In August, Warren Buffett challenged the U.S. government with his claim that the rich, himself included, “have been coddled long enough by a billionaire-friendly Congress.”
After he openly challenged the government to “get serious about shared sacrifice” when it came to raising the rates on the taxable incomes of the 1%, Obama responded with praise. Only weeks later, a “Buffett rule” that required millionaires to pay higher taxes was featured in the president’s budget plan.
However, the question of how much money will actually be raised as a result of this “Buffett Rule” remains.
The main focus has instead been on the advantages the rich have had in the past and how the scales will now be balanced. In addition, the new rule has been framed as a solution to help reduce debt and save Congress from having to cut funding for education, medical research and the military.
“If we’re serious about paying down our debt, we can’t do both,” Obama said in his State of the Union address.
The Buffett Rule will reduce the incomes of approximately 200,000 taxpayers according to study by the Congressional Research Service, and will raise taxes on the ultra-wealthy by more than 30%. That would work out to about $50,000 per million in income.
Opponents of the rule say it is blatant pandering to the masses in an election year. Some have proposed alternatives, such as allowing willing volunteers to pay more to help reduce debt.
Come “Tax Day” on Apri15th, however, Senate Democrats plan to put forward legislation that aims to turn the rule into law, and Warren Buffett has become a symbol for those looking to reform taxes.
But, how much will the rule affect Buffet personally?
When making the challenge, Buffett asserted that he was completely willing to fork over the extra cash and that it was the right and fair thing to do.
Benn Steil, director of international economics at the Council on Foreign Relations, questioned this proclamation in a recent article for Financial Times, asserting that it would “have a trivial impact on [Buffett’s] tax bill because the taxable income he refers to amounts to less than 1% of the income he holds within Berkshire Hathaway, of which he owns 22%.”
Steil asserts “Buffett is no stranger to putting his money where his mouth isn’t” and highlights the fact that he has, for example, avoided extra personal tax rates on company shares in the past by pledging to give away his fortune, as well as openly voicing opposition to tax cuts on dividends.
Buffett has been accused of leveraging political capital and support in order to boost Berkshire Hathaway’s investments and his reputation.