Buffeting the Rich

Warren Buffett had an interesting op-ed in the NYT yesterday. In it he talks about how the rich and super-rich are paying much less than their fair share.

I thought I’d work through some of the numbers in Buffett’s article. Note that I’m going to do a certain amount of hand-waving and irresponsible rounding, and that I’m going to just use his numbers without any additional research of my own. That’s OK. These are back-of-the-calculator numbers, and are designed to just give us an idea of the order of magnitude of the numbers we are talking about.

Richest 400: Following Buffett’s suggestion and simply changing the effective income tax rate back to 29% (1992) from 21% (2008) on the top 400 incomes would boost government revenues by $7 Billion. That’s just income tax (with over 20% of these richest 400 reporting no income at all).

Poorest Millionaires: there’s 228,609 taxpayers (236,883 – 8,274) earning between $1 and $10 million. Let’s say averaging $5 million. Total income of about $1.1 trillion. If we bumped up their rate by eight percentage points (like for the really rich), we’d get an additional $88 billion.

Well-off Millionaires: there’s 7,874 people who earn more than $10 million, but are not in the top 400 (who earn $200+ million). Let’s say they average $100 million. Bumping their effective income tax rate by eight percentage points brings in another $60 billion.

So, by moving effective income tax rates back to where they were during the G.H.W. Bush years, we’d pick up a total of over $150 billion. And we haven’t touched capital gains (where most of them hide most of their money). Interestingly enough, $150 billion for ten years = $1.5 trillion, or exactly what the deficit commission is tasked with achieving.

As I said, there’s not a lot of rigor in these numbers, and I wouldn’t be surprised if a more detailed analysis cut the number down to $100 billion a year. The point is, by simply going back to taxation levels that were acceptable to people like Ronald Reagan and George Bush senior, we could put a major dent in our problems. These are not new taxes, they are a reversion to older tax rates. Thanks, Warren.

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4 Responses to “Buffeting the Rich”

  1. eburnett Says:

    I like your math. How much sway does Warren Buffet have with the GOP? He’s supported Obama before, so it should make him a pariah, but I’d think that for the party that worships capitalists he would garner a good deal of respect.

  2. FoundOnWeb Says:

    Thanks. As I say, it’s very crude. With regards to Buffet’s influence, I really don’t have any idea. You are right — any time the second richest man in the country speaks, you’d expect people to listen — but my impression is that he hasn’t been lining the politician’s pockets the way some groups have, and that’s what seems to count in DC these days. He does provide people with some interesting questions to ask their representatives.

  3. Kurt Says:

    Too bad he didn’t start naming names. Not that those people can be shamed. Most of them think they have a God-given right to that money. (Read Forbes if you think that’s glib.)

  4. Buffetting the Rich « FoundOnWeb Says:

    […] in August of last year I calculated that if the top 400 US taxpayers had their taxes increased to G.W.Bush levels, that would add $7 […]

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