President Barack Obama and other Democrats have been applauding Warren Buffett for once again stirring up the debate over taxes.
In an op-ed column in the New York Times on Monday, the self-righteous, falsely modest Omaha multi-billionaire called for a higher tax rate for those making more than $1 million a year and an even higher rate for those making more than $10 million —a mere 8,274 people in 2009.
“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 wrote, noting that he paid a much lower percentage of his income in taxes than than any of the other 20 people in his office.
However, Buffett’s immodest proposal does not sit well with some of the wealthiest people in our society — successful hedge fund managers.
Every one of the handful of billionaire hedge fund managers I contacted railed at Buffett’s proposal, calling it self-serving.
All of the managers — none of whom agreed to be quoted by name, of course — criticise Buffett for not calling for a hike in the one area that would affect him the most: the long-term capital gains rate, which is currently just 15 per cent.
They are all very quick to point out that most of Buffett’s profits over the years have come from long-term capital gains. He’s been known to hold some positions for decades.
“He’s a total BS guy,” says one. “He never pays tax because he never sells.” The manager notes that Buffett has agreed to leave his entire fortune to his foundation when he dies; this will result in no estate taxes being paid. “He’s not even charitable to our country,” the manager adds.
“When Buffett hits himself, it will add credibility,” scoffs another well-known hedge fund manager.
In the column, Buffett said his proposal includes “of course, dividends and capital gains.” But he was only referring to calculating total earnings to meet his threshold for paying higher taxes, not to the rate itself.
Most hedge fund managers are not opposed to paying more in taxes. Sure, one of them asserts he does not use public roads more than lower-income people and perhaps used less of the services provided by the schools he attended.
But others quickly concede that they should pay additional taxes. “Carried interest is a joke,” stresses one prominent hedgie, referring to the low rate at which earnings at hedge funds and private equity funds are taxed. “It’s a loophole.”
He is all for raising the rate on carried interest and paying more in personal taxes. But, like most other hedge fund managers, he would only support these so-called revenue-related measures in concert with other changes, such as getting rid of certain tax deductions for individuals and corporations.
One manager would like to see the 50 per cent or so of the country that doesn’t currently pay income taxes shell out something. “I have no problem paying more,” he tells me.
Omega Advisors founder Leon Cooperman has gone on record supporting a 10 per cent surtax for three years on individuals earning more than $500,000 per year.
Perhaps investment holdings should be taxed after 10 years, regardless of whether they’re sold, says one hedge fund manager.
A prominent long-short manager says he would welcome paying more in taxes provided it was part of a comprehensive package of changes that included cutting defence spending, raising the retirement age for Social Security and changing immigration policy. He adds, “I have no problem paying more if it is not going down a rat hole.”