Stop Coddling the Super-Rich
By WARREN E. BUFFETT
Published: August 14, 2011 NEW YORK TIMES ONLINE
A version of this op-ed appeared in print on August 15, 2011, on page
A21 of the New York edition with the headline: Stop Coddling the
OUR leaders have asked for "shared sacrifice." But when they did the
asking, they spared me. I checked with my mega-rich friends to learn
what pain they were expecting. They, too, were left untouched.
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. Some of us are investment managers
who earn billions from our daily labors but are allowed to classify
our income as "carried interest," thereby getting a bargain 15 percent
tax rate. Others own stock index futures for 10 minutes and have 60
percent of their gain taxed at 15 percent, as if they'd been long-term
These and other blessings are showered upon us by legislators in
Washington who feel compelled to protect us, much as if we were
spotted owls or some other endangered species. It's nice to have
friends in high places.
Last year my federal tax bill — the income tax I paid, as well as
payroll taxes paid by me and on my behalf — was $6,938,744. That
sounds like a lot of money. But what I paid was only 17.4 percent of
my taxable income — and that's actually a lower percentage than was
paid by any of the other 20 people in our office. Their tax burdens
ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do,
your percentage may be a bit lower than mine. But if you earn money
from a job, your percentage will surely exceed mine — most likely by a
To understand why, you need to 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
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
I didn't refuse, nor did others. I have worked with investors for 60
years and I have yet to see anyone — not even when capital gains rates
were 39.9 percent in 1976-77 — shy away from a sensible investment
because of the tax rate on the potential gain. People invest to make
money, and potential taxes have never scared them off. And to those
who argue that higher rates hurt job creation, I would note that a net
of nearly 40 million jobs were added between 1980 and 2000. You know
what's happened since then: lower tax rates and far lower job
Since 1992, the I.R.S. has compiled data from the returns of the 400
Americans reporting the largest income. In 1992, the top 400 had
aggregate taxable income of $16.9 billion and paid federal taxes of
29.2 percent on that sum. In 2008, the aggregate income of the highest
400 had soared to $90.9 billion — a staggering $227.4 million on
average — but the rate paid had fallen to 21.5 percent.
The taxes I refer to here include only federal income tax, but you can
be sure that any payroll tax for the 400 was inconsequential compared
to income. In fact, 88 of the 400 in 2008 reported no wages at all,
though every one of them reported capital gains. Some of my brethren
may shun work but they all like to invest. (I can relate to that.)
I know well many of the mega-rich and, by and large, they are very
decent people. They love America and appreciate the opportunity this
country has given them. Many have joined the Giving Pledge, promising
to give most of their wealth to philanthropy. Most wouldn't mind being
told to pay more in taxes as well, particularly when so many of their
fellow citizens are truly suffering.
Twelve members of Congress will soon take on the crucial job of
rearranging our country's finances. They've been instructed to devise
a plan that reduces the 10-year deficit by at least $1.5 trillion.
It's vital, however, that they achieve far more than that. Americans
are rapidly losing faith in the ability of Congress to deal with our
country's fiscal problems. Only action that is immediate, real and
very substantial will prevent that doubt from morphing into
hopelessness. That feeling can create its own reality.
Job one for the 12 is to pare down some future promises that even a
rich America can't fulfill. Big money must be saved here. The 12
should then turn to the issue of revenues. I would leave rates for
99.7 percent of taxpayers unchanged and continue the current
2-percentage-point reduction in the employee contribution to the
payroll tax. This cut helps the poor and the middle class, who need
every break they can get.
But for those making more than $1 million — there were 236,883 such
households in 2009 — I would raise rates immediately on taxable income
in excess of $1 million, including, of course, dividends and capital
gains. And for those who make $10 million or more — there were 8,274
in 2009 — I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a
billionaire-friendly Congress. It's time for our government to get
serious about shared sacrifice.
Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.