June 3, 2020

HGDCC-Finance

analysis business finance

Warren Buffett: Raising taxes on the 1% could end class warfare

  • Warren Buffett believes expanded tax credits for working Americans and higher taxes for the 1% are needed to close the United States’ wealth gap, the Berkshire Hathaway chairman said during an interview with Yahoo Finance published Monday.
  • Buffett blamed capitalism for the growing inequality, saying that billionaires don’t have “some diabolical plot” to hoard the country’s wealth.
  • Despite being worth over $73 billion, Buffett still lives in the modest house he bought in the 1950s, eats breakfast at McDonald’s every morning, and used a flip phone until earlier this year.
  • Visit Business Insider’s homepage for more stories.

Warren Buffett’s knack for picking good investments for his conglomerate Berkshire Hathaway made him billions of dollars managing investments at Berkshire Hathaway, but he doesn’t necessarily think that his profits are fair.

While the billionaire investor is a supporter of America’s capitalist economy, Buffett also told Yahoo Finance that the current system has allowed people with certain skills to unfairly amass huge fortunes that keep resources from everyone else. Economists agree, forecasting that the country’s growing wealth gap could cost the economy as much as $1.5 trillion by 2028. Buffett told Yahoo Finance that he’s been warning for years that the situation amounts to “class warfare” and that “my class is winning.”

“It isn’t some diabolical plot, or anything,” Buffett said in an interview with Yahoo Finance’s Andy Serwer published Monday but filmed March 10. “And that isn’t because a bunch of people are sitting in a room deciding we’re going to figure out how to take it away from the poor, or anything like that. It’s because of the market system. We want the market system to keep functioning that way, but we don’t want people left behind in a society where you’ve got $60,000 plus of GDP per capita.” 

Buffett’s idea for closing the wealth gap is two-fold. The billionaire suggested raising taxes on the 1% (like himself) to combat the problem but stopped short of endorsing the moderate wealth tax that has been embraced by fellow billionaires and former presidential candidates alike. Buffett also suggested that raising the earned income tax credit that reduces the tax burden of working Americans — especially those raising children — could be instrumental in closing the country’s wealth gap.

“People on the lower half have been falling behind the gains overall achieved by the country,” Buffett told Yahoo Finance. “They aren’t worse off than they were 20 years ago. They’re somewhat better off because of things like an iPhone. I mean, that’s something that’s terribly useful. Everybody gets the benefit of [Internet] search, you know, for nothing, basically. But that’s the ultimate tension. How do you keep a system that produces incredible benefits for everybody?”

Buffett has built a $73.7 billion fortune running Berkshire Hathaway, the holding company with subsidiaries including GEICO and Fruit of the Loom. Buffett is known for living a relatively frugal lifestyle despite his wealth, still living in the modest house he bought in the 1950s, eating McDonald’s for breakfast every morning, and using a flip phone until earlier this year, Business Insider reported.

“This country has the productive capacity to let people like me live extraordinarily well — or sports stars, or entertainment stars, all kinds of good managers — and still make sure that nobody is really left [behind],” Buffett told Yahoo Finance.