When the Oracle speaks, markets listen. Congress should, too.
Multi-billionaire investor Warren Buffett, long known as the Oracle of Omaha for his ability to pick profitable businesses, whipped up a flurry of reaction in the financial blogosphere Monday by suggesting — as he has in the past
— that the super-rich should pay more in taxes.
Writing in The New York Times, Buffett took particular aim at the 15 percent tax rate on capital gains — profits realized on the value of investments. Over 60 years of working with investors, he wrote, including when capital gains rates were 39.9 percent in 1976-77, he has yet to see anyone “shy away from a sensible investment because of the tax rate on the potential gain.” Higher rates, Buffett argues forcefully, are not the job killers some say they are.
(Disclosure: Until earlier this year, Buffett served on the board of directors of the Washington Post Co., which owns The Herald. Berkshire Hathaway, the company he chairs, is a Washington Post Co. stockholder.)
Buffett was sending a public message to the 12-member congressional committee that soon will begin work on reducing the federal deficit by $1.5 trillion over the next decade. He called on the bipartisan panel to go farther than that, lest fears about the nation’s fiscal problems turn into hopelessness. “That feeling can create its own reality,” he wrote.
Buffett suggests raising tax rates on income above $1 million, including dividends and capital gains, and by more on incomes above $10 million. He would leave rates for 99.7 percent of taxpayers unchanged, and continue the current 2-percentage-point cut in the employee payroll tax.
Predictably, bloggers on the left hailed Buffett’s call, while some on the right suggested he mind his own business — after writing his own generous check to the Treasury.
But Buffett is really calling for a centrist approach. It could form the outline of a compromise that begins to rebuild the confidence and predictability necessary to sustain economic growth and job creation.
Tax reform is only part of his prescription. Job one for the bipartisan committee, he wrote, is to “pare down some future promises that even a rich America can’t fulfill.” Indeed, demographic shifts already underway with the retirement of baby boomers will force structural changes to Medicare. Delay just makes the inevitable adjustments more painful.
A fair, sustainable solution to the nation’s deficit problem requires shared sacrifice. The super-rich, says one of the super-richest, don’t need the extraordinary tax breaks they currently enjoy.
As usual, the Oracle’s advice is worth heeding.
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