Warren Buffett believes the world’s richest should share their wealth with those who may need it more.
In his 2006 book, “The Audacity of Hope,” Barack Obama quoted Buffett, who explained: “[billionaires} have this idea that it’s ‘their money’ and they deserve to keep every penny of it. What they don’t factor in is all the public investment that lets us live the way we do. Take me as an example. I happen to have a talent for allocating capital. But my ability to use that talent is completely dependent on the society I was born into. If I’d been born into a tribe of hunters, this talent of mine would be pretty worthless. I can’t run very fast. I’m not particularly strong. I’d probably end up as some wild animal’s dinner. But I was lucky enough to be born into a time and place where society values my talent, and gave me a good education to develop that talent, and set up the laws and the financial system to let me do what I love doing—and make a lot of money doing it. The least I can do is help pay for all that.”
Buffett is the third richest person in the world according to a recent estimate from Bloomberg. And he has been an outspoken campaigner of returning his wealth. In 2010, he formally announced “The Giving Pledge” with Bill Gates, an initiative aimed at inspiring wealthy people of the world to give the majority of their net worth to philanthropy.
The wealth gap continues to widen
Buffett often points out that in 1982, the first year the Forbes 400 was compiled, those listed had combined net worth of $93 billion. At the time, the 400 had a combined net worth of $2.3 trillion, up 2,400% in 30 years. Meanwhile, the median household income rose only about 180% during that time. Furthermore, the percentage of Americans living below poverty level remained at 15% over that period.
“In recent decades, our country’s rising tide has not lifted the boats of the poor,” he wrote.
“[This] mismatch is neither the fault of the market system nor the fault of the disadvantaged individuals,” he said. “It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.”
While celebrating the rich like Henry Ford, Steve Jobs, and Sam Walton, Buffett said education isn’t enough of a solution.
“To see why that is true, imagine we lived in a sports-based economy. In such a marketplace, I would be a flop. You could supply me with the world’s best instruction, and I could endlessly strive to improve my skills. But, alas, on the gridiron or basketball court I would never command even a minimum wage. The brutal truth is that an advanced economic system, whether it be geared to physical or mental skills, will leave a great many people behind,” he said.
The ‘Buffett Rule’
With the blueprint of President Trump’s tax plan just revealed, Buffett has long had something more progressive in mind: “the Buffett Rule.”
The Buffett Rule is part of a tax plan proposed by President Barack Obama in 2011. The rule would apply a minimum tax rate of 30% on individuals making more than a million dollars a year.
Buffett believed it was wrong that rich people like himself could pay less in federal taxes as a portion of income than the middle class and voiced support for increased income taxes on the wealthy.
In a 2011 op-ed in the New York Times, Buffett offered a memorable anecdote: “Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4% of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33% to 41% and averaged 36%… My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
“The 400 of us pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1% of humanity, you owe it to the rest of humanity to think about the other 99%,” he said this while speaking at a political fundraiser for Hillary Rodham Clinton in 2007.
The Buffett Rule was not in the President’s 2012 budget proposal and the White House initially stressed it as a guideline rather than a legislative initiative. The rule, however, was later submitted for deliberation in the Senate. In April 2012 the bill received 51 affirmative votes but was stopped.
Nicole Sinclair is markets correspondent for Yahoo Finance
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