A funny thing happened in the wake of the Tea Party’s victory in the U.S. debt ceiling standoff a month ago. The populist splinter group of the Republican Party forced President Barack Obama and congressional Democrats to blink, agreeing to raise the legislated debt limit only on the condition that tax increases were kept off the list of options to reduce the budget deficit. In response, a number of high-profile beneficiaries of America’s relatively low marginal tax rates made a wildly different demand: “Tax us. We’re rich.”
Warren Buffett, No. 3 on Forbes’ list of the world’s richest people and most prominent among the low-tax dissenters, wrote an op-ed in The New York Times arguing that, in concert with budget cuts, Washington should raise taxes—especially on dividends and capital gains—for those earning upwards of US$1 million a year and even more on the 8,000 or so Americans making $10 million and up. He said his own tax rate last year worked out to just 17.4% of his income, less than anyone else in his office. After a decade of “coddling” the super-rich and people who “make money with money,” Buffett wrote, “it’s time for our government to get serious about shared sacrifice.” The mega-rich “wouldn’t mind being told to pay more in taxes,” Buffet added, “particularly when so many of their fellow citizens are truly suffering.”
And many of Buffett’s peers did support him. Asked if they agreed with Obama’s earlier proposals to raise taxes on the rich, Facebook founder Mark Zuckerberg and JPMorgan Chase CEO Jamie Dimon both said they did. A group formed last November calling itself Patriotic Millionaires for Fiscal Strength includes hedge fund manager Whitney Tilson, Frank Jernigan, an early software engineer for Google who has since retired, and actress Edie Falco. Henry Bloch, billionaire co-founder of tax tabulator H & R Block (and, in contrast to Buffett, a Republican), said in an interview with the Financial Times that, “it’s not going to hurt the wealthy to part with a little money.”
Starbucks CEO Howard Schultz has gone further, offering action as well as words. In an e-mail to fellow corporate leaders, he asked them to withhold political contributions to either party until they come up with a “fair, bipartisan” solution to the nation’s budget woes, something the 11th-hour deal passed by the Senate on Aug. 2 evidently wasn’t. As of Aug. 24, Schultz said more than 100 heads of large companies had agreed to sign on.
Similar gestures are being made around the world. In France, 16 huge-net-worth types, including L’Oreal SA heiress Liliane Bettencourt and Total SA chief executive Christophe de Margerie, signed a petition calling for a “special contribution” by the super-rich to help the country through its current budget crisis, which threatens France’s AAA credit rating. “We are conscious of having benefited from a French system and a European environment that we are attached to and which we hope to help maintain,” the petition stated. “When the public finances’ deficit and the prospects of a worsening state debt threaten the future of France and Europe and when the government is asking everybody for solidarity, it seems necessary for us to contribute.” The French government subsequently announced plans to introduce a new levy on individuals earning in excess of €1 million a year.
The move to make the rich pay more to help indebted governments has not gone over well everywhere. Italy’s Silvio Berlusconi cancelled a planned “solidarity tax” targeted at the very highest earners—opposed by professional soccer players, among others—opting instead for measures to curtail tax evasion and eliminate tax breaks for co-operatives.