Buffett: Tax the Rich

[cesarz]

Its like keynesians like krugman are not ideologists

 

[Toke]

Its like keynesians like krugman are not ideologists

No of course not.

Ok, I do believe that his ideas are founded in reality than unlike those Austrian school nuts.
The problems here are:
1) That economics is not a sufficiency exact science for clear evidence in all cases.
2) That there are huge political implications, motivating people to lie and distort to get the society they burn for.

 

[jimtron]

Originally Posted by Chris L
You aren't missing anything. If fairness were something he was really interested in, he could start with his own tax burden. He apparently isn't interested enough in it to do that, so color me skeptical about what his real motives might be in this case.

What do you think his real motives might be?

 

[Chris L]

Maybe he just wants a seat at the table (for his own purposes) when tax policy is being formed. Helping give the administration cover on this issue has certainly earned him that much.

 

[Mister Agenda]

Whether we have a spending problem or not, I don't see why someone making millions should be in a lower tax bracket than someone making far less. Regardless of the spending and debt problems we have.

Buffet isn't in a lower tax bracket than his secretary (who I imagine makes at least six figures). Her/his income tax rate for his/her income from labor isn't lower than the rate for his income from labor. Her/his capital gains tax rate isn't lower than his capital gains rate. Buffet's rates aren't lower, what he effectively pays is lower as a percentage. To raise the percentage he actually pays it is not necessary to raise his tax bracket (equal or higher than his secretary's), just lower what he is allowed to deduct.

Someone making millions should be in a lower tax bracket if putting them in a lower tax bracket would bring us out of recession. That hasn't been demonstrated to be a viable solution (and I regard it as unlikely), but it shouldn't be beyond the pale to consider it because there is an inherent moral imperative that the tax rates of the wealthy must be higher than the tax rates of the upper-middle-class. I'm not saying the wealthy should be taxed at a lower rate. I'm saying that you not liking them being taxed at a lower rate isn't a logical argument against it; and therefore doesn't require a logical argument to refute it. I understand it outrages your sense of fairness, but it outrages my sense of 'do no harm' to be wedded to the idea no matter what the consequences.

 

[Mister Agenda]

Why is "making millions" the basis for apportioning social burdens ?

Buffet and his secretary go to the same office every day. They work in similar conditions, have similar patterns of consumption, live in similar houses. They personally certainly create similar social burdens.

Secretary pays perhaps ~$30k in taxes total taxes incl payroll deductions,
while Buffet pays $7.5M. Perhaps 250 times more.

There is something very unfair here that only closed minded ideologue can ignore.

The electorate has not simply exempted the indigent from taxes, they have pushed an inordinate fraction of social costs onto high-earners, and exempted median and lower earners from too much of the costs. There isn't any egalitarian idealism in wealth transfer to the non-indigent. It's a use of the tax system for social engineering or social justice instead of as a means of apportioning social costs based on burdens imposed.

The problem with apportioning social costs like this is that the people most likely to impose a higher burden relative to their income are most likely to suffer under a burden of equalized costs. Some people are indigent, some people are close to becoming indigent, and some people are getting by without much margin of safety. I'm not saying the current system is the best, but it would be very easy to make it worse.

I would think it is not inherently wrong to use the tax system for social engineering or social justice, provided it is effective and the results are desireable. Surely the system that works best won't place a burden on the most productive that is too disproportionate.

 

[jimtron]

Buffet isn't in a lower tax bracket than his secretary (who I imagine makes at least six figures).

Do you have evidence for that? I don't have evidence that he is in a lower tax bracket than his secretary, but he has made this claim, which would be a very bold lie if true.

Her/his income tax rate for his/her income from labor isn't lower than the rate for his income from labor. Her/his capital gains tax rate isn't lower than his capital gains rate. Buffet's rates aren't lower, what he effectively pays is lower as a percentage. To raise the percentage he actually pays it is not necessary to raise his tax bracket (equal or higher than his secretary's), just lower what he is allowed to deduct.

I've been saying over and over on this thread that Buffet pays a lower percentage--not a lower rate. How would you recommend deductions be changed for people like Buffet?

I'm saying that you not liking them being taxed at a lower rate isn't a logical argument against it; and therefore doesn't require a logical argument to refute it. I understand it outrages your sense of fairness, but it outrages my sense of 'do no harm' to be wedded to the idea no matter what the consequences.

That's not my argument against it. Progressive taxation is a contentious issue--I'm not arguing for that in this thread. What I'm arguing against is someone making millions or tens of millions a year and paying 15-18% tax, while someone making hundreds of thousands can pay 30% or more tax. Yes, I don't like it, and I'm guessing a majority of Americans don't think much wealthier people should pay a much smaller percentage in taxes (though I do realize, especially after reading this thread, that many folks have no problem with it).

Mister Agenda, in your view why should someone earning a couple hundred thousand a year pay a higher percentage of taxes than someone making millions (someone like Buffet whose earnings are from capital gains)?

 

[Mister Agenda]

Do you have evidence for that? I don't have evidence that he is in a lower tax bracket than his secretary, but he has made this claim, which would be a very bold lie if true.

Buffet hasn't claimsed to be in a lower tax bracket. He has claimed to be paying a lower rate. These are not the same claim.

http://en.wikipedia.org/wiki/Tax_bracket

I've been saying over and over on this thread that Buffet pays a lower percentage--not a lower rate. How would you recommend deductions be changed for people like Buffet?

Then you might want to stop using the term 'tax bracket'. I don't know all the deductions he's claiming, presumably a substantial amount is for charity, and in my ignorance, all I can recommend is that if any of his deductions are merely tax loopholes, those can be closed.

That's not my argument against it. Progressive taxation is a contentious issue--I'm not arguing for that in this thread. What I'm arguing against is someone making millions or tens of millions a year and paying 15-18% tax, while someone making hundreds of thousands can pay 30% or more tax. Yes, I don't like it, and I'm guessing a majority of Americans don't think much wealthier people should pay a much smaller percentage in taxes (though I do realize, especially after reading this thread, that many folks have no problem with it).

Mister Agenda, in your view why should someone earning a couple hundred thousand a year pay a higher percentage of taxes than someone making millions (someone like Buffet whose earnings are from capital gains)?

If it benefits the economy in a severe recession more than not doing so, it should be done. Special cases could be: If the person suffered significant capital losses that offset much of their income, or they gave so much to charity that it significantly reduced their taxes. Are you looking for some kind of moral justification that applies in all circumstances?

 

[jimtron]

Buffet hasn't claimsed to be in a lower tax bracket. He has claimed to be paying a lower rate. These are not the same claim.

OK, forget about tax bracket. From the horse's mouth:

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.

If it benefits the economy in a severe recession more than not doing so, it should be done. Special cases could be: If the person suffered significant capital losses that offset much of their income, or they gave so much to charity that it significantly reduced their taxes. Are you looking for some kind of moral justification that applies in all circumstances?

So should taxation only be decided on how it benefits the economy? I'm not looking for moral justification exactly, just trying to understand the rationale of a tax policy that results (not always, but in the case of people like Buffet) in what I quoted above (a much wealthier person paying close to half the percentage of someone with much lower income).

It seems to me that those who argue for a flat tax don't think it's fair to tax the rich more, so they think everyone should pay the same percentage (correct me if I've got that argument wrong). I understand the logic of a flat tax, and the logic of a progressive tax, but I don't understand the logic of taxing the very wealthy (in some cases) much less (in percentage) than someone making much less income.

 

[jimtron]

Buffet hasn't claimsed to be in a lower tax bracket. He has claimed to be paying a lower rate. These are not the same claim.

http://en.wikipedia.org/wiki/Tax_bracket

From the Wikipedia article you linked to:

Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

What's the difference lower rate and lower tax bracket, regarding Buffet's tax liability?

 

[TubbaBlubba]

From the Wikipedia article you linked to:


What's the difference lower rate and lower tax bracket, regarding Buffet's tax liability?

Lower tax bracket would be on a certain sort of income, e.g. regular salary. Someone who earned 10,000 a year would be in a lower bracket than someone who earned 30,000. But someone like Buffet who make their money from capital gains would not be in any tax bracket at all, except relative to other people who make their money from capital gains.

 

[jimtron]

Lower tax bracket would be on a certain sort of income, e.g. regular salary. Someone who earned 10,000 a year would be in a lower bracket than someone who earned 30,000. But someone like Buffet who make their money from capital gains would not be in any tax bracket at all, except relative to other people who make their money from capital gains.

OK, thanks for the clarification. I think my point still stands though, regardless if I misused the word bracket.

 

[Ziggurat]

Buffet isn't in a lower tax bracket than his secretary (who I imagine makes at least six figures). Her/his income tax rate for his/her income from labor isn't lower than the rate for his income from labor. Her/his capital gains tax rate isn't lower than his capital gains rate. Buffet's rates aren't lower, what he effectively pays is lower as a percentage. To raise the percentage he actually pays it is not necessary to raise his tax bracket (equal or higher than his secretary's), just lower what he is allowed to deduct.

Buffet doesn't pay capital gains tax, because he never sells stock he bought. What he pays is qualified dividends tax, and that is taxed at a lower marginal rate than his secretary.

But there's a reason for that. Dividends are paid out of a company's profits. And those profits are already taxed. So taxing the dividends is really the second time that money has been taxed. In contrast, the salary for his secretary is paid before profits, as a business expense, and so the business is NOT taxed on that money before they pay the secretary.

So in terms of what it costs the business to give Buffet $1 in dividends, after his taxes, versus giving the secretary $1 in salary, after her taxes, it costs more to pay Buffet. The true tax rate on money paid to Buffet is higher, it's just that he isn't personally paying all of it.

Someone making millions should be in a lower tax bracket if putting them in a lower tax bracket would bring us out of recession. That hasn't been demonstrated to be a viable solution (and I regard it as unlikely), but it shouldn't be beyond the pale to consider it because there is an inherent moral imperative that the tax rates of the wealthy must be higher than the tax rates of the upper-middle-class. I'm not saying the wealthy should be taxed at a lower rate. I'm saying that you not liking them being taxed at a lower rate isn't a logical argument against it; and therefore doesn't require a logical argument to refute it. I understand it outrages your sense of fairness, but it outrages my sense of 'do no harm' to be wedded to the idea no matter what the consequences.

I quite agree on this point. Which is why it was so disturbing to hear Obama talk about raising capital gains tax rates even if that lowered tax revenue, because of fairness. Taxes shouldn't be levied in order to achieve economic fairness. They should be levied to raise the required revenue. Fairness can play into how those taxes are distributed, but if lowering the rate ever increases revenue, then by god you had better lower the rates if you have any sense at all, and conversely if raising rates lowers revenue then don't raise rates. And it's important to point out that the question he asked was specifically about raising rates IF that lowered revenue. He could have answered that he would not raise rates in such a case, but he doesn't think that's what would happen in real life. But he didn't.

 

[Mister Agenda]

So should taxation only be decided on how it benefits the economy? I'm not looking for moral justification exactly, just trying to understand the rationale of a tax policy that results (not always, but in the case of people like Buffet) in what I quoted above (a much wealthier person paying close to half the percentage of someone with much lower income).

No. It should be decided based on the goals the tax code is being used to attempt to achieve. These goals are not necessarily limited to improving the economy, although maintaining a healthy economy or returning to a state of economical health should be a primary consideration.

It seems to me that those who argue for a flat tax don't think it's fair to tax the rich more, so they think everyone should pay the same percentage (correct me if I've got that argument wrong). I understand the logic of a flat tax, and the logic of a progressive tax, but I don't understand the logic of taxing the very wealthy (in some cases) much less (in percentage) than someone making much less income.

I think you've got the argument basically right. There is probably an element of opinion that the arrangement would be more economically and socially beneficial than the current arrangement. It is possible that the rich would pay a higher percentage of tax on average than they currently do under such an arrangement, which includes eliminating a variety of deductions.

My own opinion, for what it is worth, is the next time we have a sufficiently robust economy, we should enact spending reforms similar to those Canada instituted in the nineties. We should bear in mind that whether you're more impressed by Keynes or Hayek, both would agree on getting money spent by the government on stimulating the economy back into the government when the economy is strong, which we have been failing to do for sometime. In the meantime, the only stimulus idea that I've heard that I like is necessary infrastructure repair and construction, and the amount of that going on isn't very impressive. As far as tax measures go, we should be guided by what we want, as a nation, to happen; and by what we have greatest reason to believe will be effective in fulfilling those goals.

 

[jimtron]

Buffet doesn't pay capital gains tax, because he never sells stock he bought. What he pays is qualified dividends tax, and that is taxed at a lower marginal rate than his secretary.

The relevant point is that he's paying a lower tax rate than his secretary, whether it's capital gains or dividends tax.

So in terms of what it costs the business to give Buffet $1 in dividends, after his taxes, versus giving the secretary $1 in salary, after her taxes, it costs more to pay Buffet. The true tax rate on money paid to Buffet is higher, it's just that he isn't personally paying all of it.

Well I think most Americans don't think billionaires should pay a lower tax rate than working stiffs making much, much less money.

As far as tax measures go, we should be guided by what we want, as a nation, to happen; and by what we have greatest reason to believe will be effective in fulfilling those goals.

I'm pretty sure that most citizens of this nation aren't for billionaires paying a lower tax rate than hundredthousandaires.

From Politifact:

He's right that a billionaire whose income is mostly from investments is probably taxed at a lower rate than someone who has an ordinary job. Very little of this taxpayer's income is wage income, so payroll taxes don't take much of a bite. It seems likely that much of this hypothetical person's income would be taxed around the 15 percent rate. And, in fact, as Buffett says, statistics from the Internal Revenue Service show that the 400 wealthiest taxpayers pay tax rates of less than 20 percent.

 

[Mister Agenda]

I'm pretty sure that most citizens of this nation aren't for billionaires paying a lower tax rate than hundredthousandaires.

If most citizens of this nation value taxing billionaires at a higher rate than hundredthousandaires more than they value tax revenue or jobs, that's trivially simple to obtain. You only have to care about the most effective tax rates if you are more concerned with economic effects than you are about who pays how much.

 

[jimtron]

If most citizens of this nation value taxing billionaires at a higher rate than hundredthousandaires more than they value tax revenue or jobs, that's trivially simple to obtain. You only have to care about the most effective tax rates if you are more concerned with economic effects than you are about who pays how much.

I didn't say more than revenue and jobs. Taxation is obviously a very complicated, hot button issue. Of course revenue and jobs is extremely important to the economy. I think most Americans are concerned with both fairness (no one wants to be taxed unfairly, whether rich or poor or middle class) and the health of the economy.

My point is that I don't think most Americans are in favor of regressive taxation.

 

[Ziggurat]

Well I think most Americans don't think billionaires should pay a lower tax rate than working stiffs making much, much less money. I'm pretty sure that most citizens of this nation aren't for billionaires paying a lower tax rate than hundredthousandaires.

You missed the point: when corporate taxes are included (as they should be, since they directly affect what dividends can be paid), Buffet's dividends are taxed at a higher rate than his secretary. He can only claim to have a lower rate because he doesn't personally pay all the taxes that are levied on that money, but that money is still taxed more highly than his secretary's wages.

 

[Toke]

You missed the point: when corporate taxes are included (as they should be, since they directly affect what dividends can be paid), Buffet's dividends are taxed at a higher rate than his secretary. He can only claim to have a lower rate because he doesn't personally pay all the taxes that are levied on that money, but that money is still taxed more highly than his secretary's wages.

Interesting point.
There does seem to be some limits to how many times the same money can be taxed. I just checked Danish laws, the income tax on stock dividend is 28%, way below regular income tax.

It sounds fine in theory, in real life there are plenty of ways to avoid taxes providing you have enough money to juggle.

 

[respect]

I didn't say more than revenue and jobs. Taxation is obviously a very complicated, hot button issue. Of course revenue and jobs is extremely important to the economy. I think most Americans are concerned with both fairness (no one wants to be taxed unfairly, whether rich or poor or middle class) and the health of the economy.

My point is that I don't think most Americans are in favor of regressive taxation.

Well that is his point. You only seem to be concerned with your concept of what is fair but not at all with what the consequences of achieving your view of fairness would be. It seems you want capital gains taxes to be higher and/or income taxes to be lower so that people who earn large amounts of money on capital gains pay a higher personal rate than people who make less money earning a wage pay because it just isn't fair otherwise, dagnabbit. But have you even gave enough thought to the pros and cons to the economy if such changes were enacted?

Good or bad, a lot of tax policy is designed to encourage certain behaviors like capital investment, home ownership, going green etc. Quite frankly, whether or not lower capital gains taxes are fair is not important at all to whether or not it is beneficial to the economy. If you believe that higher tax rates would be superior you need to show why the pros would outweigh the cons, not just complain that it isn't fair.