Anglo American said to have attracted interest from China
By suggesting the richest 400 Americans have seen their effective tax rate drop by one-third and thus they should back a 30% minimum tax rate, Mr. Buffett is deflecting attention toward rates and away from itemized deduction and tax-avoidance regulations.
It is interesting to see Warren Buffett using selective data to steer the Hillary Clinton tax plan away from tax reform that would truly unhinge the superwealthy (“Clinton Tax Plan Backed by Buffett,” U.S. News, Dec. 17). By suggesting the richest 400 Americans have seen their effective tax rate drop by one-third and thus they should back a 30% minimum tax rate, Mr. Buffett is deflecting attention toward rates and away from itemized deduction and tax-avoidance regulations.
What Mr. Buffet doesn’t highlight is that for 2013 the millionaire club claimed tax deductions totaling $145 billion. Mrs. Clinton might be credible as a tax reformer if she proposed the elimination of itemized deductions for the millionaire club. She’d really be on the forefront if her plan eliminated Section 664 of the Revenue Code (Charitable Remainder Trusts), which allows Mr. Buffett and other millionaires who have highly appreciated stock to avoid paying tax on the gain while reducing their estate-tax liability. As Mrs. Clinton is also a member of the millionaires club, you can be sure that any tax plan she proposes will have minimal impact on her own fortune.
Ron Dudley
Sanibel, Fla.
Of course Warren Buffett is in favor of progressively higher taxes on the rich. Our progressive tax system guarantees the rich will get richer by stripping essential cash from people attempting to become rich and rewarding the already rich. If you make $10 million and pay a 50% tax, you still take home $5 million.
If two guys start a business and make $400,000, they have to pay a $100,000 tax, in cash. Because the startup’s cash is invested in inventory, receivables, payroll, assets, etc., the not-yet-rich have to borrow cash from the bank to pay taxes, further limiting their ability to grow.
Then the banks require the owners to grow retained earnings to support the loans, further limiting the enjoyment of their efforts. The solution for most of these companies is to sell to someone with deep pockets. In this example, if the two startup guys are bought for a typical five times earnings by a company that is valued at 15 times earnings, the startup gets $2 million for the company, which the owners split, pay the tax and net $600,000 each. The rich guy turns this into $6 million of market value and owes no tax.
The solution is a broad-based, first dollar proportionate (flat) tax and the elimination of all tax on the mere generation of income.