Sunday, August 21, 2011

Warren Buffett on tax rates and the benefits of a monetary printing press

Mr. Buffett on Charlie Rose recently said that the U.S. government credit rating should remain at AAA. His justification for that is we can continue to print money unlike the EU countries (Greece, Spain, Italy and Portugal) currently suffering a significant sovereign debt crisis. He said those countries wished they had their printing press, implying that if they did their debt problems would disappear.

While Mr. Buffett is a strong capitalist it is apparent that he, like most is a believer in Keynesian Economics and as his recent Op Ed in the NY Times indicates a supporter of progressive fact, it's not progressive enough for him.  He wants to increases the marginal rates on incomes above $1M and even futher for incomes above $10M.

Jack LeMenager in a letter to the editor of the NY Times wrote, " The Internal Revenue Service’s own statistics indicate that if the top 1 percent of all taxpayers (households with annual income of more than $380,000) were taxed at a rate of 100 percent, it would net $938 billion, which would barely make a dent in the nation’s multitrillion-dollar annual budget."  This would not come close to eliminating the deficit for a single year.  While Mr. Buffett has not suggested any specific tax rates, any increase in marginal tax rates on small businesses will have an impact on job creation. 

John F. Kennedy found high marginal tax rates to be bad for the economy.  If it was bad for the economy in the 1960's it's bad for the economy now.