“My View” from the Nov. 26, 2012, edition of “Viewpoint with Eliot Spitzer.”
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 Buffett, 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 — benefiting both the wealthy and the middle class. Recall this was the same conclusion that the Congressional Research Service 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 percent in 1992, but only 19.9 percent in 2009, on average income of $202 million. As Buffett says, this is an “outrage.”
Point 3: His answer? An absolute minimum tax of 30 percent on income between $1 million and $10 million; 35 percent 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 percent of GDP and raising 18.5 percent in revenue, leaving a gap — an annual deficit — of about 2.5 percent 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 percent of GDP while spending crept up to 22.4 percent. An annual deficit of 7 percent 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 percent of GDP, but are spending 22.4 percent. We should get 18.5 percent in revenue, but are getting only 15.5 percent.
So listen to the wisest investor and businessman — 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 Buffett.
That’s “My View.”