Warren Buffett is in the news this week for calling for increased income taxes on very high income individuals, such as himself (New York Times op ed of 8/14/11 - "Stop Coddling the Super-Rich"). He notes the very high income of a very small percentage of the US population. Specifically he states that about 237,000 households reported income exceeding $1 million in 2009. Buffett says they should have a higher tax rate than other individuals and the roughly 8,300 filers with income in excess of $10 million should have an even higher rate. He says the rate should be higher not only for earned income, but also capital gains and dividends.
He raises an important discussion point. How wide of a range of tax rates should a progressive income tax have? In California, the highest tax rate kicks in at about $95,000 of income for a married couple. That is fairly low. For the federal income tax, a married couple in 2010 hit the highest rate of 35% at about $374,000. Less than 2% of filers see that rate. But within that top 2%, there is really quite a range of income levels. I agree with Buffett that consideration should be given to make the system more progressive given the reality that there is quite a different between $400,000 of income and over $10 million of income. Perhaps the reinstatement of the higher tax rates in 2013 should apply to these very high income levels.
Arguments against greater progressivity include that high income individuals do pay more taxes (because they have more income) and very high tax rates can be confiscatory. High tax rates provide a greater tax benefit for deductions, but this could be addressed by converting some itemized deductions to credits.
What do you think?
Tuesday, August 16, 2011
Warren Buffett and Income Tax Progressivity
Tags:
#progressivity; Buffett
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