…
Our leaders have asked for ‘shared sacrifice’. But when they did the asking, they spared me. I checked my mega-rich friends to learn what pain they were expecting. They, too, were left untouched. While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our ordinary tax breaks.
Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only actions that are immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.
Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.
The 12 should then turn to the issue of revenues. I would leave rates for 99.7% of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax.
But for those making more than $1 million – there were 236,883 such households in 2009 – I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more – there were 8,274 in 2009 – I would suggest an additional increase in rate.
TAX FACTS
Buffett is one of the richest people in the world and believes that people like him should pay more taxes. The very rich are paying less in the way of taxes.
