Eliot Spitzer - Buffet's Fiscal Cliff
Sometimes "who says it" is just as important as "what they say." So it is with Warren Buffett's op-ed in today's New York Times about taxes and the fiscal realities of our budget.
Here are the straightforward points he makes - central to the debate that is now gripping Washington and has mesmerized Wall Street. Recall, this wisdom comes from the "Oracle of Omaha '' - the acknowledged best investor of the past 50 years, the wise man of finance, devoid of political rhetoric and ideological underbrush. The points may sound familiar, but the source, Warren Buffet - is what matters so much:
Point 1. Raising the marginal tax rate to Clinton era levels will not have any impact on investment decisions - and indeed our growth during periods of much higher marginal rates than those that apply now was robust --benefitting both the wealthy and the middle class. Recall - this was the same conclusion that the CRS reached in a report republicans tried to suppress - as I reported a few weeks ago.
Point 2. Cuts in tax rates have given, as he calls it "a huge tail wind" to the super rich. - who paid an average tax of 26.4% in 1992, but only 19.9% in 2009 - on average income of 202 million dollars. As Buffet says, this is an "outrage."
Point 3. His answer: an absolute minimum tax of 30% on income between a million and 10 million, 35% above that. No loopholes, no hidden games, keep it simple.
And finally the most important point, Point 4 - going beyond the sometimes one-dimensional debate about where to set marginal rates: over the long haul government should set its goals at spending 21% of GDP, and raising 18.5% in revenue, leaving a gap - an annual deficit - of about 2.5% of GDP. That is manageable with a growing economy. And these numbers are close to our historical norms. The crisis of the past few years has been that revenue fell to 15.5% of GDP while spending crept up to 22.4%. An annual deficit of 7% of GDP is NOT manageable. But notice, the most significant deviation has been in the revenue decline - not the spending increase! We should spend about 21% of GDP - but are spending 22.4%. We should get 18.5% in revenue, but are getting only 15.5%.
So listen to the wisest investor and business man - and also one of the wealthiest men in the world. Raise marginal rates, run consistent but manageable deficit, and stop worrying about those at the top of the income spectrum.
It all sounds very simple and reasonable - especially when it comes from Warren Buffet.