Warren Buffett's 'Ideal' Tax Code

Tax code is always a topic of debate, as frequently there are no definitive answers to whom and how much the government should tax in order to maintain the balance between collecting adequate taxes and not burdening citizens.

Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett was recently on CNBC to discuss what changes he would make to the tax code.

Progressive Consumption Tax

"Ideally, I think you would have a progressive consumption tax. You would tax the people who are making withdrawals from society's bank, rather than who are putting in the deposits in. And a lot of economists agree with that," Buffett said.

"You are not going to get there from here. Now, if you happen to put in a VAT, that would be something moving into a consumption tax in a big way. It would not be progressive though."

Related Link: McDonald's To Raise Pay 10% For 90,000 Workers

VAT As An Extra

Buffett was asked if this VAT would replace or be in addition to the taxes that individuals and entities pay. He replied, "They are talking about a VAT as an extra tax, but then they are talking about perhaps reducing some corporate taxes and perhaps individuals if they put in a VAT. I am not sure that'll happen either.

"It's very, very difficult to get major changes in the tax code. It got done in 1986 in a very big way, but those days are hard to come by."

Income Tax Changes

Buffett continued, discussing income taxes. "I would have a more progressive income tax," he said.

"I would make it easier on the people that are at the bottom. I would increase the earned income tax credit for people that work hard, but just don't have the abilities to hold down a job that pays well.

"We are doing something with the earned income tax rates. I think that's much better than changing the minimum wage," Buffett concluded.