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Stop Coddling the Rich – Why Buffet is Right

Did you catch this opinion piece in the NY Times August 15th, 2011? On the heals of a Republican hold out to get everything they wanted in the debt ceiling debacle using the American people as ransom, Warren Buffet, one of the richest men in all the world, suggested it was time for the rich to give up more of their wealth for the sake of the greater good of the nation.

Buffet mentions:

…examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Buffet is advocating increasing personal income tax for the wealthiest, and closing loopholes for capital gains so America can pay for its obligations. Since the Reagan era–a problem perpetuated by the ruse of the Republican party–taxation to the wealthiest Americans has steadily decreased.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

Prior to 1980 the tax rate for those making more than $215K was a whopping SEVENTY PERCENT (70%). THat number quickly dwindled to 35% and with added tax breaks that number can be halved with ease.

Opponents of Buffet are happy if he wants to give away his money to the government, but they don’t like it. The argument from free market proponents adamantly refuse tax increases. Those who love to make more and more money do’nt want to give the government a chance of wasting more and more tax revenue!

The primary argument to NOT increase the higher tax brackets is because more money for the wealthiest provides more opportunity/incentive for these individuals to increase productivity (to make more money) by opening more businesses (and I guess by not buying more yachts). Making more money means more jobs for Americans and that’s how you’d save the economy (a really simplistic example).

Makes sense. What does the data suggest?

So although it may sound gallant that the rich want more money so they can create jobs, they simply are not capable of doing so to turn around the current market. Furthermore, it can be argued that the decrease in unemployment was a result of an inflated market economy that relied too heavily on unsustainable levels of debt.

What’s your take? Should the rich continue to get richer at the expense of middle class? Should the government reduce size to decrease waste in tax revenues? Should the defense department take huge steps to reduce spending? Or should the poor just get a job and work harder?

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