Warren Buffett wants tax hikes for the rich – but Australian expert says “not here”

The world’s most famous investor Warren Buffett has called on Congress to target the favourable tax treatment of the “molly-coddled” wealthy as it looks for trillions in savings to help curb the country’s enormous debt load.

In a stinging opinion piece for the New York Times, the chairman and chief executive of US investment house Berkshire Hathaway calls for Congress to raise tax rates immediately for people making more than $1 million, and even more so for those earning $10 million and above.

“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,” Buffett writes.

Buffett, one of the world’s richest men, points out that last year his federal tax bill amounted to just 17.4% of his taxable income, whereas the 20 people in his office paid an average rate of 36%.

Furthermore, Buffett argues that tax rates for the rich have fallen over the past few decades, with America’s top 400 earners paying a federal tax rate of 29.2% in 1992, versus just 21.5% in 2008 despite enormous increases in their wealth.

“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,” Buffett writes.

While the op-ed is not Buffett’s first comments on what he sees as inequalities in the tax system, they come as US politicians argue on the best way to cut the country’s deficit, with Republicans ruling out tax cuts but Democrats pointing to tax cuts for the wealthy introduced by former President George W Bush as money better spent elsewhere.

His comments also follow the historic downgrade of US debt by Standard & Poor’s, with the ratings agency drawing attention to the bitter political climate which saw the country only managing to extend its debt ceiling agreement at the very last minute.

Buffett says the 12 members of Congress instructed to devise a plan that reduces the 10-year deficit by at least $US1.5 trillion have another task at hand: they must restore America’s faith in its ability to deal with the 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,” he writes.

But don’t expect Buffett’s tax-the-rich calls to gain much traction in Australia.

Yasser el-Ansary, of the Institute of Chartered Accountants, says “any suggestion that Australia needs to move to a higher tax regime is deeply flawed.”

There are many differences between the US and Australian system, El-Ansary says, namely Australia does not have the same percentage of number of super-wealthy individuals, our tax system is robust and is designed to be progressive.

“Their top marginal tax rates typically apply at much higher income levels than they do in Australia, so those on significant incomes may face a lower annual tax bill,” El-Ansary says.

“And they might have the opportunity to structure their affairs in a way that significantly minimises the amount of tax they pay.”

Beyond this, El-Ansary notes that Australia is in a superior fiscal position, already has a consumption tax in the GST, and there is broad consensus that personal income tax rates should be simplified and lowered rather than increased.