By now, newspapers could run the headline “EVERY MAJOR BANK IN THIS COUNTRY IS GOING BANKRUPT” and readers would take one passing glance and move on. I think we are all sick of hearing about bank bailouts and high interest rates by now, and frankly, though I sympathize with the unemployed, I was unfazed when I read last week that banks across the country are preparing for hefty layoffs. However, amidst the banking crisis of the week, one major player made a move that Wall Street gurus are hailing as “genius.” Warren Buffet, an investment veteran and CEO, pumped a mere five billion into the struggling Bank of America’s (empty) pockets.
Buffett’s investment in the popular bank will hopefully restore the faith of both the clientele and the shareholders. Buffet believes that BOA has a powerful franchise, and that’s something he looks for when making a big investment. “Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”
This is not the first time we’ve seen Warren Buffet in the headlines recently though; last month he authored an op-ed article in which he expressed his desire to see the super-rich taxed at higher rates. Wait, what? Yes, a super-rich guy announced that he thinks he should be taxed more than he is currently. What’s more surprising? His super-rich friends agree with him. “I know well many of the mega-rich and, by and large, they are very decent people … Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering,” says Buffett in his article.
So there is a group of mega-rich (as in the top .0001% of households-rich) people in the US who are apparently not opposed heavier taxation, and yet, in the past decades, Congress has been giving this group tax breaks. Buffett proposed that households making one million in taxable income should receive a tax increase, and for those who make ten million, yet another increase. Considering he paid upwards of six million in taxes, representing only 17% of his income, as opposed to the average rate of 36%, I think that his suggestion is not so unreasonable.
Personally I think this should be a no-brainer for the congressmen that are about to devise a new ten-year plan to reduce the deficit. There’s a group of obscenely rich people who are willing to pay more taxes…what part of that statement mandates a second thought? Additionally, this would generate revenue without adding to the debt, or hurting the already-struggling the middle and lower classes.
While the media took Buffett’s article and ran with it, there has been some negative backlash. One of the renowned and mega-rich Koch brothers contradicted the article saying that “much of what the government spends money on does more harm than good…I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.” Charles Koch makes a valid point; however, middle and lower class citizens should not be forfeiting higher percentages of their income to federal taxes than people like him and Buffett who have so much more to give. Because most of them “make money with money” through investments they are allowed to classify a large portion of their income as “classified interest,” resulting in a much lower percentage.
Republicans will likely oppose this tax increase because historically they favor the rich, and the tax cuts that put them in the comfortable place they are now were passed by Bush’s administration. So whether or not this proposal would have a chance of passing in Congress is entirely another story. Even if the best outcome of Warren Buffett’s headlining investment is increased faith in Bank of America, and the banking industry as a whole, at least that will be positive change in the right direction – away from constant crisis.
