Ken Langone: 'Raise My Taxes' to Avoid Cliff, But Cutting Spending Would Be Better

Wednesday, 19 Dec 2012 08:54 AM

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Policymakers can raise taxes on the wealthy to avoid the fiscal cliff, but true fiscal health will come from meaningful entitlement reform, said noted investor and Home Depot co-founder Ken Langone.

The White House and congressional Republicans have made progress in talks to avoid the fiscal cliff, a combination of tax hikes and deep government spending cuts due to take effect at the same time at the end of this year.

Failure to push through fiscal reforms could result in an estimated $600 billion being siphoned out of the economy next year alone, throwing the country into a recession in the process.

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

Both sides appear to be making progress when it comes to tax hikes on the wealthy.

Democrats, who once wanted to raise taxes on incomes over $250,000 a year are now proposing raising that minimum threshold of eligibility to $400,000 a year.

Republicans, who once opposed any and all tax hikes, now reportedly say they’ll accept tax hikes on incomes of over $1 million a year to help drum up revenue.

That’s all well and good if it brings about compromise, Langone said, but entitlement reform must follow suit.

“People making $1 million a year are not going to do anything different if they pay more taxes,” Langone told CNBC, adding that “you get nothing, effectively nothing, out of going after the heavyweights.”

Spending needs more attention.

“We now have to come to the issue of when we deal with our structural problem, and we have a very serious structural problem,” Langone said.

“We need entitlement reform — take away Social Security from guys like me. Raise my taxes. Nothing will change in my life.”

“I happen to think the real issue is entitlements,” Langone said.

“We need to get the issue of taxes off the table.”

Wall Street analysts say they are pleased with the level of compromise even though there is no deal yet.

“There’s an overriding belief now that we will get a deal done in 2012,” said Peter Boockvar, an equity strategist at Miller Tabak, according to CNNMoney.

Others echoed those sentiments, fueling hopes that a deal could become reality this year.

“There is certain optimism that it could potentially be done before the end of the year and that would be a very positive sign to the market,” Philip Tasho, chief investment officer at Alexandria, Va.-based Tamro Capital Partners, which manages about $1.8 billion, told Bloomberg.

“Once the solutions are in the rearview mirror in terms of fiscal policy, we will simply look forward. It’s a blip in the long-term trend.”

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

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