Buffett, taxation and the collapse in the average male worker’s standard of living
On Monday Warren Buffett stated “our leaders have asked for ‘shared sacrifice'”. But when they did the asking, they spared me….whilst most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.” (click here for the NY Times op-ed).
We’d just been looking at the chart below, so the timing of his commentary was good. Whilst mean US male weekly earnings are up 13% in inflation adjusted terms since 1969, this is highly skewed by high earners getting a disproportionate share of the economic gains of capitalism (and government intervention in capitalism!). The median, which measures the middle person in the distribution, has actually fallen by 28% over the same period. At the same time full time employment has fallen by 16.5% for men.
This lack of burden share is also well illustrated by Stephen von Worley’s breakdown of the relative U.S. income tax burden over time. Three observations are striking in this context. First, the tax burden was comparatively high in the 1950s and 1960s when the U.S. public debt stayed flat at relatively low levels. Secondly, the Bush administration lowered the tax burden across income levels at a time when the federal debt level had already been at historically high levels. We know how the story has continued. Finally, Buffett and his peers benefitted disproportionately from the Bush administration’s fiscal policy.
Interestingly, Jim tore out this newspaper article from the New York Post last time he was in the States. The commentator, Bill O’Reilly is famously right wing, and tries to avoid the real, and obvious conclusions of the survey – whilst it’s true that 49% said “no” to the question “do you think our government should redistribute wealth by heavy taxes on the rich?” (a fairly biased question to start with), 47% said “yes, heavy taxes please”. It makes the Republican’s refusal to even consider tax rises as part of the disastrous debt ceiling negotiations look not just suicidal from a credit rating standpoint, but even undemocratic.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.