Meager Income

Pay Off Debt, Retire Comfortably on Meager Income, Win the Lottery, Not Necessarily in that Order

Buffett Argues For a Minimum Tax For the Wealthy

Posted on | November 26, 2012 | No Comments

I’m not sure if you had a chance to read Mr. Buffett’s op-ed in the New York Times on Nov 25th.  As you know, I’m a fan of his.  You can read the full opinion piece here.

He has some interesting facts in his article like:

The Forbes 400, the wealthiest individuals in America, hit a new group record for wealth this year: $1.7 trillion. That’s more than five times the $300 billion total in 1992. In recent years, my gang has been leaving the middle class in the dust.

A huge tail wind from tax cuts has pushed us along. In 1992, the tax paid by the 400 highest incomes in the United States (a different universe from the Forbes list) averaged 26.4 percent of adjusted gross income. In 2009, the most recent year reported, the rate was 19.9 percent. It’s nice to have friends in high places.

The group’s average income in 2009 was $202 million — which works out to a “wage” of $97,000 per hour, based on a 40-hour workweek. (I’m assuming they’re paid during lunch hours.) Yet more than a quarter of these ultrawealthy paid less than 15 percent of their take in combined federal income and payroll taxes. Half of this crew paid less than 20 percent. And — brace yourself — a few actually paid nothing.

I agree that we need to make some changes to the tax code.  I would argue that all income is income.  Income from Capital Gains, Dividends, Interest payments on Municipal Bonds, etc — treat all of it as income. We need to get rid of carried interest.  It is all income.  We need to get rid of the tax break for health insurance purchased through an employer since it isn’t fair to people who work for a company that doesn’t offer it.  That too is income.

While we are at it, we need to limit tax deductions.  The only behavior the government should encourage (through tax policy) is saving for retirement and health costs.  The only deductions should be 401k and HSAs.  If you don’t have access to a 401k, you should be able to contribute to an IRA for the same amount.  That would cap deductions at about $20,000 a year.  That is plenty.  No more deductions for “gifts” to non-profits.  Grover Norquist, who heads up a non-profit, needs to get a real job and should not be subsidized by the government.

 

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