Like Monty Python’s crime-fighter The Bishop, Berkshire Hathaway chief executive Warren Buffett arrived late last week to the congressional argument over the debt crisis. By the time he published his broadside in the New York Times to the effect that billionaires like himself are being “coddled” by US politicians, Republicans had already staved off tax increases until after the next elections. Both parties had passed $1,500bn in deficit reductions to a bipartisan committee unlikely to call for tax increases. And Standard & Poor was sufficiently unimpressed to downgrade the US credit rating.
Mr Buffett believes taxes on the “mega-rich” ought to go up, in the name of both fairness and debt reduction. He paid just under $7m in federal taxes last year, about 17 per cent of his taxable income. But his back-office employees pay 36 per cent. It is a spreading problem. In 1992, the top 400 US earners made $16.9bn and paid 29.2 per cent in taxes. Today their income is $90.9bn and they pay 21.5 per cent.
The rich pay less because capital gains and carried interest get taxed at a low rate. As Mr Buffett puts it, “those who make money with money” are treated better than those who “make money from a job”. In saying this, Mr Buffett subscribes to the religious understanding of money that was universal in the Christian world before the rise of Florentine banking (and of Protestantism) and has been restated in our own time by practitioners of Islamic finance. People are alive but money is not, which makes it wrong – because it is life-denying – to prefer the latter.