All of the comments here attacking Warren Buffett's authenticity, suggesting that he should put his money where his mouth is and write the Treasury a big fat check, are missing the whole point.
Services provided by the government are public goods. It's blindingly obvious that a single person cannot pay for those public goods. Just Buffett's own contributions, no matter how much he donates, will not be enough to solve our budget issue. It's called shared sacrifice because it's meaningless unless everyone participates.
It's like the neighborhood park (i.e. medicare/social security): Everyone wants one, but nobody wants to pay for it. In steps the neighborhood's rich kid (Buffett), who suggests that all the rich kids pitch in to pay for the park. If that happened, everyone would be made better off, but one kid alone isn't enough.
This is a very canonical problem of public services provisioning and funding. It's completely naive to sit back and suggest Buffett tackle the issue himself, because we all know that's ridiculous.
Open your eyes. The problem is not Buffett's to solve. But he recognizes that there is a problem.
Apologies for the harsh tone, but it baffles me how members of Hacker News can think so naively. The attacks on Buffett are utterly unfair and unjustified. We should all have an open mind and try to understand the proposal.
I don't know, but I would assume so. I think most people try to pay the minimum tax they are required to, and I guess that includes Mr Buffet.
However, that's not the point. He's not saying "I want to personally pay more tax", he's saying "Why are people like me not being required to pay the same percentage tax as middle-income earners"?
OK, what about the many "breaks and loopholes." for the other tax brackets? I'm in the 25% bracket (Married filing jointly, $68,001 - $137,300) and I paid under 6% effective rate for each of the last few years.
Buffet is not talking about income tax. He's talking about capital gains taxes, since most wealthy people are making money from investments, not paychecks.
Wouldn't you if you had tons of money?, especially if all the other "rich kids" are doing the same?. If you expect people to always do the altruistic thing then be prepared for a life full of disappointment. The best you can do is try to shape peoples behavior.
Personally I would prefer a flat percentage rate of tax with an exception for very low incomes where it just isn't worth the governments time trying to collect it.
This would probably raise most peoples tax and lower rich peoples tax but I believe it is "fairer" for everybody to pay the same fixed proportion of their income. At the same time though I would simplify business taxes as well, get rid of loopholes, stop companies that do business in a country off shoring their profits. It is insane that some companies view their accounting departments as profit centers.
Flat tax economies boom, and they are progressive in the sense that there is no penalty for trying to earn more money.
> a flat percentage rate of tax with an exception for very low incomes
That's not a flat tax, then, is it? It's progressive with two bands, 0% and x%.
There is a real case for tax simplification, but the progressive nature of income tax is probably the simplest thing in the entire tax code! It's the classification of different kinds of income and capital gains, exemptions and penalties for particular uses of money/assets that makes it challenging and is the reason there is real money in tax avoidance. Don't throw out the baby with the bath water.
Finally, a progressive tax means higher earners pay a larger proportion of their income than lower earners. It's hard to gauge the validity of your argument when your assertions run contrary to the definitions of the words you use.
The reason I put fairer in quotes is because it is a term that can be argued over.
Yes two bands, with the focus on making it attractive for people to earn money and pay tax, ideally the 0% band would be just enough to clothe, feed yourself and pay rent in a bad neighbourhood.
Progressive is a word that seems to mean different things to the left and the right, I notice you didn't define it.
As I said a flat tax is economically progressive because it doesn't discourage people from trying to earn more money.
At the moment you have people buying houses they don't need or using complex financial instruments just to do something with their money because if they don't they will get taxed more. Investing this money for the sake of it is not always beneficial to the economy or society, I favour a persons right to choose what to do with their own money.
I am coming from this from a libertarian perspective, whether you earn 50k a year or 500k the government should not be taking a higher percentage from you than other people. Especially considering that with a percentage rate whilst the proportion is the same, the actual amount of tax high earners pay is greater (which is socially progressive enough for me, but perhaps not for you). I believe I am using the word proportion correctly here, but if not please feel free to let me know how I have got it wrong.
Here in the UK the top rate of tax is 50%. I doubt I will ever be taxed at that rate but the government taking half a persons income scares me a little, no wonder people try to move their money around so the taxman can't get at it.
'Progressive' as used in the same context as your original post is basically a placeholder for 'benefiting the groups I care about'. It's not a meaningful word to use, and you even know that. Contrast with 'progressive tax', which is well-defined.
I don't understand the line of thinking which effectively says "people don't want to earn £2 if they have to pay £1 in tax". Erm, you're still richer than you were if you didn't earn more. The only possible argument against this is if earning another £100k takes more amount of effort it took to earn your first £100k. But if you know anything about making money it doesn't work that way. With more capital comes greater opportunities. You can afford an accountant to manage your money, you have more investment options, and so forth; and you still have enough to spare for a comfortable lifestyle.
A flat tax implies that a dollar is worth just as much to Warren Buffett as it is to someone flipping burgers, which demonstrates a complete lack of perspective.
Put it this way: everyone's living expenses are, say, £12k. now if you're earning a median wage that leaves you £10k to invest how you like. If you're earning £50k you get to invest £38k. assuming the schemes offer the same rate of return, guess who is going to amass £50k first? Hint: it's not the guy who has to get a 5x return on his investment.
The higher rate income tax is an incentive to invest the money you receive back into the economy via business or charity, where it is taxed at a lower rate or even not at all, rather than spent on your own personal gain. Why should it scare you that the government would take that money? BTW, investment in financial instruments of dubious benefit is giving money to the financial system (this should really be obvious...) so it does contribute to the economy, but there are almost certainly better ways to do so.
The problem with the libertarian perspective is that it irrationally assumes the best of people when there is no incentive for them to do so. If a billionnaire can afford to fund all the services he requires that someone on the poverty line would depend on government for, why should the billionnaire give his money away? If you want a society you have an obligation to provide for one, if you believe it is unfair that someone with broader shoulders should carry more weight, then perhaps you should consider how fair it is that he has broader shoulders and others do not.
> The problem with the libertarian perspective is that it irrationally assumes the best of people when there is no incentive for them to do so.
I assume no such thing about people regardless of whether they are rich or poor.
I think crux of our disagreement is about the involvement of government in peoples lives. I heard a quote recently, "The more the government tries to do the less well it does everything", I might have mangled that slightly.
Your supposition is that we need the government to force us to be nice and act in a way that is beneficial to society, if so isn't that a losing proposition from the outset?. Who is the moral arbiter here?, I would really like to minimize the amount of situations where government passes judgement on its citizens.
What I am really against is mob rule, the state is a necessary evil, a large state is a larger evil.
I am convinced that while the last century's politics was dominated by left versus right, this century will be dominated by authoritarian versus libertarian. The world isn't black and white, in certain situations we can't avoid making those kind of judgements but where we can avoid it we should.
> I think crux of our disagreement is about the involvement of government in peoples lives.
The involvement of government in particular does not concern me.
My concern is the involvement of any powerful group.
If all you seek is a reduction of the state, you leave a void waiting to be filled by corporatocracy.
The argument of left vs. right, authoritarian vs. libertarianism is a red herring, what really matters is the distribution of power. Given that money is approximately power and that the government is more accountable to me than an individual, I have no qualms about the higher tax rate.
We are probably in agreement with regards to your last statement.
I think one of the major themes of politics to come will be the separation of business and state (much like how America pioneered the separation of church and state).
This will require a shift in society though, most voters see it as the governments job to manage the economy and help it grow. But corporate welfare is as damaging to business as social welfare is to individuals.
This is unfortunately a very gray area, at what point do tax breaks stop "encouraging" business versus at what point do businesses become dependent on them?. The inequality is what bothers me most, small businesses paying a higher percentage of tax than big businesses, the percentage should be the same.
I don't believe we can get there by regulation alone, citizens have to care as well, although I do concede that regulation may be necessary to a certain extent.
> if earning another £100k takes more amount of effort it took to earn your first £100k.
That's not the issue. The issue is that the 2nd 100k is worth less in terms of happiness than the first.
Various studies have shown that after around 80,000 peoples happiness is proportional to the amount of money they earn, and after that it levels out.
Thus if one didn't really care too much about that 2nd 100k, making it merely 50k might just be enough for the person to throw up their hands and say "its not worth it, I'll spend the weekends at home instead of at work".
>Progressive is a word that seems to mean different things to the left and the right, I notice you didn't define it.
"Progressive" has a very specific meaning when you're discussing tax structure, independent of its political meaning. Specifically, a progressive tax is one in which the effective rate you pay rises with income.
It's a word that has been at best deliberately overloaded, and at worst hijacked. Who would want to stand in the way of "progress"? It could equally well mean, the more you earn they more you get to keep.
No, it is a description of the tax code. It is not a judgement of the tax code. It is a 'progressive tax' or 'progressive tax rate'. It has nothing to do with 'progress' or the 'Progressive party'.
You clearly don't understand what the definition of 'progressive' tax is. It's 'progressive' in the sense that marginal tax rates increase as you make more money.
It is not 'progressive' as in 'progressive politics' or 'economic progress' or any other left or right politics.
Saying something is a 'pregressive tax' isn't a value judgement , it is just a description of the curve of the tax rate, i.e. the opposite of a regressive tax. As for 'discouraging people from trying to earn more money', that is a debate about rates but remember marginal tax rates never allow a situation where making a higher salary would leave you with less net income.
Of course it's relevant. At his level, he can pay however much tax he wants, anywhere in the world, and this will always be the case. What he's calling for is other people paying more tax.
You fundamentally miss his point. Even without finding a thousand loopholes to get out of his taxes, he will pay a lower percentage just based on HOW he makes his money.
1) The payroll tax is capped, so a guy making exactly the income it is capped at, and a guy making 100x that, pay exactly the same payroll tax. No accountant required and it is an enormous difference. For Warren, that is millions of dollars right there.
2) Money made from investments is taxed at a lower rate than salary, EVEN IF INVESTING IS YOUR JOB. I personally believe that money you have paid taxes on before should never have capital gains taxes on it - basically you are getting taxed twice. If I choose to take my money and invest it and then buy a car later I pay more tax than a guy who just takes his money and buys a car. So i'm not fan of capital gains taxes. But a guy who gets paid by investing and has no other income should be paying income taxes, not capital gains taxes. How you distinguish the two is definitely hard, but smarter people than me can figure out a way to make that happen.
I would also note that it is worthwhile to be wary of the "double tax" rhetoric. At best, it is an ideological point of dubious worth - i.e., that there is a moral injustice in taxing some money twice. How much moral injustice? Well, I don't know - how much worse is it really than the idea of taxation itself? If I'm okay with being taxed, I'm probably more concerned with how much I'm being taxed, how fair it is compared to other folks, etc., than I am with whether it's two smaller taxes vs. one larger one.
At worst, though, it's a shell game that distracts from what's really going on in the tax code. In everything I've seen, taxes occur on transactions, not on stored wealth. So it's pretty easy to point at any income and outflow and argue that the money itself is being taxed twice. One could argue that the sales tax is a double tax - I'm paying income tax when I earn my paycheck, and then sales tax on the same paycheck when I spend it on groceries.
Anyway - in your example, the non-investor pays taxes on, let's say, $50k of income, then buys a car with it. The investor pays taxes on, let's say, $40k of income, invests it shrewdly, then takes the final $50k out of the investment and buys a car. The non-investor pays income tax on his $50k; the investor pays income tax on $40k, then capital gains on the $10k he made on the market.
The government could have easily taxed the investor on the entire amount withdrawn. That would obviously be pretty dumb, though.
"He did the bookkeeping himself and prepared his own tax returns. With its numbers, accuracy, and the measuring of results, the recordkeeping aspect of the job pleased him."
[...]
"Warren was still handling all the money and doing all the clerical work himself: filing the tax returns,..."
[...]
"'Bill started trying to convince me to get a computer. I said, I don’t know what it’s going to do for me. I don’t care how my stock portfolio is doing every five minutes. And I can do my income taxes in my head.'"
Seems like indeed he is doing them himself (his personal tax bill; to do it for Berkshire, they surely have hired help)
He does not need to do anything unusual to avoid paying taxes because the law is setup to give him such a low rate. One of my aunts was once audited by the IRS who is not going to do anything creative to help people out. Net result, her rebate was close to 1 million. She had a fairly competent Accountant and good records but several minor rules helped her out.
Buffet's receptionists should get a good tax guy. With the availability of tax breaks for even middle class income ranges there is no reason his receptionists should be paying more.
The phrase was used by Dr. Garrett Hardin in his 1968 essay on global overpopulation, "The Tragedy of the Commons".
Oh, and the example Hardin explicitly cited as an example of mutual coercion? Taxes:
"Who enjoys taxes? We all grumble about them. But we accept compulsory taxes because we recognize that voluntary taxes would favor the conscienceless. We institute and (grumblingly) support taxes and other coercive devices to escape the horror of the commons."
I honestly don't understand your question. I don't mean that statement to be argumentative – I really don't understand.
Are you saying the top 1% should pay what I paid in taxes last year? I paid around $100k. I'm not sure why someone making millions to billions a year should only pay $100k. If you assert I should pay the same as high-income individuals, should someone making far less than I am also pay $100k?
To flip it around, if you assert someone making less than me should not pay the same dollar amount as me, then why should someone making many orders of magnitude more than me pay the same dollar amount?
Now then, if I assume you're asserting the mega-rich should pay the same percentage as me, then we both agree that Buffett should pay more. My tax rate was 23% while Buffett's was only 17%.
How ever you slice it, someone's going to have to pay more than someone else. Either the poor need to pay less since they can't afford the flat dollar rate that's established, or the rich need to pay more because the flat percentage rate means they owe more.
Thus, I don't understand your question – it seems logical that, given any taxation system, the rich should pay more. Am I missing something?
I was just trying to point out the fact that taxes is one of the few (if not only thing) that is almost always paid as a percentage of income.
This messes up how people see taxes and how the burden is distributed. And make people say things like Warren Buffent pays less taxes than I do.
You don't buy soldiers, schools, police officers and roads with percentage of incomes. You buy them with dollars, which is why I argue that we should measure the paid tax in dollars and realize that the rich already pay the largest share of it.
Since they don't actually use more government services (they properly use less, but that is another matter) I can't see the problem with reducing the amount paid by the highest income earners.
Although the rich do not necessarily use more of some services (i.e. food stamps), they benefit the most from government's main role: That of protecting property, ensuring safety/stability, and enforcing the law and contracts.
"It's blindingly obvious that a single person cannot pay for those public goods." ... "It's called shared sacrifice because it's meaningless unless everyone participates."
Huh? By this logic, taxes are "meaningless" unless everyone pays taxes. However, many poor and lower-income people do not pay income taxes. Does that render the income tax "meaningless"?
Also, the claim that it's "like the neighborhood park... [e]veryone wants one, but no one wants to pay for it" is absurd. We see many examples of charitable contributions made by the rich and the middle class which are used to purchase public goods such as museums, nature preserves and the like.
When push comes to shove, what Buffet really wants -- and what you are advocating when you say that no matter how much money he donates, it "will not be enough to solve our budget issues" -- is an increase in the size of government fueled by higher taxes, rather than a diminution of its scope by reducing the funds made available to it.
A bigger government benefits crony capitalists like Buffet, because they have sufficient power and influence to ensure that the goodies that can be redistributed by the Leviathan are steered their way. I wish Buffet would be honest enough to say that, rather than bloviating about how terrible it is that he doesn't pay enough taxes when he is unwilling to take the obvious direct action necessary to rectify that unfortunate situation.
You have so completely missed the point I'm not sure it's worth arguing with you, but imagine for a moment that the additional revenue from closing loopholes on the rich was used to lower payroll taxes on the average working man, lowering the cost of employment...
> Also, the claim that it's "like the neighborhood park... [e]veryone
> wants one, but no one wants to pay for it" is absurd. We see many
> examples of charitable contributions made by the rich and the middle
> class which are used to purchase public goods such as museums, nature
> preserves and the like.
We also see many cases of governments which have much higher tax rates than ours and provide fantastic public services.
> When push comes to shove, what Buffet really wants -- and what you are
> advocating when you say that no matter how much money he donates, it
> "will not be enough to solve our budget issues" -- is an increase in the
> size of government fueled by higher taxes, rather than a diminution of
> its scope by reducing the funds made available to it.
Being blunt: How do you know what Buffett really wants, or what orijing is really advocating? You've just described how you perceive Buffett's motives and orijing's assertions.
And why present this as a "lower taxes vs. smaller government" issue? That seems incredibly disingenuous. What is truly being advocated by many is a combination of both. What's the best way to solve a debt issue? Increase income while also decreasing spending. Why cripple the process by ignoring half the solution?
> A bigger government benefits crony capitalists like Buffet, because they
> have sufficient power and influence to ensure that the goodies that can
> be redistributed by the Leviathan are steered their way. I wish Buffet
> would be honest enough to say that, rather than bloviating about how
> terrible it is that he doesn't pay enough taxes when he is unwilling to
> take the obvious direct action necessary to rectify that unfortunate
> situation.
What evidence do you have of Buffett benefiting from government programs, or having taken advantage of cronyism? Honest question – he very well may have significantly increased his wealth from connections with other "crony capitalists". I have no evidence either way.
That said, do we need to look at past examples of when aggressive government spending has helped individuals or small companies? Once again, this doesn't need to be a black and white world – as the spender of last resort, the government can provide liquidity and resources to individuals, small companies, and large companies when no one else is willing to take the risk. Yes, some people may profit immensely as a result. Does that mean those programs were wrong? And a bigger government doesn't have to only benefit "crony capitalists"...
I don't understand why a holistic view is so rarely considered in these discussions. Rather than making this an "right vs. wrong", "rich vs. poor", "liberal vs. conservative", "communist vs. capitalist" argument, let's make it a discussion to find the best solution to our problems. Only then will we actually solve the problems our country faces.
While strictly true, this statement ignores all the other taxes that people pay. Rather than rehashing the entire conversation, I'll simply point you towards the thread where this was previously addressed:
http://news.ycombinator.com/item?id=2885574
Services provided by the government are public goods. It's blindingly obvious that a single person cannot pay for those public goods. Just Buffett's own contributions, no matter how much he donates, will not be enough to solve our budget issue. It's called shared sacrifice because it's meaningless unless everyone participates.
It's like the neighborhood park (i.e. medicare/social security): Everyone wants one, but nobody wants to pay for it. In steps the neighborhood's rich kid (Buffett), who suggests that all the rich kids pitch in to pay for the park. If that happened, everyone would be made better off, but one kid alone isn't enough.
This is a very canonical problem of public services provisioning and funding. It's completely naive to sit back and suggest Buffett tackle the issue himself, because we all know that's ridiculous.
Open your eyes. The problem is not Buffett's to solve. But he recognizes that there is a problem.
Apologies for the harsh tone, but it baffles me how members of Hacker News can think so naively. The attacks on Buffett are utterly unfair and unjustified. We should all have an open mind and try to understand the proposal.