San Diego Billionaire Irwin Jacobs Agrees With Warren Buffet – the Rich Need to Be Taxed More

by on August 17, 2011 · 8 comments

in American Empire, Economy, Popular

San Diego billionaire Irwin Jacobs

Billionaire Warren Buffett has been making headlines in his call for the super-rich of America to be taxed more. (See below.)

Now we hear that Irwin Jacobs – one of the richest San Diegans and co-founder of Qualcomm – agrees with Buffett.  Jacobs made this surprising statement during a meeting with the San Diego U-T Community Editorial Board earlier this week, where he raised questions about the assumption that higher taxes on the super-rich were bad for job creation, and completely agreed with Buffett.

In 2009, Forbes listed Jacobs as the 220th richest American, worth $1.6 Billion.

In an op-ed piece for the New York Times, Buffett wrote:

“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.”

Warren Buffett

Buffett called for immediate increases on all taxable income for the 0.3 percent of U.S. taxpayers making $1 million or more a year, with an additional higher bracket for those making $10 million or more a year.

~

Stop Coddling the Super-Rich

By Warreen E. Buffett / New York Times / Published August 14, 2011

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

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 percent 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 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

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.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

 

 

{ 8 comments… read them below or add one }

avatar The Mustachioed OBecian August 17, 2011 at 11:07 am

It’s all well and good for some members of the uber-rich class to call for higher taxes, but what’s stopping them from sending a check in to the IRS to account for the higher taxes they believe they should pay? If Buffet and Jacobs really want to pay higher taxes, I’m sure they have accountants who can fill out a check and find the appropriate PO Box to send it to.

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avatar Frank Gormlie August 17, 2011 at 11:22 am

We all know that people don’t pay taxes unless they have to. Let all the top 400 billionaires pay more, geez, dude!

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avatar RB August 17, 2011 at 11:47 am

I think it is clear that the tax code is going to be changed either by the deficit commission or after the next election. It think it is also clear that the income tax rates will remain progressive with higher rates for higher incomes. What is not being discussed is the income tax rate that 45% of the tax filer, who currently pay no income tax, will be taxed when the system is changed.

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avatar Allen Lewis August 17, 2011 at 10:23 pm

Could someone please tell me why a flat tax isn’t the way to go???

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avatar Shane Finneran August 18, 2011 at 8:51 pm

two reasons:
1. people who make lotsa money CAN pay a higher percentage of their income
2. people who make lotsa money SHOULD pay a higher percentage of their income

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avatar The Mustachioed OBecian August 18, 2011 at 12:42 pm

Interesting that an early progressive hero, president wilson, had the following to say to Congress in 1919:

“The Congress might well consider whether the higher rates of income and profits tax can in peacetimes be effectively productive of revenue, and whether they may not, on the contrary, be destructive of business activity and productive of waste and inefficiency. There is a point at which in peace times high rates of income and profits taxes destroy energy, remove the incentive to new enterprise, encourage extravagant expenditures and produce industrial stagnation with consequent unemployment and other attendant evils.”

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avatar Shane Finneran August 18, 2011 at 8:58 pm

Comments like this from the super-rich are refreshing. But I can’t help but feel like it’s too little, too late. The good ship USA has already taken on so much water… woulda been nice to help patch up the holes a little sooner, no?

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avatar John Lawrence August 21, 2011 at 5:18 am

It is one thing for Irwin Jacobs to chime in with Warren Buffet that there should be higher taxes on the rich, but is he also willing to advocate higher corporate taxes? Recently, the current CEO of Qualcomm, Jacobs’ son, advocated repatriating corporate profits from abroad at a ridiculously low rate. See “Qualcomm Proposes Repatriating Foreign Profits Without Paying Taxes”:

http://willblogforfood.typepad.com/will_blog_for_food/2011/03/qualcomm-proposes-repatriating-foreign-profits-without-paying-taxes.html .

Also the San Diego Union article linked to made the following nieve statement:

“We need a greatly simplified tax system free of lobbyist-driven subsidies and tax breaks – and the vague wording that often allows wealthy interests, both individuals and corporations, to turn how much taxes they pay into legal fights in which they have a big advantage: high-powered attorneys with more experience and resources than their government adversaries.”

Even after you “greatly simplify” the current tax system, it will still not be free of lobbyist driven subsidies and tax breaks. What do they think – lobbyists will simply give up? Lobbyists will still be drilling holes into whatever revised, simplified system Congress comes up with.

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