WASHINGTON – Bill Gates is concerned about the high budget deficits being run by the U.S., and said if taxes are ultimately increased to make up the shortfall, then it’s appropriate for wealthy people to pay much higher taxes.
“We only collect about 20 percent of GDP and we spend like 24 percent of GDP. So you can’t let that deficit grow faster than the economy,” the world’s second-richest man said during an interview on CNN’s “Fareed Zakaria GPS” broadcast on Sunday.
Proposals have circulated recently for the richest Americans to again face a top marginal tax rate of 70 percent, as they did during much of the 1970s before it was lowered by President Ronald Reagan. But Gates said that approach didn’t work well in practice.
“Even when that rate was high, the actual collection because of ways people could defer wasn’t — never got above 40 percent, actually,” the Microsoft Corp. co-founder said.
“If you go about doing this additional collection, of course you want to be progressive, you want the portion that comes from the top 1 percent or top 20 percent to be much higher,” he said. “The big fortunes, if your goal is to go after those, you have to take the capital gains tax, which is far lower at like 20 percent, and increase that.”
Taxing capital gains income and ordinary income at the same rates “would get rid of a lot of complexity, because whenever those rates vary, you want to make one look like the other,” said the philanthropist, whose net worth is estimated at $97.2 billion. Hedge funds tend to try to shift their tax liabilities over to the capital gains column.
“And so, you would simplify that,” Gates said.