Warren Buffett, perhaps the most successful investors of modern times and one of the world's wealthiest men, has spoken out against the US tax system which allows him to pay proportionately less of his multi-million dollar annual income in taxes than his cleaning lady.
Addressing attendees at the $4,600-a-place fund-raising dinner for the Hilary Clinton presidential campaign, Buffett, who runs investment group Berkshire Hathaway and is reputedly worth $52 billion, told the 600 Wall Street bankers and money managers that: "(We) pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
According to Buffett, he makes no use of tax shelters to mitigate his tax liability, but still managed to pay an average tax rate of 17.7% on his $46 million income last year. By comparison, his secretary, who earned $60,000, paid tax at 30%.
Buffett's comment are likely to strengthen the hand of legislators who are clamouring to address the issue of wealth inequality on both sides of the Atlantic by increasing tax on the well-off, particularly highly-paid fund managers.
In the UK, this debate has intensified in recent weeks after Nicholas Ferguson, a leading venture capitalist, remarked in an interview with the Financial Times that it could not be justified that he pays tax at a lower rate than a cleaner. Sir Ronald Cohen, regarded as the founding father of the British venture capital industry and who has a personal fortune of GBP260 million, has also publicly questioned why private equity funds should enjoy such a favourable tax regime.
Although Buffett has not publicly endorsed Hilary Clinton as the Democrat nominee for President, he said that she was "the person to run the country". However, he indicated that he would also support Sen. Barack Obama (D-Ill.) in a similar fund raising venture.
In a speech to the Manchester School of Technology in New Hampshire last month, Clinton announced that, if elected to the White House, she would remove tax breaks for large corporations and roll back tax cuts passed under the Bush administration which benefit the wealthy as part of a catchily titled 'Nine Point Plan'.
"When the president's irresponsible tax breaks for high-income Americans expire, we will return to the income tax rates for upper-income Americans that we had in the 1990s, rates that were consistent with a balanced budget and economic growth," she said.
Asked why he would not support the Republicans, Buffett responded that it was because they are more inclined to express the view: “I’m making $80 million a year – God must have intended me to have a lower tax rate.”
He also criticised the Republican campaign to repeal the estate tax, which raises about $30 billion per year in revenues, arguing that it would benefit only 12,000 of America's richest families, while effectively raising the tax burden on the rest of America.
“You could take that $30 billion and give $1,000 to 30 million poor families. Or should you favour the 12,000 estates and make 30 million families pay an extra $1,000?” he asked..
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