Buffett's latest Op-Ed in the NYT on taxes

[LC]

Regulated utilities to provide power to the variety of BRKs businesses. Airspace for Netjets. Trade regulations and customs examinations for import/export. There are a host of other services provided by the government which some citizens are  use to benefit them (on an absolute basis) much more than others.

 

Are these aspects difficult to quantify? Yes, absolutely. Which is why income is used as a proxy for utility. Is it perfect? No but it is more accurate and fairer than any "flat-tax" systems.

 

Frankly, a "per-capita fee" sounds nice in theory until you're making $40,000/year and are now living at or below the poverty line. In practice it is oppressive on lower income classes, which is why a progressive system was instituted in the first place.

 

I agree that transportation, given large disparities in citizens' utilization, should be supported by usage-based fees, determined by a free market, rather than uniform contributions.  I do not consider transportation to be a public good. 

http://marketurbanism.com/2011/02/22/urbanism-legend-public-good/

I would suggest if you can quantify any government service that is used by Warren Buffett disproportionately more than his neighbors, then that is an indication that those services should be provided by a private entity rather than government, and supported by user fees, rather than coerced contributions.  But even if you do identify a service that you believe must be provided by government, I don't understand slipping income into the equation as some sort of proxy for usage.

I don't believe it is the proper role of government to attempt to correct for the "ovarian lottery" or enforce fairness. 

I would suggest that a per capita fee is not regressive or progressive, because it does not vary based on income.  It is simply a fee, just like the price of any other good or service.  A per capita fee is "equitable" in that each person contributes equally.

[rranjan]

I don't have any opinion about tax rates but I have strong opinion about everyone paying similar rates. Arguing that taxing rich does not solve this problem because it is only 10% of deficit is very weird logic. Covering 10% or even 1% should not be a point of discussion. Why even for a minute ultra rich needs favorable treatment as compared to working class. That should be fixed quickly. Argument about not fixing it till XYZ happens baffles me.  Do we want a two separate class in US?

 

This has been discussed previously in other posts about Buffett and tax rates.  The rich do not pay a lower rate on average than the middle class.  Buffett has to allocate both halves of payroll taxes to the individual, ignore untaxed medical benefits, ignore the return of those payroll taxes at retirement, ignore that dividends and capital gains are already taxed (or likely will be) at the corporate level, and include all deductions to lower the actual income of the middle class for his analysis to work.  It is sloppy IMO.   

 

No. Corporate tax is totally different thing. Bunch of people form a corporation and take huge risk. If it blows up then they don't become bankrupt and some time society as a whole pays the price of those blow ups. Essentially, corporate is a separate legal entity. If corporate pays tax then it can not be counted for individuals because corporations are paying tax for some privilege and that privilege does not come free.

 

End of the day how much money an individual makes?  That's what matters. That cash is taxable. Cash can come as result of physical labor or money pushing, it should not make any difference. There are different mechanisms for people to earn their money. Some earn it by working in coal mines and some earn it by pushing money. End result is they earned XYZ money and both should pay similar tax rates. Person making money by pushing money does not do it in vacuum. Support system created by society is used by money pushers to make money. Corporate tax is price for that support system.

 

Dividend and capital gains are income for an individual. Before this income is generated , bunch of things happened in background. You can not start counting those things and claim that individual has paid some tax.

[Tim Eriksen]

I agree that transportation, given large disparities in citizens' utilization, should be supported by usage-based fees, determined by a free market, rather than uniform contributions.  I do not consider transportation to be a public good. 

http://marketurbanism.com/2011/02/22/urbanism-legend-public-good/

I would suggest if you can quantify any government service that is used by Warren Buffett disproportionately more than his neighbors, then that is an indication that those services should be provided by a private entity rather than government, and supported by user fees, rather than coerced contributions.  But even if you do identify a service that you believe must be provided by government, I don't understand slipping income into the equation as some sort of proxy for usage.

I don't believe it is the proper role of government to attempt to correct for the "ovarian lottery" or enforce fairness. 

I would suggest that a per capita fee is not regressive or progressive, because it does not vary based on income.  It is simply a fee, just like the price of any other good or service.  A per capita fee is "equitable" in that each person contributes equally.

 

Transportation is largely funded by usage fees.  Excise taxes on fuel (gasoline and diesel) are a large component of state and federal highway funding.  Aviation fuel taxes fund the FAA and many airports.  Thus we already have a system in place that is primarily usage based and not subsidized by non-users.  While I believe the efficiency of private enterprises usually more than offsets the profit, it is not a big deal to me the way we currently fund most roads and air travel.

 

My preferred approach to taxes is a required balanced budget (not necessarily over a one year time frame, but less than seven years) funded via a flat tax (same rate for all).  Everyone has skin in the game.  Those who make more are benefiting more from government thus they pay more.  There are no disincentives.  And while this may upset some of you since it is religious based - it was also the system designed by God for Israel in the Old Testament.  Since I believe God is just, it answers the question of what approach is most fair. (As an aside, this is why I find it ironic when President Obama or Gov. Brown (CA) tries to use a religious basis for higher taxes they misquote a verse about stewardship (to whom much is given, much is required) and apply it to taxes, and ignore the system given by God to Moses.)                                                    Note: not looking for a religious debate, just giving some of my primary reasons.     

 

[RichardGibbons]

I don't believe it is the proper role of government to attempt to correct for the "ovarian lottery" or enforce fairness. 

 

That's a neat world.  Then, since I'm much bigger than you, I can beat you up and take your food.  Hmm, actually, now that I think of it, I may as well enslave you, too.  After all, it's not my fault if you lost the ovarian lottery by being smaller than me, or older than me, or having fewer friends.

 

Totally fair, everyone can have what they can take and hold on to.  What a great place to live!

[prevalou]

following his argumentation, France should be a paradise for investors!

 

I disagree - following his argument French investors residing in France are as likely to pursue investment gains as investors residing in the US despite the higher tax rates.

 

your assertion doesn't fit the facts: in France, french investors invest in annuities (because the tax rate is low) and in "Livret A" because it is tax free. They invest in  real estate because  the main residence capital gains are tax free. They hate the stock market where the tax rate on capital gains can be 60.5 % (finance law 2013): gains and losses are then asymetric.

[twacowfca]

this one is easy. he obviously thinks he will get more bang for his charitable buck by helping the Least fortunate among us. by and large they are not residents of the United States.

 

 

Realize that very few people were snared by the top  bracket in the 1950's and 60's.  It wasn't until the upper middle class began to reach that level that tax rates started to come down. 

 

The  Obama administration controlled both houses of congress with a fillibuster proof majority during the first half of his first term.  If soaking the rich were a priority, this could have been accomplished easily without meaningful opposition then.  Instead, the congress extended the Bush tax cuts and threw in two incredible goodies, the one year zero estate tax and the unlimited rollover of 401K's and IRA's to Roth accounts --- and then justified this by saying that they had no choice but to do this because the republicans wouldn't agree! 

 

Obama's base of support is the very well off, (although less so than before the last national election), the more educated, those employed by the government (this is now where most union support comes from) and those dependent on the government for handouts.  My prediction is that once all the Saul Alinski posturing runs its course and the Republicans are painted as the party of the rich, there will be very little change in the tax code.

 

Paradoxically, first and second generation immigrants, the overwhelming part of the democrats' base that cuts across socioeconomic lines and is more hard working than the average American, are not keen on progressive taxation because that is an impediment to getting ahead in the land of opportunity.  ???

[benchmark]

Paradoxically, first and second generation immigrants, the overwhelming part of the democrats' base that cuts across socioeconomic lines and is more hard working than the average American, are not keen on progressive taxation because that is an impediment to getting ahead in the land of opportunity.  ???

 

Interesting observation. Agreed on immigrants are more hard working than average american, but i think they tends to vote democrats because they are often the ones benefits from the social safe net, as most of them are low income.

[returnonmycapital]

I think Buffett is also making a statement with regard to management compensation practices today. Not long ago, CEO compensation was 20-30 times the average wage. Today it is closer to 200-300 times. Perhaps some of the minimum tax rates for the "management" bracket will correct for this outsized increase in compensation relative to the average wage.

 

Do not think that a strong and perhaps even growing middle class doesn't matter. Social unrest comes at times of wide disparity. And social unrest is the real danger.

[SouthernYankee]

If the amount of money the Treasury confiscated from their citizens for the year 2009 was able to balance the budget for a prior fiscal year (2004), is that proof that spending is the problem, as opposed to the rate of taxation? I do understand that entitlement spending will rise every year with an increased number of retirees, inflation, COLA, etc. Of course, those increases would not result in TRILLION$ deficits so soon.

 

[returnonmycapital]

Healthcare spending is 17% of GDP in the US. Just about every other 1st world country with universal healthcare (most even have public/private) spend only as much as 10% of GDP. This is going to sound nuts but shouldn't the discussion in the US be about how to regulate the healthcare industry? If healthcare is as much a right as economically affordable electricity, education, transportation infrastructure, should it not be on the table?

 

The argument that the pharmaceutical industry will not innovate if drug prices are regulated is likely not fair. This is akin to the argument that "I will not try if my taxes rise." Europe's pharma industry does very well, even with most of its sales from outside the US.

 

Doctors' pay: in Canada, my GP (general practitioner) makes $450,000 per year. A specialist/surgeon does close to $1 million. And still we allocate only 10% of GDP to healthcare.

 

My argument is not a general comment about the irresponsibility of government and its spending. This group is no doubt leaps and bounds more responsible than the average American/Canadian. But the average, which is by definition the majority, chooses who is in charge and the majority will always accept a handout if the cost is a simple tick-mark on a ballot. Like Benjamin Franklin said: "Would you persuade, speak of interest not of reason."

[SouthernYankee]

The United States Constitution sets up the rules for how a budget is passed. Any bill that spends money must originate in the House, as far as I know. The House passed a budget, meaning those members are on record regarding how the budget should look. The majority of those members were just re-elected to office, and the same party controls that body.

 

The Senate, on the other hand, has not held a vote on that bill passed by the House. For some reason, the person (and his party) who controls that body will not let that bill come to the floor to be debated and/or voted on. Yet, both parties claim to be acting in accordance with the law, and both parties are equally blamed. The majority of those members were just re-elected to office, and the same party controls that body.

 

Perhaps Mr. Buffet should write an opinion piece dealing with the rules of the institution empowered to collect those taxes he wants them to collect. After he does that, the side that opposes him may be more receptive to his proposals.

[CassiusKing1]

One basic question: Why should my income determine my contribution to our government?

 

Since a single mother of two surviving on $25K a year in income, would find it far more difficult to come up with $5K in taxes, than a single person making $100K and having to come up with $20K in taxes if you went solely by a flat tax.  Coming up with that $1000 in rent would be pretty damn hard.  A regressive tax regime is far from equitable!  Cheers!

Just like in every aspect of life, you take from the responsible, self sustaining to support the unaccountable and irresponsible.