Warren Buffett says the single easiest thing that we could do to change the trajectory of our country is to make the tax code more effective. Currently, there are people with millions and billions of dollars who are paying very small percentages of their wealth. Meanwhile, the lower and middle working classes are paying maybe one third of their earnings in taxes. This tax discrepancy makes it so our entire American system is unbalanced and the people with more money are able to find more loopholes to pay less in tax.
What’s a solution?
How about a flat tax rate on all wealth? This means realized and unrealized gains, real estate, stocks, bitcoin, gold, and everything in between. If people are required to pay a flat rate each year on these assets, perhaps it would make the system a little more effective.
What would this look like?
If a person is making one million dollars then they would pay, for example, twenty percent so that would be $200,000 in taxes. If their stock portfolio gained one million dollars then they would also pay an additional $200,000. Similar for gold, bitcoin, real estate, and all other accumulation of wealth.
A fully functioning economy is one that is cyclical and has money moving from one place to another. The accumulation of wealth and deposit in longstanding assets makes it harder for lower and middle income people to grow to the next level of economic prosperity.
Similarly, if someone is making $50,000 in salary, then they would pay $10,000 in taxes. If they owned stocks and other assets that increased in value, they would pay 20 percent on all of those assets as well.
But wait a second – before we even have individuals pay Federal taxes, what if we examined if companies could pay their fair share?
Warren Buffett says that if companies paid their fair share, that nobody would owe a “dime” in Federal taxes.
In 2023, Buffett’s company, Berkshire Hathaway, sent in a check of $5 billion to the Federal government. According to Buffett, if 800 other companies also sent in similar checks, then nobody would have to pay a dime in Federal taxes. This includes no social security taxes, no estate taxes, all up and down the line.
Further reading: Book Note: Give and Take by Adam Grant. Legal terms used on this site are defined in the plain-language legal glossary.
