The Guardian UK
Wednesday 31 October 2007
The United States' second-richest man has delivered a blunt message to the Bush administration: he wants to pay more tax.
Warren Buffett, the famous investor known as the "Sage of Omaha", has complained that he pays a lower rate of tax than any of his staff - including his receptionist. Mr Buffett, who is worth an estimated $52bn (£25bn), said: "The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It's dramatic; I don't think it's appreciated and I think it should be addressed."
During an interview with NBC television, Mr Buffett brandished an informal survey of 15 of his 18 office staff at his Berkshire Hathaway empire. The billionaire said he was paying 17.7% payroll and income tax, compared with an average in the office of 32.9%.
"There wasn't anyone in the office, from the receptionist up, who paid as low a tax rate and I have no tax planning; I don't have an accountant or use tax shelters. I just follow what the US Congress tells me to do," he said.
Mr Buffett also took a pot shot at hedge fund managers. He said: "Hedge fund operators have spent a record amount lobbying in the last few months - they give money to the political campaigns. Who represents the cleaning lady?"
His intervention comes amid an increasingly rancorous debate on Capitol Hill about tax. Shortly after taking office, President Bush pushed through $2 trillion in temporary tax cuts, including sharp reductions for high-earners. These expire at the end of 2010 and the White House wants to renew them.
A leading Democrat, the Harlem congressman Charlie Rangel, published alternative plans this week that would impose a 4% surcharge on people earning more than $200,000 a year, while delivering tax relief to 90 million working families.
Republicans say the net effect would be a $2 trillion tax increase that would hurt small businesses and farmers. Meanwhile, Mr Buffett's remarks drew a robust response from the US Chamber of Commerce, which said the top 1% of US earners accounted for 39% of tax revenue - and the highest earning 25% of the population delivered 86% of the tax-take.
The chamber's chief economist, Martin Regalia, said: "Mr Buffett has made an awful lot of money and if he wants to pay more taxes, I think that's fine. But I think he should get his facts straight."
He added: "There's no question in my mind: if you were to impose [the Democrats'] tax increases, you would see the US go into a recession."
Rangel Offering Broad Tax Plan, and Big Target
By Steven R. Weisman
The New York Times
Wednesday 31 October 2007
Washington - When the Democratic chairman of the House Ways and Means Committee proposed a sweeping overhaul of the tax code last week, aimed at shifting more of the burden of taxation to the wealthy, Democrats were lukewarm and Republicans loosed a fusillade of attacks.
But even as Democrats ran for cover and Republicans fired away, the proposal by the chairman, Charles B. Rangel of New York, gave shape to the debate over one of the biggest issues facing the next administration: whether to keep President Bush's tax cuts in place or roll them back.
"What Rangel has done is put out a coherent plan," said Robert E. Rubin, who was Treasury secretary under President Bill Clinton and is now chairman of the executive committee at Citigroup. "You may like it, you may not like it. But it starts a discussion."
In general, the Democratic presidential candidates have made clear that they intend to reverse Mr. Bush's income tax reductions for upper-income people and use the additional revenue to pay for health care and other domestic programs. But they have not put forward detailed tax plans of the sort offered by Mr. Rangel.
His bill would increase tax rates on the wealthy; eliminate the alternative minimum tax, which is increasingly raising tax bills for many middle- and upper-income people; provide additional breaks for low- and middle-income households; and overhaul corporate taxes by reducing rates while tightening tax breaks.
By making Democratic ideas concrete, Mr. Rangel set up a target for opponents, from the White House to Congressional leaders to Republican presidential candidates to conservative commentators and editorial writers - all of whom portrayed it as a warning of the dangers Democrats pose to taxpayers and the economy.
Former Gov. Mitt Romney of Massachusetts called Mr. Rangel's proposal the "largest increase in the history of America," and former Mayor Rudolph W. Giuliani of New York said, "We certainly shouldn't raise taxes the way Charlie Rangel wants to."
Democrats have distanced themselves from the Rangel bill even while expressing approval of its general objectives of making the tax system more progressive, with the burden rising on those with the highest incomes.
Asked if she endorsed the plan, the House speaker, Nancy Pelosi, said simply, "no." But she added that the Rangel bill would be presented to Democratic House members, and without sounding like she was relishing the prospect, predicted that "we will have our usual exciting, dynamic, give-and-take on the subject."
Also sounding noncommittal, Senator Hillary Rodham Clinton of New York said she shared with Mr. Rangel "the goal of tax fairness" and "welcomes his leadership," according to her spokesman, Howard Wolfson.
"I think Charlie's being very courageous in moving forward," Mrs. Clinton said Tuesday night at the Democratic debate in Philadelphia. "I don't agree with all the details, but he's on the right track to say we've got to do something about the A.M.T.," she said, referring to the alternative minimum tax.
But if Democratic politicians have been reticent, liberal economists said Mr. Rangel was right to put on the table a statement that tax policy under Mr. Bush had become too tilted toward benefiting the wealthy and the government could not afford to let its long-term financial condition continue to deteriorate.
"His bill is both brave and well designed," said Robert Greenstein, executive director of the Center for Budget Policy and Priorities, a liberal policy institute. "The level of taxes owed by Americans under the Rangel bill is still lower than what they owed when Bush came in. The charge that it's the biggest tax increase in history is nonsense."
Mr. Rangel, in an interview, said he savored the controversy he had stirred up, especially when the ranking Republican on his Ways and Means Committee, Jim McCrery of Louisiana, labeled his proposal "the mother of all tax hikes."
"The mother of all tax hikes?" he asked, laughing. "I love it! I'm excited about having a debate. What I'm doing is putting out a score card, and people can agree or disagree. But all those people who claim they're going to be adversely affected by tax increases should now come forward and make their case."
Mr. Rangel acknowledged that his proposal had little chance of passage this year or next, or of overcoming a veto by Mr. Bush if it did. But he said he was at least addressing what most specialists say are fiscal problems that would grow harder over time.
In an op-ed article in The Wall Street Journal on Tuesday, Mr. Rangel portrayed his plan as a way to help the middle class by rescuing them from the alternative minimum tax, which was originally intended to ensure that the wealthy could not escape income taxes by using deductions and loopholes. In recent years it has increased the tax bills of less affluent households and if left unaddressed, would affect more middle-income people.
His plan, Mr. Rangel said in the article, would "put money back in the pockets of working families," a formulation similar to the language long used by Republicans to justify their tax cuts.
The congressman argues that eliminating some breaks and letting taxes go up in coming years for some taxpayers making more than $200,000 - and especially for those above $500,000 - will ensure that 90 million Americans will pay lower taxes than under the current system.
Of particular significance, he does not envision using the revenue for spending programs, which is what many Democratic presidential candidates say they have in mind.
In that sense, the proposal implicitly challenges the thinking of some Democrats that their spending proposals can be easily paid for by taxing the rich.
But Republicans who are critical of the Rangel proposal said that although it was framed as providing a tax cut to 90 million Americans (and a tax increase on 1.7 million), it would "cut" only taxes that they are not yet paying but would pay if current law governing the alternative minimum tax was not changed.
"Look at the real Democratic priorities," said Mr. McCrery, the ranking committee Republican. "Look at their appropriations bills. Look at children's health. What they need is more tax revenue. Boy, does this bill give them more revenue."
While criticizing Mr. Rangel's priorities, some Republican tax specialists give him credit for laying out priorities. "I'm not a big fan of this proposal," said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute, the conservative research group.
"But the thing he's done that makes Democrats uncomfortable is that he's exposed the fallacy of their position," Mr. Hassett added. "He's made it uncomfortable for them to blame all the world's problems on the Bush tax cuts, and to say if you just repeal the tax cuts on the wealthy, you'll have heaven on earth."
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Kitty Bennett contributed reporting.
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