Warren Buffett’s latest attack on the investment industry is aimed at compensation.
Buffett, who has time and again criticised the private equity industry, argues carry ought to be taxed at personal income tax rates, as high as 35 percent, rather than at the 15 percent capital gains tax rate.
“Some of us are investment managers who earn billions from our daily labours but are allowed to classify our income as ‘carried interest’, thereby getting a bargain 15 percent tax rate,” Buffett wrote in a New York Times column titled “Stop Coddling the Super-Rich”.
Buffet said the “extraordinary tax breaks” for investment managers were like “blessings” that were “showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species”.
The Berkshire Hathaway chairman penned the editorial as US lawmakers continue to negotiate a long-term deficit reduction plan. A 12-member panel, dubbed the “super committee”, was created earlier this month to identify $1.5 trillion in savings over the next 10 years in addition to the $2.1 trillion deficit reduction deal reached two weeks ago. The bipartisan panel must craft an agreement before a 23 November deadline to head off automatic, across-the-board spending cuts. Republicans have vowed to block any proposed tax increases.
Past legislative proposals to treat carry as ordinary income would have netted government coffers between $15 billion to $24 billion over the next decade, according to various estimates, but were ultimately abandoned after intense lobbying.
On the campaign trail President Barack Obama, a proponent of taxing carry as ordinary income, reportedly expressed his agreement with Buffett’s column.