Friday, August 19, 2011

Why the UK super-rich don't demand to pay more tax like Warren Buffett

Warren Buffett, in an article for the New York Times, ("Stop coddling the super-rich") suggests raising taxes for the rich. This is being reported in the UK as a potential alternative to the idea of cutting the top rate of 50% income tax in the UK.

The Sage of Omaha, the third richest man in the world, says he paid almost $7m income and payroll taxes last year. Although a big figure it's just 17% of his income. He notes that the tax rates paid by the other 20 people in his office ranged from 33% to 41% and averaged 36%. He describes a tax system designed to enrich the wealthiest at the expense of the middle and lower classes. Mr Buffett is very clear that the super-rich can afford higher taxes, and that they will not be put off investing by allegedly "uncompetitive" tax rates.

Let's be clear though. Mr Buffett's views concern the US tax paid on his investment income and capital gains.

Would any of the super-rich in the UK agree with his sentiments?

The top rate of income tax on investment income here is already 50%. On capital gains it is 28%. (There is a reason for this as I explained in a blog post last year: CGT rules unlikely to change again in this Parliament).

Thirty years ago the top rate of income tax was 83% and there was an additional 15% 'investment income surcharge'. This meant that investment income was subject to a whopping 98% tax rate. It is hard to understand how such taxes could ever have been justified. Even back then capital gains tax was only 30%.

I tend to doubt anyone in their right mind would volunteer to pay more than half of their income or gains away as tax. And there is no facility here for anyone to pay more tax than is strictly due (as I explained here: Hazel Blears and Gordon Brown - a genuine gesture or deliberately deceptive?)

What do you think?

1 comment:

  1. I seem to recall that certain temporary tax exemptions for the wealthy in the US, arranged during the George W Bush presidency, are about to expire, if they haven't already (can't remember the timeline). It would be interesting to see what the new base line of tax rates are (following the expiry of these exemptions)and whether WB would still be happy to pay at these rates. Having said that, when you have as much capital as he has, any tax on capital gains in these rocky economic times is going to be insignificant. The likes of WB can live off his capital with a 0% return. Now, if he were proposing a wealth tax on his capital ...