When the nation’s richest person speaks, he is worth listening to. Especially when the economy is stalled in recession and unemployment looks stuck at 9 percent.
Warren Buffett, speaking for himself and for others among the super rich, wrote in the Monday New York Times: “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 extraordinary tax breaks.”
He complained that his federal tax bill last year was only $6,938,744, which was 17.4 percent of his taxable income, a lower percentage than those of the other 20 people in his Berkshire Hathaway office.
A big part of his tax advantage was that he and other investment managers earn billions in trading and can have their income taxed at a bargain rate of 15 percent. They also pay practically nothing in payroll taxes, which hit the middle class hard along with income taxes often in the 28 percent bracket.
Mr. Buffett’s comment on the richest getting richer while the rest of us are lagging behind, barely making it or actually losing ground proportionally, comes at a crucial time. Twelve members of Congress have been assigned the job of devising a plan to reduce the 10-year deficit by at least $1.5 trillion. He urges that it consider not only cutting spending but also raising revenues.
Specifically, he called for leaving most tax rates the same but immediately raising the rates for those making more than $1 million including dividends and capital gains and even higher for those who make $10 million or more. That implies jacking up the measly 15 percent tax now paid for investment gains.
He could have gone farther. A 2010 book, “Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class,” describes how the richest Americans have been coddled over the past 30 years. It is by two political science professors, Paul Pierson of the University of California at Berkeley and Jacob S. Hacker at Yale.
They showed that income distribution ran relatively unchanged until 1978. With a Republican president and Congress, the wealthy won deep cuts in the capital gains tax and a sharp rise in the regressive payroll tax. Those actions, plus the fad of deregulation, began a steady march of special benefits for the richest. The book reported that from 1979 to 2006 the top 1 percent received 36 percent of all income growth, and the highest-income one-tenth of 1 percent — one out of every 1,000 households — received nearly 20 percent. The poor, middle class and lesser executives shared the rest.
The authors attribute the steeply growing disparity not to the conventional explanation of economic globalization and education differences, but to organization and political skill by business and management.
What’s needed is not just cutting the deficit but narrowing the gap between the few very rich and the rest of Americans.