Laffer Center: Buffett’s call for higher taxes would “worsen the federal budget deficit and lead to a further weakening of the economy”
_______________________________________________________
Proposed “Buffett Rule” would confiscate income from entrepreneurs while exempting Buffett’s main sources of income from taxation
Contact Joshua Treviño, (512) 472-2700, jtrevino@texaspolicy.com
AUSTIN – Billionaire investor Warren Buffett’s public call for the government to raise taxes on him and other “mega-rich” citizens is counterproductive and harmful to the economy, according to an article by internationally renowned economist Dr. Arthur Laffer that was published today by the Laffer Center for Supply-Side Economics.
Warren Buffett’s “effective tax rate on his true income would hardly budge if this ‘Buffett Rule’ were applied,” Dr. Laffer wrote. “What’s worse, raising tax rates on the highest income earners would most likely worsen the federal budget deficit and lead to a further weakening of the economy, which would penalize everyone across the income distribution.”
Last August, Buffett wrote an op-ed in the New York Times noting that his 2010 federal tax bill amounted to 17.4 percent of his taxable income—the lowest effective tax rate of any of the people working in his office—and arguing that wealthy Americans such as himself should pay higher taxes. Since then, President Barack Obama has regularly used Buffett’s secretary, Debbie Bosanek, as a rhetorical tool to make his argument for higher taxes, even hosting her in the First Lady’s box during last night’s State of the Union address.
According to Forbes magazine, Buffett’s net worth increased by $10 billion in 2010, even after a $1.6 billion donation to the Bill & Melinda Gates Foundation. The net worth increase is an unrealized capital gain that is part of his total income. Adding these tax-exempt items to his taxable income increases his total income from $40 million to roughly $11.6 billion, which drops his true effective tax rate from 17.4 percent to 0.06 percent.
“Buffett’s proposal to raise taxes on the rich would not tax the vast majority of his shielded income, including either his unrealized capital gains, which are currently taxed at zero percent, or charitable contributions, which are tax deductible,” Laffer wrote.
Laffer also notes that Buffett’s donation to the Gates Foundation is contingent on “continu[ing] to satisfy the legal requirements qualifying Warren’s gift as charitable, exempt from gift or other taxes.”
“Buffett quite consciously shields almost the entirety of his true income from federal income taxation, and makes no bones about his belief that he can do more good with his wealth than Uncle Sam,” Laffer wrote. “Buffett’s call for higher tax rates is dangerous because doing so would stifle economic growth and, depending on the severity of the hikes, could actually reduce federal revenue relative to what it otherwise would have been.”
The paper, “Warren Buffett’s Call for Higher Taxes on the Rich,” is available for free download from the Laffer Center’s website, www.LafferCenter.com.
Dr. Arthur Laffer is founder and chairman of Laffer Associates, an institutional economic research and consulting firm. Laffer was a member of President Ronald Reagan’s Economic Policy Advisory Board for both of his terms.
The Laffer Center for Supply-Side Economics is a partnership with the Texas Public Policy Foundation dedicated to preserving and promoting the core tenets of supply-side economics.
Laffer Center website: http://www.laffercenter.com/
______________________________________
David Guenthner
Senior Communications Director
Texas Public Policy Foundation
900 Congress Ave., Suite 400
Austin, TX 78701
(512) 472-2700 office
(512) 925-3512 cell
(512) 472-2728 fax
dguenthner@texaspolicy.com e-mail
@DavidGuenthner Twitter
