Monday, November 26

Higher marginal tax rates do not stop wealthy people from investing

Warren Buffett's op-ed in yesterday's New York Times is well worth reading. His common sense cuts through all of the political posturing, straight to the heart of the matter:
"SUPPOSE that an investor you admire and trust comes to you with an investment idea. 'This is a good one,' he says enthusiastically. 'I'm in it, and I think you should be, too. 
"Would your reply possibly be this? 'Well, it all depends on what my tax rate will be on the gain you're saying we're going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.' Only in Grover Norquist’s imagination does such a response exist. 
"Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered."
A Minimum Tax for the Wealthy (New York Times)

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