Listen to Warren Buffett: Tax Cuts Bad
Billionaire investor Warren Buffett slices the Bush tax cut reasoning into little tiny pragmatic pieces in a Washington Post editorial. He's been more right about a lot of things than most people. Mr. Buffett writes, in part:
Posted by Mitch Ratcliffe at May 20, 2003 11:58 AM | TrackBack
The annual Forbes 400 lists prove that -- with occasional blips -- the rich do indeed get richer. Nonetheless, the Senate voted last week to supply major aid to the rich in their pursuit of even greater wealth.
The Senate decided that the dividends an individual receives should be 50 percent free of tax in 2003, 100 percent tax-free in 2004 through 2006 and then again fully taxable in 2007. The mental flexibility the Senate demonstrated in crafting these zigzags is breathtaking. What it has put in motion, though, is clear: If enacted, these changes would further tilt the tax scales toward the rich.
Suppose this measure goes through and the directors of Berkshire Hathaway (which does not now pay a dividend) therefore decide to pay $1 billion in dividends next year. Owning 31 percent of Berkshire, I would receive $310 million in additional income, owe not another dime in federal tax, and see my tax rate plunge to 3 percent.
And our receptionist? She'd still be paying about 30 percent, which means she would be contributing about 10 times the proportion of her income that I would to such government pursuits as fighting terrorism, waging wars and supporting the elderly. Let me repeat the point: Her overall federal tax rate would be 10 times what my rate would be.
When I was young, President Kennedy asked Americans to "pay any price, bear any burden" for our country. Against that challenge, the 3 percent overall federal tax rate I would pay -- if a Berkshire dividend were to be tax-free -- seems a bit light.