He doesn’t seem to be able to help himself. In the New York Times (of course), Warren Buffett has — once again — insisted that America’s “mega-rich” are not paying their fair share. In fact, he claims, they are paying less than some middle-income earners.
This is a broken record that Mr. Buffett has taken to re-playing over the past five years. What’s different this time is that it coincides with a tour throughout America’s Midwest being taken by President Obama, in which the chief executive is echoing the same theme.
But you only need to look at the Congressional Budget Office’s figures to see that, contra the Obama-Buffett school of economics, America does in fact have a progressive tax system. As the CBO stated in late 2010: “In 2007, households in the bottom fifth, or quintile, of the income distribution paid about 4 percent of their income in federal taxes, while the middle quintile paid 14 percent, and the highest quintile paid 25 percent.”
What’s more, the CBO is also clear that those who earn more have been paying an increasing share of the tax burden. “The share of taxes paid by the top fifth of the population,” it states, “grew sharply between 1979 and 2007.” Indeed, this group was paying almost 70 percent of federal taxes by 2007.
But what’s perhaps more interesting than all this number-crunching is who Mr. Buffett regards as America’s “mega-rich.”
In his op-ed, Buffett gives this away when he argues that those earning more than $1 million dollars in taxable income should have their taxes increased while those earning more than $10 million should pay even more.
It’s safe to say that a substantial number of these people operate small-to-medium-size businesses that don’t play the corporate welfare game a la General Electric, that are already subject to some of the world’s highest corporate tax rates (most of which is paid by the owners of companies), that reinvest much of their income in expanding their activities and taking on new risk, and, above all, that employ people. They are the engine of growth and employment in America today — not the United States government. Why on earth would we disincentivize them from creating value and jobs by raising their taxes?
As a businessman, Warren Buffett is a great American success story. As a contributor to public debate about America’s economic future, however, he would be better off channeling a little less Barack Obama and reading a little more Adam Smith: the same Smith who pointed out that sometimes the worst enemies of free markets and wealth-creation overall are businessmen.
– Samuel Gregg is research director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.