Excerpt from an interview with Warren Buffet over the weekend:
"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further," Buffett said. "But I think that people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it."
The full Buffett interview will air on a special Thanksgiving edition of "This Week" focused on The Giving Pledge, a major philanthropic effort spearheaded by Buffet, and Bill and Melinda Gates.
The billionaire brushed aside Republican arguments that letting tax cuts expire for the wealthy would hurt economic growth.
"They say you have to keep those tax cuts, even on the very wealthy, because that is what energizes business and capitalism," anchor Amanpour said.
"The rich are always going to say that, you know, just give us more money and we'll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on," Buffett explained.
Wealthy does not equal smart. I'm tired of people thinking that Buffett is some sort of genius just because he's rich. Donald Trump is another example of this. Buffett is a savvy investor, frugal, and knows how to spot value, but he knows almost nothing about economics and how to run a business. Again, same thing with Donald Trump, he's a clever negotiator and is great at starting businesses but is terrible at managing them. None of this makes either of these men "the smartest in the room" - yet people still look to these men for their take on the economy and where the country should be headed. That's irresponsible.
I'm not going to say that he's right or wrong on taxes, I'm just saying that his opinion on such matters shouldn't be taken as gospel. And besides, any increase in taxes on the "super wealthy" isn't going to do much in the way of reducing the federal deficit, or improving the economic outlook of the country. If Buffett were so knowledgeable about public finance, he would have known that already.
I agree, people like him should be paying more. But unless you are the second richest man in the country worth an estimated 45 billion, or at least one of the top 400 richest people in America you should NOT be paying more.
Here is the problem with raising taxes on those making 250-k or better. Most small businesses are either S corporations or LLC'c. That means that income flows through these structures as personal income. Why would we want to take money out of the hands of small business especially during a recession? Small business hires over 60% of all new employed workers.
I really think there is a disconnect between what George Soros and Warren Buffett think and what makes good economic sense for the United States. I suppose it's good that they can get rid of some of their "Rich man's guilt" this way however.
I'd like to only hear back from those who are actually out in the world working with a family to support. I understand that college kids like to post about how taxes should be higher but that's like someone who has never touched a weight giving bench press tips to Ed Coan.
Well... I have owned a business before. I work. I go to school. And, I have a wife and 2 kids. I hope I'm qualified for you to hear my opinion.
And, having owned an S-Corp and an LLC, I can assure you that they specifically protect the small business owner from the type of leveraged risk you are implying above. The income of the company was not MY income. It did not "flow through the companies as personal income."
You may be thinking of a sole-proprietorship. In that instance, yes. All of the income of the company is essentially personal income of the owner. Fortunately, less than 1.9% of small businesses are structured this way.
Incidentally, George Soros and Warren Buffett aer two vastly different individuals. Nonetheless, they are both smart motherfuckers when it comes to how our economy works. Discounting their opinion as "rich man's guilt" regardless of which side of the political aisle you sit on is foolish.
"An S corporation is a regular corporation that has between 1 and 100 shareholders and that pases-through net income or losses to shareholders as individual income in accordance with Internal revenue code, Chapter 1, subchapter S. Corporations must meet specific eligibility criteria, and they must notify the IRS of their choice to be taxed as an S-Corporation within a certain time period."
As for an LLC:
"An LLC is not a separate tax entity like a C corporation; it is what the IRS calls a pass through entity, like a partnership. All of the profits and losses of the LLC pass through the business to the LLC owners, who report this information on their personal tax returns."
I have owned one of each and have thus filed taxes under said structure. Obama's tax hike would indeed hurt the very people that move the economy. Over 60% of all new hires are from small business. That means they are either a sole proprietorship, S Corp, or LLC. It matters not tax wise.
I'd post a link, but all you have to do is google any of the three entities and you will see that I am correct.
Zeb is correct, for tax purposes an LLC is pass through, for liability purposes it shields your personal assets.
And sorry but tax on income is just plain stupid and spits in the face of the consitution, but no one cares about that anymore. But if we do have to have it, a flat tax would be the only way to go. I am getting so sick of politicians and progressives talking about my income as their money, in any amount. That to not steal my income would cost them too much.
How big a share of the bailouts did Buffett get? He has done his best to avoid taxes his whole life and now he is giving Obama political cover. Hard to take his statement seriously. He is just another liar.
I feel the same way. A flat fair tax with no loopholes is the way to go. If democrats want to play class warfare with this one all someone has to point out is that all the loopholes for the rich are closed.
Let's have a flat tax of 17%, no exceptions unless you make under 25-k. You fill out your taxes on a post card sized form. No accountants needed. If you made 50-K in 2010 you pay $8,500. Now how many government employees would have to get another job if we did that?
He has the opportunity to donate any money he wishes to the federal government and does not. That just makes him a hypocrite. I'm willing to bet he has a slew of lawyers and tax experts trying to get his taxes as low as possible.
Any person in favor of higher taxes that isn't currently volunteering their own money is a piece of shit.
Buffet made his first million selling whole life insurance policies to people on their death bed, so they could dodge estate taxes (i.e., sell $1,000,000 policy for $1,000,500, grandpa dies, and since there is no tax on insurance proceeds, the estate comes out ahead).
Expensive tax dodges (but cheaper than federal taxes) remain a primary source of income for his companies.
So, keep that in mind as Buffet acts to noble.
A flat tax or similar fair, non-dodgeable, tax would put him out of business.
(It would suck for me, too, but I can find other things to do.)
ehhh, are you using turbo tax or some other deal similar to that. That statement is just blatantly wrong. I too have had both s-corp and llc.
I wish my employees and the general public understood the repercussions of this better.
warren buffett has been saying this for years, its really nothing new. yet he has failed to ever lead the charge and actually start forking over his money voluntarily. buffett does give a ton of money to charity which is good. but if he really wanted to help he could start an angel fund, investing in risky longterm development projects like solar (ie start building new industry in america through innovation), or giving grants to small business owners. the bottom line though is just giving more money to the government is like giving meth to a meth addict. its just a bad idea.
Well, he and Bill Gates intend to donate all of their money to charity after death, so I guess they are philanthropists. Right now, they have certain funds set up for charity which earn money off interest.
It's funny though, I remember reading that Buffet lives an extremely modest lifestyle, even staying in the same house he had before he acquired his wealth. I doubt he needs to keep as much money in the bank and probably would be better served dispersing it now.
Interesting... I don't know about your lawyer and/or accountant, but our business started out as an LLC filing as an S-corp under form 8832. We eventually re-filed as an S-corp for the sake of simplicity. In either instance, we had a number of ways of sheltering ourselves from pass-through profits or losses. We put a lot of the profits back into the company every year, and we did not pay taxes on this. A sole proprietor (though, I've never had the experience) as I understand it is treated very much like someone on a payroll... Any money that comes in, they get taxed on... regardless of whether or not it goes back into the company or against losses. Granted, they get taxed at a much lower rate... it only seems to make sense in certain purely transactional businesses.
The important term, BTW, is "net." A sole proprietor is responsible for "gross" profits and losses. It's an entirely different ball game.
Having seen how much money it is possible to shelter and avoid paying taxes on in a small business, if the owner of an LLC or S-corp ends up with $250K + at the end of the year, then they are no more immune to a higher tax bracket than a person on payroll making those numbers, in my opinion.
Why? Raising taxes isn't going to solve a thing. Why shouldn't the american people and the government make a show of good faith, and actually cut spending, first? No, not the silly "cut government waste" bull-puckey. Long term solvency isn't going to materialize through tax increases alone, sorry. Real cuts to actual benefits are required. Why do we keep trying to kick it down the road? IF, IF, taxes are to be raised without spending cuts, then they should be raised across the bord, including lower and middle class. We should demand that our government squeeze the last non-essential penny out of us, and pay for our spending habits, together.
No, it's pretty much the same for a sole proprietorship as well. The business is taxed using Schedule C on your 1040 form. You pay taxes on the net income after expenses. You don't have a payroll in that case (no employees), but any money that you pay out to sub-contractors or use to purchase expense items is tax deductible. If you buy capital equipment you can, with some limitations, choose to expense it or depreciate it over time. In either situation, the money spent on the equipment is tax deductible over one year or several.
The point of "pass through" taxation, whether for a SP, LLC, or S-Corp, is that the net income of the business is only taxed once. Every dollar that comes in either goes out as expenses (and is taxed as income for the vendor/contractor) or is paid out to the owner as profit and taxed. With a C-Corp, the company pays taxes on its profit, and then the owner/employees pay taxes on their distributions. Money paid out to employees or vendors is still only taxed once, as far as I know.
Anyway, this is all kind of beside the point. If I'm a small business owner and I rely on my company's profits to pay for my room and board, then I'm going to expect to take a certain amount of money out of the company every year so I can feed myself and my family and keep a roof over our heads. The dollar value that I need to take out of the business every year has a lower bound determined by my personal expenses. Let's say that number is $300,000, and let's also assume that I routinely meet or exceed that number most years.
Now, what happens when my taxes are increased? I still need to net at least $300,000, but now more of my top-line is going to the government in taxes. Now I need to take out at lease $325,000 to get the same after-tax take home pay as before. In order to meet my needs, I either need to increase sales or decrease expenses to make up the difference. If the business cycle is on the down swing, then I may not be able to increase sales enough to cover that additional tax burden. The only options left are to cut business expenses or to live with less take home pay. Hmmmn. Maybe I can live without a secretary, or perhaps I could eliminate a position and get more hours out of the remaining employees. I'll probably save on overhead even if I have to pay more for the hours worked.
Hey, it's easier than telling my kids they're not going to Disneyland this year, right?
By the way, I'm not arguing for or against tax cuts or increases here. It just seemed that the way people were framing the discussion wasn't helping anyone understand the issue.