Tuesday, August 16, 2011

On taxing the wealthy

Warren Buffett wrote a great, patriotic op-ed piece in the New York Times a couple of days ago. In it, he explained that he pays a lower tax rate than any of the less wealthy people in his office, and that the tax rate on the super-rich has fallen from 29% to 22% since 1992.

If tax rates rose back to 1992 levels for the 400 highest-income individuals, who reported an aggregate $90 billion in income in 2008, we could raise an additional $6.3 billion in taxes each year. Over ten years, that would mean $63 billion in deficit reduction. Now, that's only 4 percent of the $1.5 billion in reductions the congressional super committee need to find, but it's not pocket change. (And that's only the top 400: Buffett actually advocates increasing tax rates for anyone earning over $1 million a year, and he doesn't say how many taxpayers that includes.)

The advantages of Buffett's proposal is that it would demonstrate that "shared sacrifice" does not exempt the wealthiest. His is also one way of cutting the deficit that will have essentially no negative effect on growth. As Buffett points out, the super-rich don't decide to hold back on investment because of slightly higher tax rates. They have to put the money somewhere.

The major problem with Buffett's proposal is that it doesn't delve far enough into the ranks of the wealthy. I'm not in Buffett's million-a-year category, but I know I could afford to pay more in taxes, and I'm willing to do so. After all, I've been very fortunate. My father started Intel, and though both he and my mother elected to leave the vast majority of their wealth to charitable foundations, they left plenty for their kids and grandkids. (My father also recognized, as some self-made individuals do not, that luck and good timing, not only merit, played a role in his success.) My husband and I can pay for healthcare, for our children's college educations, for a nice house, a lovely vacation house, and travel. We have the freedom to choose work that is meaningful without much regard to how well it pays. As a result, we've chosen to invest in building new enterprises--a biotech company that is seeking a treatment for amyotrophic lateral sclerosis (Lou Gehrig's disease) and now a company, Tumblehome Learning, dedicated to creating science-related adventure books, biographies, and hands-on kits for children. Some years, as a result of our entrepreneurial efforts and market vagaries, we have negative income. Most years we fall into the category of the high income individuals who have benefited most from the Bush tax cuts.

I'm with Warren Buffett. I wouldn't stop doing the work I love, generating ideas, investing in those ideas, and hiring people to help carry them out, even if capital gains taxes were higher. My "lifestyle" doesn't require more money: I don't fly first class or stay in the fanciest hotels; my wardrobe is a little ragged; I don't drink fine wines. I've been privileged to grow up among the benefits of a strong national economy: good public schools and roads, top research universities partially supported by government grants; talented classmates enriching my life because they could get government loans; medical research pushing advances against the asthma that would otherwise have killed me; regulations providing ever cleaner air, safe water and food... The list goes on.

When we kids became young adult, my father asked his good friend, banker Paul Hwoschinsky, to mentor us about the uses of money. Money, Paul told us, is a battery. You can charge it up, and then you should use it for something good. Don't just let the charge leak away. A battery can power toys, but it can also power machines that make good things.

Sure, most of us would rather use money for what we ourselves decide are the most important good things, not necessarily what Congress or federal bureaucracies decide are good things. (Once you start running a foundation, though, you find out that giving money away responsibly is no simple matter.) But most of those who have been fortunate also recognize that we have a duty to give back, to help support the infrastructure and social compact that has made this a great country in which to live, build enterprises, and earn money. I'm willing to pay more taxes, and paying more taxes isn't going to kill any jobs that I would otherwise provide.

Ever since 2001, there has been a large group of us willing to make sacrifices to help build and protect the country we love. But we've never been asked to sacrifice. Instead we've been pandered to and, yes, coddled, as though if anyone asked us to help we would take all our toys and go home. We won't. Try us.
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