Prince: ‘Buffett Rule’ makes Main Street sense
BY LEW PRINCE June 1, 2012 9:52PM
Warren Buffett says it's not fair he pays a lower income tax rate than his secretary. | File photo
Updated: July 6, 2012 11:07AM
As a music store owner, the Buffett I’m usually concerned with is singer Jimmy Buffett of “Margaritaville” fame. But a bunch of lobbying groups that claim to represent small business have me focusing on another Buffett and are making me mad.
They’re trying to scare people into believing that job-creating small businesses such as mine won’t hire people if the “Buffett Rule” or anything like it is enacted. What hogwash.
The Buffett Rule is named after billionaire investor Warren Buffett, who says it’s not fair that he pays a lower tax rate than his secretary. The rule would address the problem by assuring that households making more than $1 million annually don’t pay a smaller share of their income in taxes than middle-class families pay.
That sounds like simple, common sense to me. But in April, a minority of U.S. senators used a filibuster to block it from moving forward.
Some top politicians and many lobbyists are dedicated to protecting, and even increasing, the tax advantages that allow people such as financiers, hedge fund managers, commodity speculators and top corporate executives to avoid paying their fair share of taxes.
But they can’t admit that’s what they’re doing. So they profess to stand for “small business” and “job creators.”
My accountant works for a firm that does income tax returns for more than 400 small businesses. I asked him how many of those business owners would be affected by the Buffett Rule. His answer: “Maybe as many as four.” In other words, 1 percent or less.
Here’s what nationwide data from the nonpartisan Tax Policy Center shows: Just 1 percent of the roughly 34 million households reporting business income on their tax returns earn more than $1 million annually.
And that includes Wall Street investment partners and others who use Main Street small businesses as poster children when they oppose higher taxes on the highest incomes.
It’s not surprising that the lobbying groups working to kill the Buffett Rule or anything like it are the same ones who twisted the tax system out of whack in the first place. It’s not surprising, but it’s wrong.
As the chief executive of a small company, my primary job is to predict the future and prepare for it. For my company, that means providing my two dozen employees with the tools, training and logistics for growth and prosperity.
For a country, that means updating and maintaining large grids such as power, broadband and transportation networks and improving access to education so we don’t waste our precious human capital.
These are long-term investments whose payback accrues to all of us and our children and their children and that were made before us and as a community. It’s only right that those who have gained the most from that infrastructure pay their fair share in maintaining it.
The organizations trying to scare us into believing that hiring will go down if some income tax rates go up are not being honest. It’s not how business works for me or for much-wealthier business owners.
If demand for our products increases and we need more people, we hire more people. If I get an idea for a new product or service that I think will make money, Vintage Vinyl, like most small businesses, views the people that we hire to institute the service or make and market the product as part of the cost of doing business.
These are tax-deductible expenses. My income tax rate on the profits has no effect on the decision.
It’s painful for me to watch my customers, some of whom worry about scraping by each day, pay more in income tax than top business executives.
The Buffett Rule is one of the steps we need to bring more fairness to the tax system and to support the public investment and job creation we need for a healthy economy.
Lew Prince is managing partner of Vintage Vinyl, an independent music store in St. Louis. He also is a member of Business for Shared Prosperity, a national network of forward-thinking business owners and executives.