Posts Tagged Warren Buffett
Forbes 400 List Reveals Why the Greedy Rich Fully Deserve Your Contempt — And Jesus’s
The bulk of America’s superwealthy refuse to pull their weight and kill opportunity for the rest. And they want your thanks!
Photo Credit: Shutterstock
Last week, as you were treated to Mitt Romney’s contempt for nearly half the country, Forbes Magazine published its annual list of the 400 wealthiest Americans.
The list reveals that Bill Gates is still the top dog, boasting a whopping $66 billion fortune. Warren Buffett, Michael Bloomberg, various members of the Walton family, and the Koch brothers are all in the top 10. Mark Zuckerberg hung on, despite the evaporation of a big chunk of his wealth. Spanx founder Sara Blakley, who brought women a whole new world of restrictive undergarments, is on the list.
Nothing extraordinary in all that. But this year’s Forbes list has a big lesson for us: It shows just how jaw-droppingly rich the top 400 have become compared to everybody else.
Forbes reports that in the last year alone, the total net worth of the 400 people at the top skyrocketed $200 billion. The average net worth of a 400-lister jumped from $3.8 billion to $4.2 billion, the highest figure ever recorded. Two-thirds of the individuals got richer in the past year. Forbes, not exactly a cheerleader for income equality, concluded: “The gap between the very rich and the merely rich is widening.”
And how did the rest of us do while the uber-rich were getting richer? Not so well, according to the Census Bureau. Adjusted for inflation, America suffered a 1.5 percent drop in median household income last year.
The redistribution of wealth toward the top is clearly getting worse. In fact, despite the financial crash, the Occupy movement, and the obvious failure of trickledown economics, the Census Bureau reports that the gulf between the rich and the rest of us is at an all-time high.
Maybe that’s why the rich and their apologists are getting a bit defensive lately. Like a drug addict turning every cushion upside-down in search of lost change, the 1 percenters are scrounging up every timeworn myth, lame justification and absurd rationalization they can think of to convince us that the rich are super-smart, hard-working job creators instead of greedy parasites refusing to pay their share in taxes and play by the same rulebook as everyone else.
This line gets harder to sell every minute. Mitt Romney’s candidacy has done wonders to expose not only the general contempt of his class toward ordinary people, but also just how many special privileges the rich enjoy. Romney has accumulated great wealth not only because of his job-destroying and predatory business activities, but also because he gets a special break that allows him to get away with paying the capital gains tax rate of 15 percent.
And that’s one big reason that the rich are getting richer. Romney and his ilk claim this is good for the economy – the old “trickledown” myth. But as New York Times columnist Joe Nocera points out, that canard is easily exposed: “In 1986, when Ronald Reagan was president, the differential between capital gains and ordinary income was eliminated — and the economy soared.” Interesting, isn’t it? Nocera adds that the capital gains rate was higher during the Clinton years than in the George W. Bush years, yet the economy miraculously did better under Bubba. Doesn’t sound like a low capital gains tax rate that lines the pockets of the rich is what the doctor ordered, does it?
Let’s take a closer list of who is on the Forbes list. Financiers make up a big chunk. Around 40 percent inherited their wealth. The vast majority, some 65 percent, came from circumstances ranging from very comfortable (Mark Zuckerberg went to the fanciest schools) to downright plush (Donald Trump inherited his dad’s company). A mere 35 percent came from backgrounds that could be described as middle- to lower-middle-class.
Most of the folks on the list got great breaks in life. And yet in a recent survey conducted by Salon, only 2 percent of people in this Happy Billionaires Club said they would be willing to pay more in taxes (Warren Buffet, Todd Wagner, James Simons, Leon Cooperman, Mark Cuban, John Arnold, Herbert Simon, and George Soros). Which is proof that not all of the rich are unpatriotic and rapacious. But they are lonely voices in a storm of greed.
Charles Koch, CEO of Koch Industries and funder of conservative causes, summed up his opposition to the idea of forgoing special tax breaks: “I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.”
Ordinary Americans are plainly getting screwed, and the vision of America as a land of opportunity is increasingly becoming dimmed. And yet a recent article inFortune magazine, “Stop Beating Up the Rich,” shamelessly calls for an end to what author Nina Easton describes as “diatribes against the 1%.”
“America stands out among Western nations for its grudging, and often fawning, admiration for the wealthy classes it produces,” explains Easton. (It’s hard to argue with that. Score one point for Easton). She continues: “With the road to riches seemingly wide open, Americans favor aspiration over resentment, envy over animus.”
The key word here is “seemingly.” It seems like anybody can make it, because the press makes much of those Horatio Alger rags-to-riches stories. Unfortunately, as economist Joseph Stiglitz frequently points out, those stories make the news for a simple reason: they are rare. And becoming rarer all the time. By Easton’s own admission, “today American upward mobility (especially for men) lags behind Canada’s and some European nations.”
Easton goes on to complain that the Occupy movement, the most recent incarnation in America’s traditional disdain for cheating, hording fatcats, is wrong in its 99% v. 1% frame. ”Sadly, it is a confusing and flawed prism,” sniffs Easton, “marred by hyperbole, half-truths, and unnecessary pessimism about what it means to succeed in America.” She goes on to whine that “if Americans really understood who the 1% are, they would be more likely to stop the name-calling and shift the debate to the dire task at hand — getting millions back to work.”
All righty then. While we’re trying to get back to work, we’ll try to forget that Wall Street’s reckless casino games crashed the economy in 2008, destroying millions of jobs. And we’ll see if we can ignore the fact that corporate-friendly policies pushed by the greedy rich have made decent wages and job security a thing of the past for many. And we’ll pretend that all the people at the top of the pyramid are ordinary folks who had the same chances as everybody else and made it through hard work and grit. And we’ll make an effort to discount the fact that it is the super-rich who should be thanking us, for our job creation, and ourtax dollars that build their roads, educate their workforce, provide the research needed to make their products – and, oh wait! — lots of them don’t make or do anything, they just bleed money out of the real economy and deplete the government of revenue with their special tax breaks!
While we’re at it, we’ll see if we can forget the famous teaching of Jesus, uttered after a rich young man came to ask how he could be saved. Very simple, said Jesus. You just sell your worldly possessions and become a follower of my teachings. But the young man was overly fond of his worldly possessions, and turned away. To which Jesus said:
“Again I say to you, it is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God” (Matthew 19:24).
That Jesus. He sure did beat up on the rich, didn’t he?
- Forbes 400 List Reveals Why the Greedy Rich Fully Deserve Your Contempt — And Jesus’s (alternet.org)
- 5 Obscene Reasons Why Richest Americans grow Richer As Middle-Class Declines (alternet.org)
- How The Wealthiest 400 Americans Got Rich [INFOGRAPHIC] (valuewalk.com)
- Gates, Buffett top Forbes’ list; Kochs, Waltons weigh in (kansascity.com)
- Forbes 400; wealth and politics in America (kansascity.com)
- Gates again tops Forbes list of richest Americans (cbc.ca)
- Mary Sanchez | To those ‘born on third base,’ wealth comes easily (kansascity.com)
- The ‘Self-Made’ Myth and Our Hallucinating Rich (ourfuture.org)
- The Forbes 400 (sustainingthenorthernplains.wordpress.com)
- Forbes Billionaires to Watch and Who Are the Real Job Creators:read Below to Find Out (bonjupatten.com)
The Zuckerberg Tax
By DAVID S. MILLER
Published: February 7, 2012
WHEN Facebook goes public later this year, Mark Zuckerberg plans to exercise stock options worth $5 billion of the $28 billion that his ownership stake will be worth. The $5 billion he will receive upon exercising those options will be treated as salary, and Mr. Zuckerberg will have a tax bill of more than $2 billion, quite possibly making him the largest taxpayer in history. He is expected to sell enough stock to pay his tax.
But how much income tax will Mr. Zuckerberg pay on the rest of his stock that he won’t immediately sell? He need not pay any. Instead, he can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax. That’s what Lawrence J. Ellison, the chief executive of Oracle, did. He reportedly borrowed more than a billion dollars against his Oracle shares and bought one of the most expensive yachts in the world.
If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.
Consider the case of Steven P. Jobs. After rejoining Apple in 1997, Mr. Jobs never sold a single Apple share for the rest of his life, and therefore never paid a penny of tax on the over $2 billion of Apple stock he held at his death. Now his widow can sell those shares without paying any income tax on the appreciation before his death. She would have to pay taxes only on the increase in value from the time of his death to the time of the sale.
Now compare Mr. Zuckerberg with Lady Gaga. Last year she told Ellen DeGeneres that she had to get “completely wasted” to sign her tax returns because she owed so much. Lady Gaga reportedly earned $90 million in 2010. Because she earns fees and royalties, she’s subject to the highest income-tax rate. So, assuming she’s just as successful this year, she will certainly pay more than $30 million in taxes and probably more than $45 million, which is infinitely more tax than Mr. Zuckerberg will pay on the $23 billion of Facebook stock he now holds.
Why is this?
Our tax system is based on the concept of “realization.” Individuals are not taxed until they actually sell property and realize their gains. But this system makes less sense for the publicly traded stocks of the superwealthy. A drastic change is necessary to fix this fundamental flaw in our tax system and finally require people like Warren E. Buffett, Mr. Ellison and others to pay at least a little income tax on their unsold shares. The fix is called mark-to-market taxation.
For individuals and married couples who earn, say, more than $2.2 million in income, or own $5.7 million or more in publicly traded securities (representing the top 0.1 percent of families), the appreciation in their publicly traded stock and securities would be “marked to market” and taxed annually as if they had sold their positions at year’s end, regardless of whether the securities were actually sold. The tax could be imposed at long-term capital gains rates so tax rates would stay as they were.
We could call this tax the “Zuckerberg tax.” Under it, Mr. Zuckerberg would owe an additional $3.45 billion when Facebook went public (that’s 15 percent of the value of the roughly $23 billion of stock he owns). He could sell some shares to pay the tax (and would be left with over $20 billion of Facebook stock after tax), or borrow to pay the tax.
If his Facebook shares decline in value next year, he’d get a refund.
President Obama has proposed a “Buffett rule” that would require millionaires to pay tax at a 30 percent effective minimum rate. Under the rule, Mr. Buffett’s taxes might have doubled to $12 million in 2010, but this would represent only a trivial amount of additional tax for him. If the Buffett rule applied in 2010, Mr. Buffett’s effective tax rate would be only about 2/100 of 1 percent on the $8 billion in appreciation of his holdings. A Zuckerberg tax would be far better: under it Mr. Buffett would have paid $1.2 billion in tax in 2010.
A mark-to-market system of taxation on the top one-tenth of 1 percent would raise hundreds of billions of dollars of new revenue over the next 10 years. The new revenue could be used to lower payroll taxes, extend the George W. Bush tax cuts, repeal the alternative minimum tax, reduce the budget deficit, prevent military cuts or a combination of all of these.
This tax would not affect the middle class, or even most wealthy Americans. Nor would it affect small-business owners. It would affect only individuals who were undeniably, extraordinarily rich. Only publicly traded stock would be marked to market.
Some would argue that it is inherently unfair to tax “paper gains” before they are realized — Mr. Zuckerberg won’t receive $28 billion in cash; he holds only paper. Moreover, markets are inherently volatile; one year’s paper gains is another’s real losses. However, these arguments are far less credible when paper losses give rise to real tax refunds. Moreover, in a downturn, the mark-to-market tax would act as a fiscal stimulus — the cash refunds would offset a declining stock market.
This proposal follows the Ronald Reagan model by broadening the “base” of tax without increasing rates. In fact, Reagan was responsible for the last major reform of our antiquated realization system when he signed a law requiring taxpayers to pay a tax on interest that accrued on bonds but was not paid.
The most profound effect of a mark-to-market tax would be to level the playing field between wage earners, on one hand, and founders and investors on the other. Superwealthy holders of publicly traded securities could no longer escape tax on their vast wealth.
- Mark Zuckerberg and the case for a wealth tax (blogs.reuters.com)
- Zuckerberg’s Tax Bill Could Be Largest Ever (lawprofessors.typepad.com)
- Zuckerberg to Be Taxed at Lower Rate Than Most Facebook Employees (mashable.com)
- Tax Aspects of Facebook’s IPO (taxprof.typepad.com)
- Top Tax Tips From Zuckerberg’s Facebook Bonanza (forbes.com)
- Facebook’s Zuckerberg may face $2 billion tax hit (money.cnn.com)
- Zuckerberg’s huge tax bill may benefit Facebook (mercurynews.com)
- Zuckerberg’s taxes on IPO? How about $2 billion (news.cnet.com)
- Zuckerberg’s taxes on IPO? How about $2 billion (news.cnet.com)
By: Alex Crippen
Warren Buffett says he could fix the U.S. deficit problem very quickly.
Here’s his not-entirely serious (but not entirely joking either) plan, as told to Becky Quick during this morning’s live interview on CNBC:
“I could end the deficit in five minutes. You just pass a law that says that any time there’s a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election. Yeah, yeah, now you’ve got the incentives in the right place, right? (Laughs)
So, it’s capable of being done. And they’re trying to use the incentive now that we’re going to blow your brains out, America, in terms of your debt-worthiness over time. And that’s being used as a threat. A more effective threat would be just to say, ‘If you guys can’t get it done, we’ll get some other guys to get it done.’”
The only problem: the people who would have to pass such a law are the same people who would lose their jobs.
UPDATE: An attorney in St. Louis, Jarrad Holst, points out by email that there is a way to enact Buffett’s idea without the cooperation of Congress. Under Article V of the U.S. Constitution , a “Convention for proposing Amendments” is convened when called for by the legislatures of two-thirds of the states. A proposed amendment would then need to be ratified by the legislatures of three-quarters of the states. If that happens, and it is a very, very big if, Buffett’s deficit plan would become the law of the land. That process would, however, take more than five minutes.
They covered many other topics. You can find the full transcript and video clips here on Warren Buffett Watch.
- Warren Buffett tells CNBC how to end the deficit by changing how Congress works [Fiona Brownsell] (ecademy.com)
- We The People (beenetworknews.com)
- Buffet: “I Could End The Deficit In 5 Minutes” (lewsmuse.wordpress.com)
- Jay-Z Gets Animated for Warren Buffett’s New Cartoon Series (celebritybabies.people.com)
- Warren Buffet, remarks made on CNBC…Think about it…via E-mail this AM to Admin/CapeCoral (capecoralblogger.wordpress.com)
- Getting Political On A Tuesday… (caridwen.wordpress.com)
- Hey, Kids: Warren Buffett Will Take Your Questions Now (blogs.wsj.com)
- Warren Buffett (atropregor.wordpress.com)
- Warren Buffett sparks storm over millionaires’ tax-rate hike – The Hill’s Blog Briefing Room (mbcalyn.wordpress.com)
- How to Fix Congress by Warren Buffet !!! (2012patriot.wordpress.com)