Pethokoukis

Oops! Warren Buffett inadvertently makes the case against tax hikes

Image credit: Wikimedia Commons

Image credit: Wikimedia Commons

Warren Buffett is someone who’s been calling for higher taxes on the rich. Here he is again in a New York Times op-ed today. But Buffett also outlines some fiscal goals:

Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. — levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won’t stem our budget deficits; in fact, it will continue them. 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.

Right now we’re more like 16% revenue, 24% spending. Buffett would boost revenue to a bit above its historical average of 18% partly via his version of Obama’s so-called Buffett rule — a new 30% alternative minimum tax on taxable income between $1 million and $10 million, and 35% on amounts above that.

One effect of this rule would be to raise investment tax rates dramatically from today’s 15% level, which would be anti-growth. But that point aside, does Buffett really think we can only get revenue to 18.5% of GDP via tax hikes? Turns out, the long-term CBO budget forecast pegs revenue at 18.5% of GDP in 2022 even while keeping the Bush tax cuts in place. That’s right, if we do nothing other than let the economy continue to recover we’ll hit Buffett’s revenue target, according to the CBO.

In other words, to get to Buffett’s 18%-21% revenue/spending ratio, we really need to focus on spending cuts, not tax hikes. And why not first try to boost revenue through economic growth rather than raising the tax burden? Why tax hikes first in a weak economy?

Liberals touting the Oracle of Omaha’s economic views should also keep in mind he is calling for a government much smaller than they probably want. For instance, a budget plan put forward by the Center for American Progress a year or so ago has revenue and spending at about 24% of GDP in 2030. One from the Economic Policy Institute has revenue at 24% and spending at 28%.

And Team Obama? Well, its most recent budget called roughly for revenue of 20% of GDP and spending of 23% in 2022. Beyond that, who knows? But the White House stiff-arm of Simpson-Bowles may be telling since that plan called for long-term targets of 21% of GDP for spending and revenue. My guess is that Obama is much closer to the CAP/EPI target than Simpson-Bowles. It sounds like Buffett is just the opposite. Maybe Obamanomics needs a dose of Buffettology.

15 thoughts on “Oops! Warren Buffett inadvertently makes the case against tax hikes

  1. You tell ‘em, Jim!! You just lecture one of the most legendary capitalists in history, and tell him how wrong he is, despite the mountain of empirical evidence against you.

    Because there are so FEW people in the world with your enormous intellectual grasp of economics.

    “One effect of this rule would be to raise investment tax rates dramatically from today’s 15% level, which would be anti-growth. But that point aside, does Buffett really think we can only get revenue to 18.5% of GDP via tax hikes? Turns out, the long-term CBO budget forecast pegs revenue at 18.5% of GDP in 2022 even while keeping the Bush tax cuts in place. That’s right, if we do nothing other than let the economy continue to recover we’ll hit Buffett’s revenue target, according to the CBO.”

    Of course, Jimmy P. jumps on these 2022 estimates as if they were LEAD PIPE CINCH TO HAPPEN.

    This is now 2012. Would Mr. Pethokoukis care to regale us with any “estimates” for the US and global economy made in 2002?

    Because this site will need a laugh track if he does.

    The AEI : An endless pipeline of twaddle.

    • Back in 2010, Mitch McConnell averred that, of course, the Bush tax cuts generated an increase in tax revenues. This column was one result, with some unintended support from the Heritage Foundation. http://voices.washingtonpost.com/postpartisan/2010/08/cherry-picking_season.html The low lights: average tax revenue 2000-07 was 17.6 percent of GDP, until it plunged to 15 percent in 2007 and 2008. Heritage is a might tetchy about this because it predicted precut that all that nascent growth would retire the federal debt by 2010. Yes, sh*t happens,which would be the primary flaw in CBO forecasts. But you have to admire the chutzpah of people who can spend money they don’t have and call themselves conservatives.

      • That’s a good article, and it’s one that points out how farcical the arguments have become, particularly from the Cato/Heritage/AEI troika of Fortune 500 backed ignorance promotion.

        Mr. Pethokoukis will spend his life cherry picking charts and data- as this article points out in Heritage’s case- isolating points of data and drawing a false narrative from them, while ignoring the rest of the picture. This, for some, has become a defined career path.

        it would be laughable if so many people weren’t taken in by it. But it looks like finally, the American people have gotten the message. Grover Norquist is going to be as popular as Menudo. And discarded just as easily.

        • A point of distinction here. Cato has led the charge on corporate welfare, which is why the Kochs tried to mount a coup on its board. I have no problem with principled libertarians, which I define as folks who don’t want to be in your bedroom and dislike welfare in all of its forms.

  2. Why does this multi-billionaire advocate soaking and punishing the rich, wealthy, job creators at every opportunity–especially when their are cameras and media reporters present? The answer is simple.

    This is how this hypocrite keeps the unwashed masses, with their pitch-forks and torches, off of his front porch. The Sage knows very well how he got his and he knows very well how free-market capitalism facilitated this process. And he also knows that he can write a billion dollar check–payable to Uncle Sam–any time that he wants.

    The Sage and his public persona is as phony as a $3 bill. And he’s counting on the grubby, unwashed and uneducated masses to continue to be too stupid so as not to be able to figure this out.

    So far, the Sage has been right. So far, there has been no check made out to Uncle.

  3. In line with MacDaddyWatch’s point, Mr Buffett could make a simple switch and give his regular $1.5 billion yearly contribution ( with a charitable deduction) not to the Gates Foundation but to the Federal Government. He can back up his NY Times posted words with action and take the lead for others.

  4. What a prick. Nothing but a publicity stunt.

    No matter how much money anyone else earns, it has absolutely no impact on anyone else. Even if his class paid 100% this government would squeeze it into the toilet with one hand on the lever and the other palm up.

    All of this to brag to the envious? Congrats Mr. Buffett…..GFY

  5. As I understand it, Buffet sells assets only rarely, and so capital gains, as a percent of his net worth, is very small in any given year.

    If/when I hear Buffet calling for a tax on ASSETS, then I’ll know that he finally believes that “what’s good for the goose is good for the gander”

    • Buffett also favors increases on capital gains, and openly mocked Norquist, who will soon me American politics SECOND most humiliated man.

      ““Let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased,” Buffett wrote. “Only in Grover Norquist’s imagination does such a response exist.”

  6. If Buffet wants to pay higher rates why not arrange his compensation such that he gets paid a salary and bonus. All his cap gains and dividends accrue to Berkshire instead of him personally leaving him paying ~35% on the salary and bonus.

    His compensation wouldn’t change but his tax bill would and his conscience would be clear.

  7. Just for you folks calling Buffett a “hypocrite” he will be on Charlie Rose tonight on Bloomberg Television.

    He advocates raising cap gains to 25% (at least)
    Dividends to ordinary income levels (which even I’m not in favor of)
    in addition to the marginal rate tax hikes.

    No hypocrisy here.

    • I’m not going to weigh in on the “hypocrisy” issue, but I would observe that what Buffet favors, in essence, is punishing investors who trade their positions frequently, and rewarding those who hold positions for many years, even decades. (Hold your position long enough, and the tax laws will eventually change)

  8. I’d like to find out Buffet’s position on the tax deductability of charitable contributions.

    After all, the government knows best, right?

    Why let rich people decide what to do with their own money when the government can spend it so much more wisely?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>