Friday, August 19, 2011

Why the Rich Should Pay More in Taxes

Posted By on Fri, Aug 19, 2011 at 2:30 PM

Warren Buffet has come under considerable criticism this week for his notion that the rich should pay more in taxes in this country. One popular critique from the conservatives: Why doesn't Buffet just pay more himself and leave the rest of the put-upon wealthy Americans alone?

The Arizona Republic chimed on that very point today in an editorial that cleverly tries to outwit Buffet:

In fact, Buffett could pay whatever he wants to pay right now. There is nothing prohibiting him from adding as much as he wants to his check to the IRS. He says the 17.4 percent rate he pays on his taxable income, which realized under $7 million in taxes, is far below the 33-41 percent rate paid by the 20 other people working in his office.

That's a serious guilt burden Buffett shouldn't have to endure. By effectively taxing himself, on behalf of everyone in his office, he could solve that problem tomorrow.

Former Reagan administration official Bruce Bartlett explains why that's an argument unworthy of the state's largest newspaper:

On Monday, financier Warren Buffett ignited a tax debate by recommending a tax increase on the super-rich. The reaction by some Republicans and others has been that if Mr. Buffett wants to pay more, he should simply write a check to the Treasury Department and send it to Washington. While such a sound-bite response may go over well on Fox News, it is a completely unserious response to the point he made.

In the same column, Bartlett offers real analysis as opposed to silly taunting:

So where is the data supporting the argument that taxes on the rich are the sine qua non of growth? I don’t see it. On the contrary, the data from the last several decades would in fact support the opposite conclusion — that higher tax rates on the wealthy stimulate growth. It is worth remembering that throughout most of Ronald Reagan’s presidency the top rate was 50 percent, and Republicans believe his economic policies are the gold standard that we should try to emulate in every way possible.

The entire thing is worth a read, unless you already have your mind made up that higher taxes automatically kills jobs and destroys America, but here's the final takeaway:

The obvious compromise is for those like Mr. Buffett who believe that the top rate should be increased, for both financial and distributional reasons, to make clear that they are talking only about people who really are rich. The top rate ought to stay at 35 percent for those in the $370,000 to $1 million income range. But those making $1 million can easily afford to pay 40 percent, which was the top rate in the 1990s, and those making $10 million annually could pay 50 percent, the top rate under the Reagan administration.

Given our budgetary situation, it is irresponsible to keep higher revenues completely off the table, as Republicans insist. And their dogmatic belief that low taxes on the rich are the key to growth is transparent nonsense. But it’s reasonable for the modestly well to do to fear being treated like millionaires when there is talk of raising taxes on the rich. Higher tax rates on the rich should apply only to those who really are rich.

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