Why Warren Buffett’s Tax Returns & Payments Matter
October 24, 2011
Why Warren Buffett’s Tax Returns & Payments Matter
By: Congressman Tim Huelskamp
In mid-August billionaire Warren Buffett wrote a column in The New York Times calling for higher taxes on people who make extraordinary amounts of money. It’s a popular line and one that certainly generated a lot of news and media fawning for him, but his call is a misguided one. And it ignores the real problem: America’s $15 trillion of debt is not because Washington taxes too little; it is because Washington spends too much.
In response to his column, I called on Warren Buffett to release his tax returns in order to back up his claim about how he is taxed at a lower rate than his secretary. Some people have said that it is a waste of time to ask Warren Buffett to prove his claims. But if we are going to write an entire country’s tax policy based on one billionaire's anecdote, then show the proof. If Mr. Buffett were to come before a congressional committee, then we would need to see the evidence – under oath.
When he finally responded to my request, he did not release his full returns, but he did share what he allegedly made ($63 million), how much was sheltered from taxation through huge tax loopholes ($24 million), and how much he paid in taxes ($7 million). This equates to Mr. Buffett having an effective tax rate of 17 percent on his taxable income. Contrary to his claim, while he does pay less a lower rate than the average top one-percent payer (24 percent tax rate), he still pays a higher-than-average rate. The bottom 50 percent of earners paid an average of less than 2 percent of their annual incomes in taxes.
Far too often, politics can often be reduced to the old adage: do as I say, not as I do. And Buffett is no exception as he campaigns here for President Obama.
Though he has options to make his actions match his words, Mr. Buffett has yet to do so. He could write a check to help pay down the country’s debt or make a “gift” to the Treasury, but like any smart and savvy American, he will not give one dollar extra than required to Washington. Instead, he shelters his income by giving it to the foundation of another multibillionaire. I would much rather people give to charity, but if Mr. Buffett truly believed that Washington is a force for good in the same way that private organizations are, then he would have “donated” to the federal government. But beyond the additional “donation,” he could start by paying the $1 billion in back taxes his company, Berkshire Hathaway, apparently already owes.
It is obvious that Mr. Buffett does not trust the President with his money. He wants the President to have more, but to obtain it from others. He says it is only fair. But how fair is it that the top 20 percent of earners pay 91 percent of all taxes while the average person in the bottom 40 percent actually receives a payment from the government? Even if Mr. Buffett were to get his way, doubling taxes on the richest 400 Americans would only fund the government for about two more days. Taking all the income of the richest 400 would only cover expenses for about four days.
Therein lays the real problem. Taking all income of the “rich” will not cure America’s biggest challenge: excessive spending. Instead of class warfare, it is time for a real discussion about taxes and spending in America, including about who pays, how much, and why more revenue from the same taxpayers is needed in the first place. Unless and until Mr. Buffett voluntarily “invests” in the federal government (or pays the back taxes his company apparently owes), America should be wary about what one billionaire suggests the President and politicians do.