• With: Harvey Golub, former CEO of American Express

    This is a rush transcript from "Journal Editorial Report," September 17, 2011. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Obama takes his Jobs Act on the road, calling once again on wealthy Americans to pay more. Warren Buffett may want to do that, but one former CEO says no way. He's here to tell you why.

    And new census numbers paint a grim picture of the economic recovery. Why Democratic efforts to spread the wealth are falling short.

    And Michele Bachmann takes on Rick Perry over a controversial cancer vaccine. Who is right? We'll have a debate.


    PRESIDENT BARACK OBAMA: Right now, Warren Buffett pays a lower tax rate than his secretary, an outrage he has asked us to fix. We need a tax code where everyone gets a fair shake --


    OBAMA: -- and where everybody pays their fair share.



    GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

    That was President Obama last week, unveiling his $450 billion Americans Jobs Act, calling on the wealthy to pay more in taxes to finance it. And while Warren Buffett may be willing to do so, at least one former CEO is not. In a resent op-ed in the Wall Street Journal, Harvey Golub had this message for President Obama, "Before you ask for more money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely, then you'll need less of my money."

    Harvey Golub joins me now. He's the retired CEO of American Express and a member executive committee of the American Enterprise Institute and also chairman of Miller Buckfire.

    Welcome to the program.


    GIGOT: So, take us through your arguments, your beef with Warren Buffett?

    HARVEY GOLUB: I don't really have a beef with Warren Buffett. If he thinks that he's paying unfairly low taxes, largely because he takes advantage of capital gains, and then puts his money into a foundation so he doesn't pay taxes on the capital gains and gets a he deduction on the money that he contributes to this foundation, I think that would be entirely appropriate that he pay those taxes.

    GIGOT: So, what is your -- what about you? You don't -- you say -- you wrote the piece, very interesting, that 80, 90 percent of your income this year would go for taxes of one kind or another. How do you get to that size?

    GOLUB: Yes. It's an actually slightly lower number. But I get to it because of not only the current year's state and federal income tax burden and FICA taxes and the like, but also at age 72, my life expectancy is not great, so I would expect to pay estate taxes soon. And the sum of those, too, ends up to be a very high number.

    GIGOT: Here is one of the points that Buffet makes, I think. He says capital gains taxes, which he acknowledges he pays a lot of, and taxes on dividends. Those are taxed at a lower rate, 15 percent now, than on income from wage earners, which is taxed at the highest rate of 35 percent. He seems to be saying, look, that's unfair, unfair to salary workers. What's your response?

    GOLUB: My response is that the personal income tax code ought to be completely redone. And I would advocate essentially eliminating every single deduction, every deduction, except for savings and investments. But I would also count in income every source of cash. Now, currently, a lot of people in the middle class pay taxes, get a great benefit from tax exempt income in the form of health care and retirement. I would advocate a code that has everybody paying based on cash and non-cash income.

    GIGOT: Right.

    GOLUB: Subtract from it investment, and pay a progressive rate on the remainder. But have that progressive rate start for everybody at a very low rate for everybody.

    GIGOT: So, everybody at least pays something in income?

    GOLUB: Everybody ought to pay something.

    GIGOT: But should there be a lower rate for capital income like capital gains.

    GOLUB: No.

    GIGOT: What that means is something you invest in a company. You get a -- you sell the company and you get a big pay day, you think that should be taxed at regular income?

    GOLUB: I think that should be taxed at regular income, but at a much lower rate. The regular income ought to be at a much lower rate and we ought to eliminate all of the tax deductions and all tax preferences.

    GIGOT: So if the top marginal tax rate were 25 percent, then you wouldn't mind -- then you wouldn't need a differential on capital income or on dividends?

    GOLUB: No, wouldn't need a differential at all.

    GIGOT: All right. Interesting.

    Now let's talk about the president's jobs plan, which he says -- where he's given certain tax breaks, an extension of the payroll tax break for employees and now he's added it for employers, and as well as some tax credits for small business, but those all expire at the end of 2012. What is -- what goes through the mind of an employer, a CEO, when he says, OK, I'm going to get a tax break now to hire somebody but it's going to vanish in 16 months?

    GOLUB: It is completely discounted.

    GIGOT: Really?

    GOLUB: It -- yes. It has no relevance to making a decision. The view that that people are hired because a company has cash to hire them, reflects an ignorance about how businesses and people are actually motivated and work that is -- that is astounding. People, businesses hire people when they have more business and they need the people to conduct that business. If they don't have the business to conduct, they're not going to hire the people.

    GIGOT: Would it matter at all if the tax incentives were permanent?

    GOLUB: It wouldn't matter if the tax incentives would permanent because then you would build it into the tax base.

    GIGOT: And you would calculate your costs over a period of time and say, you know what, I'm not going to have to lay that person off in 16 months or I know now, I have a better sense of what my cost basis is?