Buffett recognizes need for raising taxes on wealthy

Warren Buffett has a great op-ed in the New York Times today about the need to stop protecting the wealthiest Americans when so many in the middle class are still struggling. Buffett points out that the rich pay a lower effective tax rate because "they make their money with money" rather than being paid for doing a job. Not only are their earnings taxed at a lower rate than many middle class families, they avoid the payroll tax. To me, the key point that he makes is this one:

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

I often hear prominent members of the Right (like Mitt Romney) make the wild claim that by taxing the rich at a fairer rate, we're "punishing them for their success" and creating a deterrent for people to work hard to make more money. If they're taxed a little bit more for that money, they wouldn't bother. It's a bizarre claim, because as Buffett points out, if someone wants to make money, they won't shy away from investing because a little bit more of that extra money will be taxed. The evidence bears him out. Despite the magic supposedly unleashed by repeated tax cuts over the last decade, the '00s is the worst decade for job creation and for stocks since the Great Depression.  

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