I am somewhat pressed for time because of school responsibilities, so I will not go as thoroughly through the piece as I might otherwise. But consider his first two paragraphs:
SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”It gets better from there, and remember, the arguments are coming from America's most successful investor EVER, someone fairly universally admired. Continue below the squiggle for a few highlights.
Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
Buffett talks about periods when taxes on capital gains and top brackets on income were much higher than today, and points out that he was pretty successful. He never had anyone mention taxes as a reason to forego investment, and
Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.He points out how much money the truly wealthy have to invest - the Forbes 400 has $1.7 TRILLION in wealth as of 2009 as compared to $300 billion as recently as 1992.
And consider this - they have an average income of $202 million while more than 1/4 paid effective tax rates of <15%, half paid <20%. Some paid NOTHING. The average rate on Adjusted Gross Income for all 400 is now 19.9%, compared to 23.2% in 1992.
Buffett wants to eliminate the Bush tax cuts completely, although - like incoming Senator Tim Kaine - he prefers a cutoff of $500,000 rather than the President's proposal of $250,000. He also wants ADDITIONAL taxes of 30% on AGI of $1 - 10 million, and 35% on incomes above that.
His goal is to restore a ratio where the government takes in revenues of 18.5% of GDP while spending is at about 21% of GDP - still in deficit, but
- far better than current ratio of 15.5% in revenue and 22.4% in spending. PLEASE NOTE - this means increasing revenue by almost 20% while decreasing spending by around 6%, a very different ratio than proposed by Simpson-Bowles or any of the other proposals by "serious people" in Washington. Buffett notes, and this is key,
But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.As for the argument that it is taxes keeping good investment from happening? Let me allow Buffett his final words:
In the meantime, maybe you’ll run into someone with a terrific investment idea, who won’t go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him.Read the Buffett.
Pass it on.
Especially to your Senators and Congressman.