Buffett: Against Bank Tax, for Higher 'Rich Guy' Taxes

Legendary investor says it doesn't make sense to tax banks.

January 20, 2010, 12:25 PM

OMAHA, Neb. <br/> Jan. 20, 2010 &#151; -- Legendary investor Warren Buffett today came out against the Obama administration's plan to tax major banks to recoup losses from the government's Troubled Asset Relief Program.

Last week, the administration unveiled a plan to levy what the government calls a financial crisis responsibility fee on roughly 50 banks with assets of $50 billion or more. The goal is to raise at least $90 billion over the next 10 years. The tax is based on banks' size and their liabilities.

In an interview with ABC News at a special investors conference in his hometown of Omaha, Neb., today, Buffett said it was unnecessary to go after banks that had already repaid the loans they had received through TARP. The country's largest banks, including Bank of America, Citigroup, JPMorgan Chase and Goldman Sachs, have all repaid their TARP funds.

"I don't think it makes sense … The banks are not going to be the cause of big losses in the TARP program, maybe the auto companies will," Buffet said."It's a separate situation."

Buffett, the billionaire CEO of the investment company Berkshire Hathaway, also said he was against the British government's recently-announced tax on banker bonuses and calls for the U.S. to restrict bonuses.

Buffett, who made headlines in 2008 for investing billions in Goldman Sachs -- one of the institutions most heavily criticized for awarding bonus billions -- said restricting banker bonuses would only lead to better returns for bank shareholders and would not benefit the U.S. government, the country's unemployed or those who have lost their homes.

"It's sort of a false argument, saying if we would take away these bonuses, it would solve everything," he said. "There are lot of bonuses that aren't justified, make no mistake about that … It bothers me when people get paid a lot for not doing much but if they get paid for performing, I don't have a problem."

Still, as he's said before, Buffett supports levying higher taxes on high-earning individuals.

"I think higher earning people in this country should be taxed more," he said. "I don't think our tax system is very equitable and I think it's drifted dramatically during the last ten years toward favoring rich guys like me."

"I pay a lower tax rate on much of my income than my cleaning lady does," Buffett said, reiterating an example he's used over the years to illustrate his distaste for the current tax system. "I think that's crazy."

Buffett Worried About Inflation, Fed Indepedence

Buffett was similarly pessimistic about the health care reform efforts that supporters worry will be hurt by Massachusetts' election last night of Republican candidate to succeed Ted Kennedy.

"I don't know whether its dead … If it was in, you know, sort of the sniffle stages before, it's in intensive care now obviously. But how it all plays out who knows."

"The American public is not enthused about the health care bill, and that was expressed" through the Massachusetts election, he said.

But health care doesn't top Buffett's list of concerns about the economy right now: Instead, he says he's most worried about inflation.

"We are running huge fiscal deficits and it looks like we will for a long time and it's going to be very hard to avoid getting those monetized in some way and that's going to be inflationary," he said. "I would say, that is the biggest long-term financial worry I have."

The so-called "Oracle of Omaha"-- a nickname Buffett picked up for decades' worth of prescient stock picks -- had a more optimistic prediction for the struggling housing market and the country's unemployment rate: The market, he said, is now looking "pretty good," especially for real estate valued below $500,000, though he added that he didn't expect home prices to return their boom year levels.

"I think within a year, except for a few hotspots, except for the high end, I think the housing market is going to be straightened out pretty much," he said.

Unemployment, meanwhile, gets a mixed outlook from Buffett, whose company recently laid off some 7,500 workers in its carpet and brick businesses.

In an earlier interview with ABC News, he said he wouldn't be surprised if the country's jobless rate exceeded 11 percent. Today, he said, he didn't think "it's a high probability but I wouldn't rule it out."

Buffett also weighed in on calls in Congress to strip the Federal Reserve and Fed chairman Ben Bernanke of some of their power. He's against such efforts, he said.

"I think an independent Fed is enormously important to the future of our country," he said. "I think if the Fed became a captive of Congress, heaven help us."

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