Point, Counterpoint (aka: He Said, He Said)

Last week, most of you probably read Warren Buffett’s op-ed in the NY Times, “Stop Coddling the Super-Rich.

“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 lot.

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 boot.”

Today, Harvey Golub, the former chairman and CEO of American Express responds in the WSJ’s Op-ed pages:

“I also resent that Warren Buffett and others who have created massive wealth for themselves think I’m “coddled” because they believe they should pay more in taxes. I certainly don’t feel “coddled” because these various governments have not imposed a higher income tax. After all, I did earn it.

Now that I’m 72 years old, I can look forward to paying a significant portion of my accumulated wealth in estate taxes to the federal government and, depending on the state I live in at the time, to that state government as well. Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes. Isn’t that enough?”

First of all, I take issue with Golub’s claim that he will pay 80%-90% in taxes this year.  There’s no way – even if he is planning on kicking the bucket and counting estate tax, which shouldn’t be counted.   If I’m wrong, someone please show me how Golub will pay 80-90% of his current income this year in taxes.  If he’s counting taxes that he owes on long term capital gains (which I’m guessing is part of it), that’s sensationalistic in my view.

I want to point out one point where I think Golub is dead right.  He writes:

“Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too. “

It’s the last sentence there that I think is very important – the “have a stake in it” mentality.    I think that people raise and spend money (or advocate raising and spending money) very very differently when it’s their own money that they’re spending as opposed to other people’s money.  It affects your entire philosophy – for the better, in my opinion.

As for the rest, well, you can read them and decide for yourself…

-KD

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