Warren Buffet asks for higher taxes.
August 15, 2011 4:55 AM Subscribe

Stop coddling the super-rich, an opinion piece by Warren Buffet.
posted by splatta (204 comments total) 49 users marked this as a favorite

Boil em instead!
posted by Ahab at 4:56 AM on August 15, 2011 [11 favorites]

Lightly poached, on a bed of spinach greens!
posted by stavrosthewonderchicken at 4:57 AM on August 15, 2011 [1 favorite]

In cooking, to coddle food is to heat it in water kept just below the boiling point.

No, keep on coddling them, until they're ready to serve.
posted by ennui.bz at 5:02 AM on August 15, 2011

So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall.
posted by indubitable at 5:04 AM on August 15, 2011

Good luck with that.
posted by tommasz at 5:06 AM on August 15, 2011 [1 favorite]

I'm always astounded that people I know who make middle-class salaries will argue loudly against taxing people making millions.
posted by octothorpe at 5:09 AM on August 15, 2011 [37 favorites]

This recipe is rated "easy"! Open a can of rich, put in a pot, add butter....
posted by Cocodrillo at 5:09 AM on August 15, 2011 [3 favorites]

I really have no idea how the myth that taxing the rich is a horrible, socialist idea has been allowed to grow into pledges for no new taxes at any cost.

Particularly since the highest tax rates on the rich have come from a Republican (Ike) and since American politics has marched steadily rightward since after Nixon. Now for shits and giggles, point out (correctly) to the next Bagger you run into that Obama sits firmly to the right of Nixon and watch them have a hissy fit.
posted by Dodecadermaldenticles at 5:09 AM on August 15, 2011 [7 favorites]

...there are many middle class conservatives who support making it easier on them even at their own expense. I just have no idea why.

A lot of times I'll see people say it's because they think they'll eventually be just as rich and want to enjoy the dream of being able to keep it all. I don't think that's much of it, though. I think it's indoctrination, something learned at the feet of their parents and peers who share their morality and politics. The politicians who espouse their morals also preach the evils of taxing the rich and that's good enough for them.
posted by empyrean at 5:10 AM on August 15, 2011 [6 favorites]

So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall.

Add ?ref=fb to the base link of any NYT article and the paywall drops - according to to an opinion piece in Wired yesterday.
posted by Ahab at 5:10 AM on August 15, 2011 [33 favorites]

So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall.

We all now pay our fair share for equal access.
posted by hal9k at 5:10 AM on August 15, 2011 [14 favorites]

This will never happen? You have a party that caters to the rich half from ideological reasons and half because that's where the money is. You have another party that might be willing to oppose the rich, except that then they have no funding, and there isn't a strong countervailing force that can organize and provide the cash needed to run a campaign these days (labor).

And the money is necessary. In light of no real public financing laws to speak of, continued hammering by the Supreme Court that "money equals speech", and the fact that the last twenty years has proven that you can fool most of the people all of the time, the rich remain, and will remain, overly powerful. Because politicians want to be elected, and they can only do so by getting the money of the rich, which means catering to their interests.

Not to mention that in general, the political class themselves are rich as well. You rather have to be to run in the first place.
posted by X-Himy at 5:14 AM on August 15, 2011 [11 favorites]

I really have no idea how the myth that taxing the rich is a horrible, socialist idea has been allowed to grow into pledges for no new taxes at any cost.

I've give you a hint: How many media outlets are owned by the poor?
posted by DU at 5:15 AM on August 15, 2011 [71 favorites]

It's plainly obvious that you won't get rid of these problems unless there is drastic, serious, full-of-teeth campaign finance reform. Good luck with that.

This is not just about the rich, it's about the people helping the rich improve their position. The bootlickers are treated very well, which only encourages more bootlicking.
posted by Benny Andajetz at 5:19 AM on August 15, 2011 [5 favorites]

We all now pay our fair share for equal access.

Ha! Good one! But seriously, thanks for the &ref=fb thing.
posted by indubitable at 5:21 AM on August 15, 2011 [5 favorites]

This is not the first time Mr. Buffett has offered this opinion (which I endorse heartily) and I hope it won't be the last. Still it falls on deaf ears because Americans in general would rather believe the economic drivel peddled by the likes of Paul Ryan, Eric Cantor, Rick Perry, and Grover Norquist rather than Krugman, Buffett (Warren, not Jimmy), and even George H. W. Bush.
posted by beelzbubba at 5:27 AM on August 15, 2011 [2 favorites]

americans prefer rage
posted by LogicalDash at 5:30 AM on August 15, 2011 [2 favorites]

You have another party that might be willing to oppose the rich, except that then they have no funding, and there isn't a strong countervailing force that can organize and provide the cash needed to run a campaign these days (labor).

Um ... Obama outspent McCain by like 10:1 in 2008.
posted by ZenMasterThis at 5:30 AM on August 15, 2011

Um ... Obama outspent McCain by like 10:1 in 2008.

I think the point was that the Democrats have no OTHER funding than the rich. Which is why all the handouts to the rich at the expense of the poor under the supposed OMGSOCIALIST.
posted by DU at 5:34 AM on August 15, 2011 [3 favorites]

But! Our nannies coddled us while our daddies were out raping the earth to hand us in a gift-wrapped basket. How are we supposed to succeed if we're forced to compete? Or worse, compete fairly?
posted by Eideteker at 5:35 AM on August 15, 2011

Q: How many super-rich people does it take to change a lighbulb.
A: Only one, but you have to hold the bulb while they spin the world around it.
posted by blue_beetle at 5:35 AM on August 15, 2011 [5 favorites]

Did anyone read this? Buffet's actually calling for a position even further to the right of Obama on raising taxes: raise them only on people making $1 million or more every year. Oh, and cut entitlements, as in:

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.
posted by indubitable at 5:38 AM on August 15, 2011 [2 favorites]

Poor People: Hey, Rich People. Will you share some of your money, please?
Rich People: No.
Poor People: Pleeeeeeeease?
Rich People: No.
Poor People: Pleeeeeeeeeeeease please please please?
Rich People: No.
Poor People: OK, well if you won't share, we'll get the government to make you. Hey, government, will you make the Rich People share?
Government: No.
Poor People: Please?!
Government: No.
Poor People: Fine! If you won't make them, we'll elect a candidate who will. Um. Uh... Wait, where did they all go? And why are you guys laughing so hard?
posted by overeducated_alligator at 5:42 AM on August 15, 2011 [23 favorites]

The rich have it easy in America and there are many middle class conservatives who support making it easier on them even at their own expense. I just have no idea why.

It just might possibly be that they support the idea of fairness in taxation, even if it doesn't benefit themselves personally.

And most seemingly support the idea of tax reform more so (from everything to a flat tax to geoism), as an increase of taxes doesn't necessarily get rid of instances like this.

Of course, you'd have to, you know, actually talk to them as a person to be privy to such information.
posted by quintessencesluglord at 5:48 AM on August 15, 2011 [1 favorite]

So, what are the cool kids using these days to circumvent nytimes registration?
Just hit esc before the page is finished loading.
posted by chillmost at 5:48 AM on August 15, 2011 [1 favorite]

So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall.

On Firefox, You can use AdBlock Plus to block the relevant javascript; the paywall is enforced in your browser rather than by their servers. I'm using chrome at work and I don't remember the relevant block rule(s) off the top of my head, but I think you want to block http://*nytimes.com/*gw.js|
posted by a snickering nuthatch at 5:50 AM on August 15, 2011 [5 favorites]

By not catering to the rich, we'd simply have a Buffet...
posted by samsara at 5:53 AM on August 15, 2011 [2 favorites]

It just might possibly be that they support the idea of fairness in taxation,

If everyone who is in or who enters a particular economic bracket is subject to the same tax law, the tax is fair. There's nothing "unfair" about progressive taxation. Everyone pays exactly the same rate (sans any sneaky bookkeeping tricks) on the same level of income. The law applies equally to any individual in an identical circumstance. That's as fair as it can ever be, and to claim otherwise is dishonest.

How is it "fair" that Bush gave the rich two tax cuts while giving the rest of us only one?
posted by saulgoodman at 5:55 AM on August 15, 2011 [17 favorites]

It just might possibly be that they support the idea of fairness in taxation..

A fair taxation is any one that leaves poor people homeless on the street begging for food.
posted by DU at 5:57 AM on August 15, 2011 [5 favorites]

The rich have it easy in America and there are many middle class conservatives who support making it easier on them even at their own expense. I just have no idea why.

Because they have enough experience to know the difference between the picture on the menu and what actually comes out of the kitchen. In practice, income taxes disproportionately affect the middle class. The ultra-rich, the people we all actually WANT to see taxed, don't have any trouble getting out of paying more than a pittance. You can shoot the money-seeking missiles at the upper-upper-upper-upper class all day long, and every time you will watch them suddenly change course and hit someone else.
posted by overeducated_alligator at 5:59 AM on August 15, 2011 [1 favorite]

Can we stop reaching for our fucking rhetorical revolvers around here? My guess is about 5% of Mefites have actually ever held a gun in their hands, let alone shot at something (or someone) as a hunter or in military service perhaps.

Let me drag your fainting couch over here.
posted by indubitable at 6:01 AM on August 15, 2011 [11 favorites]

I start to think about firearms training

Wait this again? Do you mean you want to shoot him?

Oh, you're right, I start to think about the possibilities of collective political action in a culture defined by financial rabbit chasing, passive media consumption, get rich quick schemes and metaphysical fantasy worlds.

Instead of a bullet, I sentence Buffet to a year on my mother's social security payments living in an efficiency apartment with a dairy queen on one side and the dog track on the other:

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

So, in return for reducing my putative social security income and medicare, Buffet advocates an "increase in rate." And the American public is teetering on the brink of hopelessness unless SuperCongress^TM guts SS and medicare now. Maybe a suicide vest is a better idea...
posted by ennui.bz at 6:04 AM on August 15, 2011 [3 favorites]

MeTa
posted by zarq at 6:05 AM on August 15, 2011 [1 favorite]

Given the numbers in the article, taxing Mr. Buffet at an average of 36% would increase his tax burden by $7,417,278, an amount I'm not yet seeing in the gift contributions for the year.

I won't apologize for Warren Buffett, but i believe that he has made arrangements to give everything away upon his death. He has said that he can leave more for philanthropy if he allows everything to compound instead of donating in dribs and drabs. He's not leaving anything for his kids, either, believing they have already benefited from their lucky position.
posted by Benny Andajetz at 6:06 AM on August 15, 2011 [21 favorites]

While the super-rich are pledging to give away their wealth to philanthropy, they can drop a few coins into the treasury to help pay down the debt. If they're that concerned about being taxed so lightly, then they can voluntarily give back to the government an amount they feel is just. Given the numbers in the article, taxing Mr. Buffet at an average of 36% would increase his tax burden by $7,417,278, an amount I'm not yet seeing in the gift contributions for the year.

I'm sure that'll solve everything. Forever and ever. And since Exxon doesn't pay any federal taxes, they can just not take the 4.5 billion dollars in subsidies oil companies get every year. Or pay an equitable sum to compensate the American tax payer. GE can use all of the money they get from not paying taxes to pay a fair amount for their use of the interstate highway system. Wow, this is so easy. We just have to depend on the charity of the wealthy. I don't know why we didn't think of that before. It's so obvious now.
posted by stavrogin at 6:15 AM on August 15, 2011 [9 favorites]

If everyone who is in or who enters a particular economic bracket is subject to the same tax law, the tax is fair.

But why stop only at tax law? Separate laws entirely for economic brackets.

Or I can see that you kinda missed most of the other points raised, such as those championed by Mr. Freemarket himself, Milton Friedman, concerning support for progressive taxation.

But I'm not here to argue the point. Merely pointing out that actually engaging conservatives in conversation might actually lead to some insight to their thought patterns, rather than the bizzaro world Free Republic scapegoating that commonly passes as considered judgement here.
posted by quintessencesluglord at 6:16 AM on August 15, 2011 [3 favorites]

Thanks, Mr. Buffett, but instead of raising your income taxes, we've decided to tax you on your wealth. Just once. 10% of your net worth should do it. Hello? Are you still there?

The lie here is that the super-rich give a shit about their income. They don't. At that level, being rich is about control of wealth. Not necessarily ownership or possession of it.

Tax the Forbes 400 just 10% of their net worth and you get over $120 billion. In one year alone.

And that is just 400 people. I'd like to see how far any politician gets pushing this idea.
posted by Pastabagel at 6:17 AM on August 15, 2011 [7 favorites]

Merely pointing out that actually engaging conservatives in conversation might actually lead to some insight to their thought patterns...

Is there really a shortage of knowledge of conservative opinion on tax policy? It seems to be almost the only thing this country talks about, followed closely by conservative opinion on science, foreign policy, gender issues, etc.
posted by DU at 6:33 AM on August 15, 2011 [5 favorites]

Taxing wealth is a bad idea. And we kind of already do that because income derived from wealth is taxable. Someone who is sitting on a big pile almost can't help but make money off of it. And that is taxed. (at least on paper. with tax shelters and whatnot, maybe not. fix those, problem solved.)

Further, that wealth has likely already been taxed when it was earned.

Anyway, I'm not usually a "tax is theft" kind of guy, but taxing wealth outright seems like that kind of situation. Skimming off a percentage of income is a democratic sort of a thing, it's like tipping the croupier after a winning night at the table. Taxing wealth is more like charging people to walk into the casino.

If your goal is to punish the wealthy, figure out a way to punish them for their actual misdeeds. The mere act of being wealthy is not something we should be punishing.
posted by gjc at 6:35 AM on August 15, 2011 [8 favorites]

indubitable wrote: So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall

Does it not just work™ when you follow a link from Mefi? That's how it works for me.

gjc, taxes are not punishment any more than your car payment is punishment, it's just the cost of civilization. Personally, I'm torn on the wealth tax concept. On the one hand, it helps prevent intergenerational domination by a few wealthy families who pay relatively little tax because their income is not wage income. On the other, why should we get a cut merely because it exists. (of course, the same could be said for property tax, and I'm a full-on supporter of that concept)
posted by wierdo at 6:41 AM on August 15, 2011

IF YOU want to see what is really going on with our banks, corporations, and very wealthy, then I suggest you read:

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson
This book will get you away from the simplistic notion that a bunch of wealthy people put their money in Cayman Islands or in Switzerland...no. Goes much much beyond that.
posted by Postroad at 6:42 AM on August 15, 2011 [4 favorites]

I really dislike the concept that taxes are a punishment. They are not a punishment, they are a way that a society as a collective pays for things that benefit all of us. Collecting a reasonable and fair share from the super wealthy is NOT a punishment.
posted by tingting at 6:43 AM on August 15, 2011 [58 favorites]

A lot of times I'll see people say it's because they think they'll eventually be just as rich and want to enjoy the dream of being able to keep it all. I don't think that's much of it, though. I think it's indoctrination, something learned at the feet of their parents and peers who share their morality and politics. The politicians who espouse their morals also preach the evils of taxing the rich and that's good enough for them.
posted by empyrean at 5:10 AM on August 15 [+] [!]

It isn't just that; I think that is a overly simplistic distillation of the issue. Some of that exists, I'm sure, but not to the degree this meme is blamed for it.

More likely, I think, is that your typical upper middle class person who supports these things does so because they derive some benefit as well. When it comes tax time, they see that their modest savings generate a modest return, and they only have to pay 15% on it. Might only amount to a few thousand bucks difference, but that few thousand bucks is real money. If you take that from the rich, it gets taken away from them too and they don't like that.
posted by gjc at 6:43 AM on August 15, 2011

Did anyone read this? Buffet's actually calling for a position even further to the right of Obama on raising taxes: raise them only on people making $1 million or more every year.

Well I'd hope that a Democratic president was to the left of a billionaire financier but it's a big deal that someone like Buffet is pushing the idea that he doesn't pay enough taxes. How many Fortune 500 CEOs would admit that in public?
posted by octothorpe at 6:46 AM on August 15, 2011 [6 favorites]

if they're that concerned about being taxed so lightly, then they can voluntarily give back to the government an amount they feel is just.

This is plain nonsense. It's not a matter of just not even caring about money and saying, "fuck it, I don't even want this stuff, take it", this is about caring enough about your country that you support collective action to fix its fiscal situation, even if that means you pay more tax.

Did anyone read this? Buffet's actually calling for a position even further to the right of Obama on raising taxes: raise them only on people making $1 million or more every year. Oh, and cut entitlements, as in:

Yes, but the point is that Buffet is a billionaire businessman and Obama is a president from a party that is ostensibly interested in at least some kind of an equitable society. In a logical world, this would form the start of a negotiating position, not the prescription for policy.
posted by atrazine at 6:47 AM on August 15, 2011 [4 favorites]

Further, that wealth has likely already been taxed when it was earned.

But it was likely taxed at an absurdly low capital gains tax rate. A one-time tax on wealth is a way to make up for years of abnormally low income and capital gains tax rates.

At the same time we should impose a more progressive capital gains tax scheme. Traditionally, capital gains taxes were lower than ordinary income taxes in order to reflect the fact that most investments were not a sure thing, so a lower tax rate encourages investment. But the modern reality is that the investments of the super-rich essentially always win (witness Goldman Sachs). So there's no reason not to tax the capital gains of the rich at a much higher rate than we do now.
posted by jedicus at 6:47 AM on August 15, 2011 [2 favorites]

It's not about punishing the wealthy, it's about restoring the kind of tax code we had back when the USA was doing pretty well. My father (born in 1923) and the people he hung around with, mostly pretty well off, never complained about taxes, and they paid more than half their income to the IRS every year.

And these would be people in the top 5% of the heap today. Even people in the bottom half of the top 1% are often just people with high-paying jobs. Neurosurgeons, VPs, etc. It's the top .1% that is living a lifestyle we only see in the movies: multiple homes, private jets, and never having to ask how much anything costs.

Call me a commie, but that's just wrong.
posted by kozad at 6:48 AM on August 15, 2011 [5 favorites]

(of course, the same could be said for property tax, and I'm a full-on supporter of that concept)

If you mean real estate tax, I agree. The members of a community should foot the bill for that community. It isn't so much that people are being taxed because they own something, but that land is a convenient way to account for their "shares" in the community.
posted by gjc at 6:50 AM on August 15, 2011 [2 favorites]

ut the modern reality is that the investments of the super-rich essentially always win (witness Goldman Sachs).

No. Go look at the data. the super rich are no better and no worse than everyone else when it comes to investment returns. It is just sample bias that leads to your conclusion.

(Actually its pretty funny you mentioned GS - given the returns for their asset management business are terrible. Their biggest hedge fund was one of the earliest victims of the GFC)

No to say I disagree about progressive capital gains taxes, or just higher capital gains taxes. Wealth taxes tend to lead to pretty nasty externalities that render them much less effective than you think.
posted by JPD at 6:52 AM on August 15, 2011 [1 favorite]

I really dislike the concept that taxes are a punishment. They are not a punishment, they are a way that a society as a collective pays for things that benefit all of us.

You might want to ask the Irish about the window and chimney tax.

Or smokers about the cigarette tax. Or the liquor tax. Or the Spanish-American War phone tax.
posted by quintessencesluglord at 6:55 AM on August 15, 2011 [2 favorites]

Thanks for the link, zarq
posted by This, of course, alludes to you at 6:57 AM on August 15, 2011

And yet, most cantons in Switzerland -- supposedly the kind of place rich people will flee to if Teh Soshulizum takes hold in America (assuming they renounce, evade the exit tax, and never set foot in one of the various expanded definitions America has of its own jurisdiction) -- tax wealth over a couple hundred thousand francs (whether in real property, cash, gold bars, art, the ears of vanquished foes, etc.) at a rate topping out around one percent a year.

The citizens of Zürich will vote next month on whether they want to halve its rate to be more competitive with smaller cantons in the center of the country, some of which actually have regressive tax rates once you get really, really rich; in a refreshing contrast to the insane following of the Gospel of George H.W. "Read My Lips" Bush, there is essentially zero chance of it passing. Last year's tax cut failed to pass as well. We may have a little issue with scary xenophobic pseudofascists, but at least we don't have Republicans.
posted by Vetinari at 6:57 AM on August 15, 2011 [4 favorites]

Buffett also believes corporations should pay more in taxes, for those who think this op ed piece is his solve everything idea. Berkshire-Hathaway, Buffett's company, is one of the top corporate tax payers in the US. Here's a quote from him in Berkshire's 1998 annual report:

Writing checks to the IRS that include strings of zeros does not bother (me). Overall, we feel extraordinarily lucky to have been dealt a hand in life that enables us to write large checks to the government.
posted by zippy at 7:00 AM on August 15, 2011 [12 favorites]

But it was likely taxed at an absurdly low capital gains tax rate. A one-time tax on wealth is a way to make up for years of abnormally low income and capital gains tax rates.

If your goal is to punish the wealthy, figure out a way to punish them for their actual misdeeds. The mere act of being wealthy is not something we should be punishing.
posted by gjc at 9:35 AM on August 15

My goal is not to punish anyone. My goal is simply to point out that when someone with $45 billion is telling you to tax them "over here", it's probably because they are worried you are going to tax them "over there." Which suggests that if you are in a raising-taxes kind of mood, maybe you should look "over there."

Further, that wealth has likely already been taxed when it was earned.

So what? People invoke this rule like it's an inviolable law of physics. The post-tax income I use to buy a stock which I sell and then have to pay capital gains tax on, is that not double taxation? My post tax income that I put in the bank and earn interest on is taxed as well.

The point of taxation is to alter behavior. Tax wealth and wealth won't get accumulatedas much. By the way, my example only mentioned taxing the wealth of individuals.

What if you decided instead to tax the cash hoarding of corporations instead?

The country is broke and there is no way to "grow" our way out of it. Revenue has to be obtained from somewhere, because if we cut entitlements now, there will and should be rioting. But no, we simply rehash the same bullshit about raising taxes on the top 3% or whatever because it's nice, predictable class warfare with a well-worn playbook and clearly defined lines in the media.

The old rules won't work because the old rules created the problem. So change the rules. Shake things up.

New rule: Tax corporations 35% on cash or short-term holdings in excess of 1 year's operating costs/expenses.

New rule: If a household holds more than $10 million in cash, stock, bond or other securities, tax those holdings at 10%.

New rule: Income below the median US income of the previous year is exempt from federal income and SS taxes.

New rule: Capital gains tax on derivatives is 50%.

Go.
posted by Pastabagel at 7:01 AM on August 15, 2011 [29 favorites]

Here's a useful summary of the potential consequences of not changing the path we're on: Study Shows That Austerity Leads to Violence And Instability.
posted by twsf at 7:02 AM on August 15, 2011 [4 favorites]

there are many middle class conservatives who support making it easier on them even at their own expense. I just have no idea why.

I'm with the War Nerd on this: 6. Most people are not rational, they are TRIBAL: "my gang yay, your gang boo!" It really is that simple. The rest is cosmetics.

Just remember, folks: Colonel Sanders is pro-chicken.
posted by flabdablet at 7:03 AM on August 15, 2011 [5 favorites]

Take into account that there is always a conflict between taxing the things we want to tax, and taxing the things that we can easily tax.

On the one hand, it's only fair that cap gains and dividend taxes should be higher than those on earned income because rich people benefit more from the former than the latter. On the other hand, labour is much less mobile than capital and you may find that you increase tax evasion.

Same thing with income tax vs sales tax / VAT, the latter is easier to collect and from a tax theoretical point of view it is easier to collect and harder to evade. However, consumption taxes are regressive which is why the government doesn't just rely on them for revenue.

In earlier periods, with less sophisticated financial systems, all taxes were on tangible transactions (sales taxes, customs taxes, excises) or property. This was because taxing income would have been impossible in a mostly cash economy.

In other words, pragmatism always plays a role in designing a tax structure.
posted by atrazine at 7:04 AM on August 15, 2011 [1 favorite]

but it seems counterproductive in the long term to work to destroy that wealth.

If you have two bank accounts, each with $1000 in it, explain how wealth is destroyed in the transfer of $100 from one account to another?
posted by empath at 7:06 AM on August 15, 2011 [2 favorites]

1) What Postroad said -- maybe this needs an OP???

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Also : CSPAN Talk

Sure you can find more.

If you start from the GOP's arguments about taxation, then you are being misdirected.

2) I like Buffet, and am surprised so many people here are hating the guy. He invests in the country. He buys bonds and the companies that are necessary for the government to exist. He's honest.

I feel like he represents the 'actual middle ground' in this country, no matter how shaky that is.

What I wished from this article was that not only would he and his fellow richie richs pledge money to help the country, but to more directly address Grover Norquist and his suicide cult.

He should openly and publicly create a group counter to the Norquists of the country. Do the political district moneybombing that norquist does. Focus on elections in the southern state districts where the core of Norquist;s people come out of.

Declare ideological warfare on Norquist and that cult and we can get somewhere...without election finance adjustments.
posted by lslelel at 7:07 AM on August 15, 2011 [5 favorites]

So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall.

The only thing you have to do is erase everything to the right of "html" in the URL and then reload the page. Get rid of the junk added to the URL, and the page loads just fine.
posted by emelenjr at 7:08 AM on August 15, 2011

My goal is simply to point out that when someone with $45 billion is telling you to tax them "over here", it's probably because they are worried you are going to tax them "over there." Which suggests that if you are in a raising-taxes kind of mood, maybe you should look "over there."

Right. Because the American political climate is such that Warren Buffet is pre-emptively suggesting this to forestall the otherwise imminent introduction of a wealth tax.
posted by atrazine at 7:08 AM on August 15, 2011 [10 favorites]

Does Warren Buffett write an additional check to the government each year to close the fairness gap? It sounds like his company does (metaphorically, in not taking advantage of available loopholes) but does he? Not snarking, just wondering.
posted by stupidsexyFlanders at 7:11 AM on August 15, 2011

The mere act of being wealthy is not something we should be punishing.

Vast stores of accumulated wealth in the hands of a few are not compatible with democracy. If you have a lot of money, without progressive taxation and capital gains, accumulating more money is rather a simple matter of doing nothing but collecting rents/interest. And then you can buy politicians and influence and distort democracy to your whim, until you're a king, having contributed nothing of value to society. Or your children are, or their children. (See the Rockefellers, Carnegies, etc).

If a democracy doesn't stop these stores of wealth from accumulating, eventually 'the people' will get fed up with it and simply take it through non democratic means, ie, looting.
posted by empath at 7:11 AM on August 15, 2011 [7 favorites]

We just have to depend on the charity of the wealthy. I don't know why we didn't think of that before. It's so obvious now.

I hear the weathly talk about the unfairness of the tax rates but given an outlet to pay their due, they don't. So my point wasn't so much relying on the charity of the wealthy as it was pointing out the emptiness of the words. They're not going to do anything regarding the debt until forced to by law, and when the wealthy have influence over the law, I don't see taxes changing.

this is about caring enough about your country that you support collective action to fix its fiscal situation, even if that means you pay more tax.

I agree.
posted by hoppytoad at 7:12 AM on August 15, 2011

The point of taxation is to alter behavior.

I thought the point of taxation was to raise money to pay for essential municipal services.
posted by overeducated_alligator at 7:14 AM on August 15, 2011 [24 favorites]

But the gains off that big pile of money keep getting taxed every year. It is sort of like an annuity for the Treasury. I can't even visualize the numbers at the moment, but it seems counterproductive in the long term to work to destroy that wealth.
posted by gjc at 10:01 AM on August 15

Secondly, and I can't believe you are making me argue the socialist position, but you aren't "destroying that wealth." The idea that you are destroying it implies that it matters that all that money is in the control of one person vs. being spread around or being used to eliminate a debt which burdens everyone equally. We are slightly reducing one person's wealthiness, yes, (I only said 10%, but I pulled that number out of thin air, I could have said %50% or 2%). But the money is not being destroyed.

Also, these are not analytical responses. They are ideological. Trickle down economics is wrong not because the theory has mathematical defect, but because the super-wealthy don't spend their money. The entire reason taxes were cut in the 80's was on the presumption that the money that wealthy individuals now kept would work it's way back into the system. I don't see how this has happened except at the level of the upper-middle class.

So that would suggest keeping taxes low for everybody up to about $1 million a year in income. And then beyond that, yes, it's a completely different set of tax rules to deal with a completely different set of behaviors. It has nothing to do with punishment or equity or justice or anything. It has to do with the $X trillions in debt that the country can never ever ever pay off ever AND with the possibility that the super-rich can exit the country at any time and take their wealth with them.

So the combination of those two things eliminates either the Reagan-extreme of cutting taxes on everybody, or the marxist extreme of taxing rich people at 90% (at which point the rich would simply leave.)
posted by Pastabagel at 7:15 AM on August 15, 2011

Writing checks to the IRS that include strings of zeros does not bother (me). Overall, we feel extraordinarily lucky to have been dealt a hand in life that enables us to write large checks to the government.

+1 Nobody likes paying taxes, but NOBODY is going to stop trying to make money just to spite the taxman. That is the myth of the supply-siders, it doesn't account for actual behavior, it only accounts for what the complainers say. "Christ, another check off to the feds for half my income. I might as well not even bother, amiright?" Despite that griping, you know goddamn well they aren't going to stop trying to make money.

Same thing with this fun new idea that we need to kiss "small-business"'s ass because they are the job creators. WTF? Entrepreneurs don't create jobs. Demand creates jobs. Supply-side or trickle down economics works only to the extent that you don't want to suck up so much of their profit that they can't invest in expanding the business to meet new demand.

Because the other myth is that taxes affect job growth in the slightest. Business only pays tax after expenses. They are only taxed on profit. If they add another employee, their tax bill goes down, because that employee's compensation is a new expense. If a company has sufficient demand that they need to add an employee, they are going to add that new employee.
posted by gjc at 7:15 AM on August 15, 2011 [32 favorites]

If you have two bank accounts, each with $1000 in it, explain how wealth is destroyed in the transfer of $100 from one account to another?

Not all wealth is cash. A substantial percentage of my wealth - of the wealth of most Americans - is in my house. The only way I can realize that is by selling it. Bill Gates was (is?) worth about 50 billion dollars. The only way he could pay 10% of that would be by selling MS stock. That would do many things to Microsoft's stock price - and the market in general - and none of them would be good.
posted by It's Never Lurgi at 7:16 AM on August 15, 2011 [3 favorites]

Right. Because the American political climate is such that Warren Buffet is pre-emptively suggesting this to forestall the otherwise imminent introduction of a wealth tax.
posted by atrazine at 10:08 AM on August 15

As long as all of the tax talk is about income tax, no one will remember that there is other money that can be taxed as well.
posted by Pastabagel at 7:17 AM on August 15, 2011 [1 favorite]

...it's a big deal that someone like Buffet is pushing the idea that he doesn't pay enough taxes.

There isn't anything stopping him from paying more. If he truly feels he doesn't give enough he should just pony up some extra to Department G of the Treasury. That department exists solely for the purposes of voluntarily paying down the national debt.

I think everyone that thinks the debt is too high should send some cash that way.

I did it.

If Buffett paid the same percentage of his income that I sent it would be real money.
posted by cjorgensen at 7:17 AM on August 15, 2011

Not all wealth is cash.

This is why you tax capital gains.
posted by empath at 7:21 AM on August 15, 2011 [2 favorites]

It's funny to me how people internalize this debate. I once had a discussion with a relative about my brokerage investments who actually asked me why would I invest my money since, if my investments grew, I would have to pay taxes on them. I told her that if my investments grew and I made lots of money I would cheerfully pay the taxes on my gains. She looked at me like I was from Mars.
posted by lordrunningclam at 7:24 AM on August 15, 2011 [2 favorites]

Taxing wealth is more like charging people to walk into the casino.

Actually, I'd argue it's more like charging the people who have a lot of chips just to STAY in the casino.
posted by kingbenny at 7:24 AM on August 15, 2011 [4 favorites]

I imagine Buffet's money will probably do more good with the Bill and Melinda Gates Foundation and the Buffet Foundation that it would have with the U.S. Government.
posted by banwa at 10:08 AM on August 15

Again, I don't understand this. Then maybe the US government should go broke? And when the 40 million Americans now on food stamps can't feed their children, how long do you think it will be before they Jean Valjean their way through some store windows to get it?

I don't think people appreciate how bad things are.
posted by Pastabagel at 7:26 AM on August 15, 2011 [8 favorites]

If Buffett paid the same percentage of his income that I sent it would be real money.

I suspect that he does. Probably more. He takes a salary from Berkshire, and Berkshire doesn't pay a dividend. The problem is that his income just isn't very high, and never really has been.

Attacking Warren Buffet is really just about the most counter-productive form of class warfare I could possibly think of btw. Of all the guys to target this just seems silly. He's giving all of his money away, he's got a history of supporting liberal causes like planned parenthood, and he's been very open about the advantages both him and his children received by being born into relative privilige (his dad was a congressman). Layer on to that the fact that he as generally made his money by being a buy and hold investor who often helped families sell their businesses in ways that were very employee friendly and I don't understand what they guy has done wrong other than being rich. If that's really what's going on here then you all really are playing into the fox news "class war" narrative.

This isn't to say he's some sort of ubermensch. I could go on for hours about how he has used his reputation to undertake deals that no one else in the world would even be offered, or how his insurance businesses have never really been as upstanding as he portrays them in public, but still. The guy got that reputation he now uses to his advantage through a lot of time and a lot of effort.
posted by JPD at 7:28 AM on August 15, 2011 [25 favorites]

how long do you think it will be before they Jean Valjean their way through some store windows to get it?

I'm using this.
posted by cashman at 7:29 AM on August 15, 2011 [2 favorites]

He should openly and publicly create a group counter to the Norquists of the country. Do the political district moneybombing that norquist does. Focus on elections in the southern state districts where the core of Norquist;s people come out of.

because there's one thing we know which is that there is no one more high-minded and disinterested in personal gain than a billionaire with a political movement.

The point of taxation is to alter behavior.

The point of taxation is to equalize "negative externalities." If you are doing something which has hidden costs to your community that you aren't paying, then the community needs to charge you for those costs. You could argue that the existence of great wealth, exacts a real cost on society. But, I'd rather get into taxing and regulating the kind of behaviors that lead to anomalous wealth.

In my view, billionaires are essentially a pathology of the system... but their existence just tells you that there is something wrong that needs to be fixed. Removing the wealth at the end doesn't change the system, and a wealth tax just creates a social pressure between a society that over-rewards certain activities and the tax system... which leads to corruption.
posted by ennui.bz at 7:30 AM on August 15, 2011 [5 favorites]

Pastabagel - the issue with wealth taxes are that they incentivize other sub-optimal behaviors - like increasing leverage, and in they also create a tremendous incentive for tax evasion/asset sheltering. You should take a look at the experience in Europe.

There are better ways to redistribute wealth that have fewer side effects.
posted by JPD at 10:18 AM on August 15M

We know from recent experience that even with 0% wealth tax in the US, people were increasingly leverage. Your point about tax evasion sheltering is a fine one, but this doesn't argue that such a tax would be a bad idea, but simply that it wouldn't work.

Again, I'm not trying to redistribute wealth so much as buy down the national debt to non-critical levels. And I don't see any way to do this that would generate the same amount of revenue in as short a period of time.
posted by Pastabagel at 7:31 AM on August 15, 2011

I really have no idea how the myth that taxing the rich is a horrible, socialist idea has been allowed to grow into pledges for no new taxes at any cost. The rich have it easy in America and there are many middle class conservatives who support making it easier on them even at their own expense. I just have no idea why.

The idea is that the money that would have otherwise been taxed will instead get spent or invested and that "the market" is better at figuring out worthwhile investments than the government. By lowering taxed in general and on the rich especially, growth in encouraged and everyone benefits.

I firmly believe in both demand and supply-side economics. The problem is that the market really is better at identifying investments and it has no problem sending that money where the growth is. Over the last couple of decades that has largely been everyplace except the U.S. I'm confident in asserting that the Bush tax cuts have created tons of jobs...in India and China.

If we want growth through low taxes, we'll need to wait until the rest of the world has tapped out it growth potential before we see any effect domestically and that could take a while.
posted by VTX at 7:32 AM on August 15, 2011

You know who I blame for this? Disney. That's right. That beloved goddamned mouse. And not just because of the ridiculous war on copyright that they've been fighting for the last half-century; I blame the story-telling in animated films aimed at kids. Because every protagonist of every Disney movie has had everything work out just fine in the end, the entire middle-class world has been instilled with a simplified version of the Just World Theory. That is why the guy with a GED who hangs drywall for 60 hours a week and can barely keep up with the mortgage will happily vote for financial policies that are self-evidently against his own best interests. It's why Facebook feeds are full of barely-coherent ravings against liberals and all that they support, written by people whose lives would be improved instantly by affordable health care. Everyone gets fed a steady stream of bullshit from before they are capable of conscious thought: if you are a good person, everything will turn out OK. Those people who are poor must not have been good people, or else they would not have been punished like they clearly have. Those folks on Wall Street, who made off with millions of dollars at the expense of our pensions? They must have done something karmically fit, and they were rewarded thusly.

And, because everyone is the hero of his own story, it must just be a matter of time before things come back around and my misery will end. Deus ex machina is simply waiting for the right time in the story. And when that day comes, by god, I want to make damn sure I've paved the way not to pay any taxes on my hard-earned windfall. Because Cinderella never had to pay no 35% when that slipper fit.
posted by Mayor West at 7:34 AM on August 15, 2011 [35 favorites]

Attacking Warren Buffet is really just about the most counter-productive form of class warfare I could possibly think of btw. Of all the guys to target this just seems silly. He's giving all of his money away, he's got a history of supporting liberal causes like planned parenthood, and he's been very open about the advantages both him and his children received by being born into relative privilige (his dad was a congressman). Layer on to that the fact that he as generally made his money by being a buy and hold investor who often helped families sell their businesses in ways that were very employee friendly and I don't understand what they guy has done wrong other than being rich.

Let me repeat from his oped:

... It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness... Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.

Of all the guys to target this just seems silly. He's giving all of his money away,
posted by JPD at 10:28 AM on August 15

Look, the tax debate is all about who has the money so that everyone who doesn't have it can get it. This is why Obama proposed raising taxes on the top 5% or 3% or whateever. Because the presumption is that they have money that they can part with.

If that is the objective, then go after the biggest piles of money. Buffett has a $45 billion pile of money. Gates has a $54 billion pile. No one is talking about the taking the whole pile. Just enough to back away from the abyss.

After that, you want to talk about cutting entitlement programs, re-engineering the tax code to properly incentivize people etc., I'm all ears. But right now, in the next 2-4 years, where the hell is are the multiple billions of dollars we are short going to come from? Is there some new bubble economy in the works that I don't know about? Cold fusion? Ssuperflu to wipe out 30% of the population? What's the plan, exactly?
posted by Pastabagel at 7:38 AM on August 15, 2011 [1 favorite]

Again, I'm not trying to redistribute wealth so much as buy down the national debt to non-critical levels. And I don't see any way to do this that would generate the same amount of revenue in as short a period of time.

The ONLY way to buy down the national debt quickly is to have a correspondingly large rate of economic growth.

Look, the tax debate is all about who has the money so that everyone who doesn't have it can get it.

No. The tax debate has NOTHING to do with the deficit and everything to do with returning the US government to a pristine state, to how it was before that class-traitor FDR mucked it up.
posted by ennui.bz at 7:41 AM on August 15, 2011 [2 favorites]

Our tax issues are really more of a symptom, rather than the actual disease.

The US is the only advanced democratic society where one half of the rulers (and governed) actually argue against shared sacrifice and a social safety net. Even the hardcore right in other countries accepts universal healthcare as a given. They've decided that there is a floor to what is acceptable in a workable society and what isn't.

We have no floor other than "fuck you, I got mine, you get yours".

There's no way, none, zero, zip, nada that this will end well unless serious systemic changes are made.
posted by Benny Andajetz at 7:42 AM on August 15, 2011 [17 favorites]

well leverage can always get worse. The rich in the US weren't the ones who were overleveraged anwyway.

Again, I'm not trying to redistribute wealth so much as buy down the national debt to non-critical levels. And I don't see any way to do this that would generate the same amount of revenue in as short a period of time.

See this is where we disagree. The problem isn't where debt levels are now, its where debt levels are going to go. You can fix the problem with the current structure we have, without touching entitlements and without reducing spending today. Its all about revenue. The US has the lowest tax rate of the big OECD countries, and yet despite the rhetoric of the right, hasn't grown at a fast enough rate relative to the higher tax countries to justify the issues caused by the low revenues.
posted by JPD at 7:47 AM on August 15, 2011 [1 favorite]

This shit makes me soooo angry.

I have never been so high that I would ever think, let alone say,"Let's cut taxes on the corporations and the rich, but immediately stop unemployment benefits (because we don't have the money, never mind that the people don't have jobs because the people and corporations we're cutting the taxes on won't fucking hire them)."

And yet, pot is illegal but supply-side horseshit is not.
posted by Benny Andajetz at 7:58 AM on August 15, 2011 [6 favorites]

It just might possibly be that they support the idea of fairness in taxation, even if it doesn't benefit themselves personally.

Sure, that's entirely possible. However, many white-collar and trade workers have been convinced that the rich are over-taxed, and that this over-taxation is preventing job creation, because you know, investors and CEOs and people like that USUALLY HIGHER WELDERS AND MACHINISTS AND SHIT FROM THEIR OWN FUCKING PERSONAL INCOME.

OK, sorry for the outburst. I will continue in a reasonable and respectful tone. Reading Buffett's piece, what really jumped out at me is the fact that he has the lowest overall federal tax burden (on a percentage basis) of anyone in his office. And a big part of that is the regressive payroll tax structure that wage slaves have to endure. Sure, your marginal rate may only be 15 or 25 percent, but you get slammed with Medicare and SS and you're suddenly in for a lot more. God help you if you rely on 1099 income.

If you're rich, though, you get to claim a huge portion of your income under, non-salary categories, like capital gains, which is set at a ludicrous 15%.

Even with this regressive structure, federal tax rates are quite low at this moment in our history. People have this sense, though, that taxes have gone up, even though they've been moving down. I have a theory on this - my theory is that healthcare payroll deductions are essentially a tax, albeit paid to a private entity, and that people are seeing less and less in their net pay, and so it looks for all the world like taxes are going up. Because healthcare insurance is a tax paid to private entities.

Add to that recent spikes in food and fuel prices against a background of wage stagnation, and people have a lot less disposable income. So it feels like we're being taxed too much, when the reality is that the invisible hand is reaching into our pockets more and more every year, extracting an ever higher toll for basic services. I can't wait til we privatize the highways, so that will run just like healthcare!
posted by Mister_A at 8:04 AM on August 15, 2011 [3 favorites]

USUALLY HIGHER WELDERS

EDIT: THat should say USUALLY HIRE WELDERS. Screedfail :(
posted by Mister_A at 8:06 AM on August 15, 2011

THE COUNTRY HAS BEEN HIJACKED BY ANTI-TAX ZEALOTS.

ARE YOU A BAD ENOUGH DUDE TO PAY YOUR FAIR SHARE?
posted by The Card Cheat at 8:12 AM on August 15, 2011 [15 favorites]

So why doesn't Mr. Buffet buy off some politicians and hire an army of lobbyists in order to get the marginal tax rate raised? Isn't that how it works now?
posted by sourwookie at 8:18 AM on August 15, 2011 [5 favorites]

Secondly, and I can't believe you are making me argue the socialist position, but you aren't "destroying that wealth." The idea that you are destroying it implies that it matters that all that money is in the control of one person vs. being spread around or being used to eliminate a debt which burdens everyone equally. We are slightly reducing one person's wealthiness, yes, (I only said 10%, but I pulled that number out of thin air, I could have said %50% or 2%). But the money is not being destroyed.

Someone else explained it well, but I'll take another stab at it. Money is not wealth. Wealth is sort of like stored work. Or perhaps "economic comfort". I work and earn money, and pay a carpenter to build a house for me. Now I own a house, and can use my work to buy other things from other people, and the carpenter can go build a house for the next person.

Another example might be someone that has a nest-egg of say $50,000. It is time for a new car, and instead of borrowing money for it, they can use their own savings to buy the car. Then, rather than make the car payment to someone else, they pay themselves back. Instead of making payments for 5 years to pay off the loan, it only takes 4 years because they don't need to pay interest. Now they can buy another car a year sooner, contributing to the economy.

Another example is the housing boom. Housing values kept going up, and instead of using this to build wealth, people used it to build income. When an economic downturn came, nobody had any wealth to help them through the bad times.

What is the common theme here? Having a society that holds wealth allows them to buy, build and consume (in aggregate) with less of the negative leverage that taking on debt causes. It diverts the flow of money away from the moneyed classes and toward the working classes. The less work a society has to do to maintain its standard of living, the more it can do improve its standard of living. Destroy the wealth of some people, spread it around, and it will eventually filter back up to them.

It is the broken windows fallacy. You don't create by destroying.

Anyway, history shows that in the long term, the wealthy have no problem destroying their own wealth.
posted by gjc at 8:20 AM on August 15, 2011 [4 favorites]

Nobody is talking about taxing home owners, we're talking about vast stores of accumulated familial wealth like the Hiltons and Rockefellers, etc..
posted by empath at 8:25 AM on August 15, 2011

Destroy the wealth of some people, spread it around, and it will eventually filter back up to them.

This is why you have progressive taxation, to slow the inevitable flow of wealth to people who already have a lot of it.
posted by empath at 8:27 AM on August 15, 2011

gjc, you still didn't show how a wealth tax destroys wealth. It makes certain people less wealthy, but it doesn't reduce the amount of wealth in society as a whole. And maybe the relatively wealthy folk I know are strange, but they much prefer when the bank puts up a large portion of the money for whatever project than putting it all up themselves. Something about cash flow.
posted by wierdo at 8:28 AM on August 15, 2011

There is, actually, a reason to oppose "progressive" taxation which has nothing to do with concepts of fairness or class. Simply put, if a significant percentage of government revenues come from the tiny fraction of the population with the most money, variations in that tiny fraction's annual income will have a significant effect on government revenues. And since these variations 1) happen, and 2) are by definition far larger in absolute terms in large incomes than in small ones,* a tax system which depends on a very small number of people making a very large amount of money will likely run into trouble pretty quickly.

People with high incomes tend to be relatively more income stable, but a 1% variation on a $1 million income is the same as a 10% variation on a $100,000 income and a 50% variation on a $20,000 income. A millionaire making a few points less than they did last year is pretty common, especially in an economic downturn, and while they'll still likely be quite comfortable, the effect in absolute terms is quite pronounced. Even more so at the very high end. An A-list movie star might make $40 million this year and $20 million next year, and while even a 50% drop keeps him in the top 1% of incomes, his tax liability just fell by 50% too.

This is just basic math combined with what we all know about government spending, i.e. it always grows to use up available revenues, and is much harder to cut than it is to expand.

This is significantly what happened in California. The state government saw that dot-com types were making oodles of money on capital gains, so they decided to tax it. Fair enough. But, like all governments do, they then adjusted their baseline expenditure commitments as if this capital gains income were a permanent, reliable source of income. Which it wasn't. And when capital gains income dried up, boom goes the fiscal crisis.

So, basically, one might resist overly progressive taxation, particularly when such is proposed as a means for closing a structural budget deficit, because it won't actually fix the problem, and is, if anything, likely to make the problem worse by exacerbating variability and risk in the federal revenue structure. Sure, it does, at times, represent more income for the government. But the government will necessarily come to depend on that income, and because the income of the very rich can vary quite drastically on an absolute basis, this is unwise.
posted by valkyryn at 8:50 AM on August 15, 2011 [3 favorites]

The "it filters through" argument only works with reasonable distribution. 400 (or 40,000) people can only support so many carpenters and builders and so on.
posted by Benny Andajetz at 8:50 AM on August 15, 2011 [1 favorite]

I don't care if the super-rich exist, as long as they don't get to spill oil in the arctic, poison us at home, make up drugs we don't need, patent all the world's food crops, use our money to make war for resources elsewhere in the world to increase their wealth, thereby making the people of the US culpable in the horrific crimes they perpetuate in these resource wars. When the super rich control the flow of information to perpetuate their grip on politics and the economy, when they function without taxation, or they are above the law, then I take issue with the whole thing. If they would just take it down a notch, and stick to tea, golf, whiskey, and their private perversions, I wouldn't mind them so much.

But what I dislike the most right now, is all the news coverage of the "royals" and their weddings, and their ugly little princesses flaunted for the captive breeding program, of these strange "royal" families. Royal jelly, ewww. Curmudgeon billionaires with a taste for fat blonde sopranos, ugh, that is a little personal for me. Put them all in some sort of Neverland plantation scenario, so at least I don't have to look at them.
posted by Oyéah at 8:51 AM on August 15, 2011 [4 favorites]

Separate laws entirely for economic brackets.

You say that as though it were some kind of hypothetical, rather than the de facto current situation.
posted by Kirth Gerson at 8:54 AM on August 15, 2011 [6 favorites]

gjc, you still didn't show how a wealth tax destroys wealth. It makes certain people less wealthy, but it doesn't reduce the amount of wealth in society as a whole.

Try this. Let's say I have a business that is worth $10 million. I get taxed on 10% of that (say), which is $1 million. I don't have $1 million. I don't have cash in that amount or bonds or gold or stock or anything else that is easily convertible. The only asset I have is the business and it's far from clear that I could liquidate 10% of it without damaging, perhaps destroying, the business.

Going back to my example of Bill Gates, if he had to sell 10% of his Microsoft shares then Microsoft shares would likely crash (meaning he'd have to sell more) and there is a good chance that it would drag tech down with it. That would end up destroying wealth.
posted by It's Never Lurgi at 9:00 AM on August 15, 2011

Earbucket in 2009: "Under Reagan's first term, that bracket paid 50%. Under Nixon, it was 70%. During the Great Depression, it was 80%, and it went up to 90% during World War II. Here's a handy chart to compare."
posted by cashman at 9:03 AM on August 15, 2011

60 Minutes: A look at the world's new corporate tax havens
posted by homunculus at 9:05 AM on August 15, 2011

Earbucket in 2009: "Under Reagan's first term, that bracket paid 50%. Under Nixon, it was 70%. During the Great Depression, it was 80%, and it went up to 90% during World War II. Here's a handy chart to compare."

Hey, that shows that the top tax rates were really low leading up to the (first) Great Depression! What a coincidence!
posted by Big_B at 9:07 AM on August 15, 2011 [6 favorites]

No matter how much I agree, isn't Buffett just preaching to the choir here? Whose opinion is getting swayed by this?

indubitable: "So, what are the cool kids using these days to circumvent nytimes registration? Bugmenot has blocked it due to the paywall."

So ironic. In a thread about a piece advocating that people essentially need to pay their fair share, you must interject to find out how to avoid paying for it, presenting it as something "cool" to do.
posted by mkultra at 9:12 AM on August 15, 2011

But when it comes down to it, he's arguing for chopping SS and medicare because hopelessness about the deficit is killing th economy? I'm supposed to ignore this because he cares? and is generally a good guy for a big money investor?

That's not how I read that section at all. He wrote: "Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here."

He's cleverly vague - he's not necessarily referring to social security or medicare (and I don't think he is). Maybe he's talking about the "promises" the USA has made about the ridiculous military and criminal corrections spending in fighting the war on terrorism, or drugs. Or this idea that every successful American needs to own their own McMansion and car. There's a lot of false promises being made.
posted by artificialard at 9:12 AM on August 15, 2011 [1 favorite]

It's Never Lurgi wrote: Going back to my example of Bill Gates, if he had to sell 10% of his Microsoft shares then Microsoft shares would likely crash (meaning he'd have to sell more) and there is a good chance that it would drag tech down with it. That would end up destroying wealth.

That one can think of a stupid way to implement a wealth tax does not mean a wealth tax is unworkable. By that standard, we can do essentially nothing.
posted by wierdo at 9:12 AM on August 15, 2011 [3 favorites]

Hey, that shows that the top tax rates were really low leading up to the (first) Great Depression! What a coincidence!

The other glaring coincidence was so many people were leveraged to their eyeballs before the Great Depression.
posted by Benny Andajetz at 9:12 AM on August 15, 2011

Vast stores of accumulated wealth in the hands of a few are not compatible with democracy. If you have a lot of money, without progressive taxation and capital gains, accumulating more money is rather a simple matter of doing nothing but collecting rents/interest. And then you can buy politicians and influence and distort democracy to your whim, until you're a king, having contributed nothing of value to society. Or your children are, or their children. (See the Rockefellers, Carnegies, etc).

That's what I was talking about when I said punish the behavior, not the wealth. Wealth gives people the means to buy influence, but not necessarily the will or the opportunity. Taking away people's savings because they might spend it on bad things is kind of like [all sorts of analogies].

gjc, you still didn't show how a wealth tax destroys wealth. It makes certain people less wealthy, but it doesn't reduce the amount of wealth in society as a whole. And maybe the relatively wealthy folk I know are strange, but they much prefer when the bank puts up a large portion of the money for whatever project than putting it all up themselves. Something about cash flow.
posted by wierdo at 8:28 AM on August 15 [+] [!]

Money is not wealth. Wealth is money that doesn't need to be spent.

Suppose I am a rich person, and this tax takes away $300,000,000 from me. $1 is given to every US citizen. $300m in wealth has been converted into $300m of income. As long as that money is filtering through the economy paying bills and taxes and movie tickets, it is not wealth. Only until people eventually pull that money out of the economy and save it does it become wealth again.

(Not to mention the loss of whatever that $300m was doing just sitting there. Maybe I had it in a savings account at the bank. I still had $300,000,000 of wealth, but the bank also had $300,000,000 minus the reserve percentage that it used to loan out to other people. So right there, taxing my wealth has ZERO effect on the number of dollars out in the economy. But my $300m got destroyed.)

Cash flow has nothing to do with wealth. Someone who NEEDS to borrow doesn't have [enough] wealth. A wealthy person is the one who has the choice: I can fund this from my savings, or I can borrow. Which do I prefer?
posted by gjc at 9:15 AM on August 15, 2011 [1 favorite]

gjc, the answer to your ultimate question in my experience is borrow. A really wealthy person will have as little cash as possible, because cash has a zero return. Better to borrow than liquidate something to pay for it, as long as the interest rate isn't unreasonable.

You have a strange definition of wealth. Wealth is everything you own, minus what you owe, not just illiquid assets, savings, or whatever it is you're trying to say constitutes wealth.
posted by wierdo at 9:30 AM on August 15, 2011

If the definition of inflation is "too much money chasing too few goods" then it seems to me that the income tax cuts enacted since the Reagan years have led to the perverse increase of the pay to sports stars, CEOs, etc. There's no sense in ever paying someone $30 million a year in the first place when the marginal tax rate for the last $20 million is 90%. If marginal income tax brackets reverted to more sensible levels they would just have to learn to get by with less.

The rise of lotteries and other types of gambling for tax revenue over the past 30 years are in essence newly enacted regressive taxes. Here in Rick Perry's economic miracle state of Texas (state income tax free!), I've seen the combined state and local sales tax go from 5.25% to 8.25% in about 30 years. Sales taxes are notoriously regressive.
posted by Daddy-O at 9:33 AM on August 15, 2011 [2 favorites]

I HAVE A SOLUTION.

But to hear what it is, it will cost you twenty billion dollars.
posted by TwelveTwo at 9:46 AM on August 15, 2011 [2 favorites]

Taxes are dues to pay for the working institutions that protect liberty. Our rights don't exist in a vacuum but require organizations that actively protect them. The wealthy have more to protect, so they appropriately should pay a proportional amount.

It is also suitable for the republic to tax at a level that discourages a consolidation of power that threatens it's own existence. It is impossible to have both a plutocracy and a republic. I am not intellectually committed to republicanism, personally, but unless I were one of the plutocrats, I'd probably prefer a republic.

And last, taxes may save some of the wealthy from themselves. It's tempting for some (not all) to become entitled, less compassionate, less aware, more selfish, and lazy with the trappings of wealth. There's no evidence that wealthy people become more generous as they gain wealth; nor is there any evidence that the wealthy are more creative or better entrepreneurs. If anything, extreme consciousness about money merely elevates the making of money above other goods, including the creating of real wickets that can be bought and sold. If anything, at some point, the concomitant inclination among some of the wealthy to hoard and count one's gold signifies a sociopathic mentality that the public has every right to regulate.

We should tax the super-wealthy (the .3% at the top), not merely for the health of the republic, but for their own sake. They would not feel the pain that much, and may be liberated from the arduous responsibility of worrying about how to spend it. The public can then recirculate the money. And then, of course, other people will become wealthier as demand increases.
posted by john wilkins at 9:55 AM on August 15, 2011 [1 favorite]

They would not feel the pain that much, and may be liberated from the arduous responsibility of worrying about how to spend it.

Actually, it is more of the opposite. Taxes would more likely give them the pressure to invest and put their money away into various forms so that it cannot be so easily taxed. If anything, a dearth of taxes relieves them of the responsibility of worrying about how to spend it. This is probably why the mansions of the super rich just aren't as spectacular as they used to be.
posted by TwelveTwo at 10:01 AM on August 15, 2011

Raise taxes so we can have giant gold monuments of Warren Buffet in every town he visited, each staffed with twenty guards dressed as regimental soldiers. There would be skate parks made out of the windshields of billion dollar air crafts. There would be mansions built beneath artificial lakes. Squares of Manhattan would be purchased, bulldozed, and replaced by rolling manicured lawns, and a single red farm house. Let's have some damn pyramids built in Texas, pyramids composed entirely of iPads. When the sun hits the solar panels which stretch on for miles around the pyramids base, the screens light up. Only one face of the pyramid displays an image. It is an image of a middle finger directed at Washington.

Things would be as they should be.
posted by TwelveTwo at 10:09 AM on August 15, 2011 [1 favorite]

I honestly don't care whether or not the super rich (or even the rich) plan on giving their money to charity or not, because there's a hell of a lot of things that governments do far, far better than private charities. In each instance you can point to specific cases where a charity can do a better job than the government, but *on the whole* the following are things that a well-funded, stable, elected government can do better at delivering to more people than private individuals or institutions, no matter how well-funded:

Education (yes, it can be awful, but it was a hell of a lot worse when it was not seen as something that the public should fund and government deliver)
Roads
Clean water
Clean air
Non-contaminated food
Public security (police) and justice (if you think it's bad now, look back at what it was when private landowners largely controlled its dispensation)
Healthcare

In each of these cases you can point to disasters on the parts of Western governments, but even with those disasters the situation is significantly better for most of the population than it was in the 19th century. And governments would be better at delivering these things if private industry and interests didn't keep gaming the political process to fuck them up as much as possible
posted by lesbiassparrow at 10:11 AM on August 15, 2011 [3 favorites]

No matter how much I agree, isn't Buffett just preaching to the choir here? Whose opinion is getting swayed by this?

Buffett has said essentially these same things in the past; I have found "Warren Buffett pays less tax percentagewise than his secretary" and "Warren Buffett is practically begging to have his taxes raised" as useful points in conversations with neighbors and such.

He's not going to sway Ted Nugent, but no one will.
posted by Flunkie at 10:13 AM on August 15, 2011

Instead of a bullet, I sentence Buffet to a year on my mother's social security payments living in an efficiency apartment with a dairy queen on one side and the dog track on the other

He owns Dairy Queen so he would eat for free. Also, either this isn't so bad or you need to take better care of your mother.
posted by michaelh at 10:14 AM on August 15, 2011 [2 favorites]

He's not going to sway Ted Nugent, but no one will.

I'm pretty sure an underage girl can.
posted by NoMich at 10:16 AM on August 15, 2011 [2 favorites]

This is probably why the mansions of the super rich just aren't as spectacular as they used to be.

While I take the point about incentive to spend/invest rather than hold cash, I have my doubts that's what's going on here. I think there's been a fundamental cultural shift in how architecture reads and is used to tell stories to people about who built/inhabits a structure and also in how status is signified among the wealthy. Note that a bank built today is far more likely to have generic cube-farm architecture accented with upscale fast-food decor as it is to look elaborately august.
posted by weston at 10:25 AM on August 15, 2011 [1 favorite]

I am a bit dismayed and confused by the posts directing anger/sarcasm/cynicism/skepticism back at Buffet. To what purpose and why. Here is someone advocating, very publicly, for the a step in tax reform that, I would guess, almost all posters support. He is certainly a more convincing voice than any of us, any collective, or any other person could muster. Though it is an extremely small gesture I intend to find a way to thank him and/or support for his position, leadership and similar efforts. It may never reach his ears/eyes and any financial or volunteer support I can offer may have negligible impact but it is more consistent with my objectives than dumping on him. Also, thanks to those who posted similar responses.
posted by rmhsinc at 10:35 AM on August 15, 2011 [2 favorites]

Warren Buffett gave away $1.93 billion in company shares to charity last year, and he got his rich friends to pony up a lot more. Last year, it was 3.3 billion. In previous years, it's been even more than that.

I'm a Buffett fan. I know where he stands and he's putting his money where his mouth is. Pastabagel, your little speech which basically boils down to, "What if we tax his wealth? *crickets*" is not only simplistic, it's completely ignoring what he's written in the very article that was linked here:

"But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate."

Buffett is agreeing with you! Not only does he say, "Hey, tax me more," he also makes the very good point that raising income taxes isn't going to do much when it comes to the super-rich unless you include dividends and capital gains, because they don't make salaries, they invest.

But you don't really care about that, because you want an argument, and Buffett makes a convenient target. This man has pledged to give away 99% of his income. He doesn't have to do that. He could leave much of it to his children. And what's interesting is that most of us here would like to make sure our kids are financially set, if we could handle it, but we hold the super-rich to a different standard because we're not them. We don't want them to keep their money at all; we talk about dynastic wealth and inheritances with scorn because those people didn't earn the money themselves. But who here would give away all their money on that principle and leave their kids with nothing?

Now is when I expect to hear crickets. Because I know from experience that this site is peopled by members who openly support piracy of written and recorded works, who look for ways around paywalls, who brag about torrenting and say things like, "Who even pays for music any more?"

So the only person in this thread that really has any credibility with me at all at this point is cjorgensen, who at least voluntarily paid more than he had to.

Warren Buffett does already, but that doesn't fit into your personal philosophy of fuck the rich, so by all means conveniently ignore that.
posted by misha at 10:45 AM on August 15, 2011 [16 favorites]

That one can think of a stupid way to implement a wealth tax does not mean a wealth tax is unworkable. By that standard, we can do essentially nothing.
posted by wierdo at 9:12 AM on August 15 [+] [!]

No, the idea is that by definition, a wealth tax requires the wealthy to shed a portion of their assets. Some people might have the ready cash, some might not.

There is no scenario where taxing wealth doesn't create perverse incentives. It de-incentivizes savings, which is not good.

You have a strange definition of wealth. Wealth is everything you own, minus what you owe, not just illiquid assets, savings, or whatever it is you're trying to say constitutes wealth.

That's pretty much what I'm saying, isn't it? My descriptions of wealth have been from a macro perspective, however, since that's the context. The question was how can wealth be destroyed by taxing it.

But net worth is not exactly the same as wealth. Net worth is a snapshot, wealth is a more temporal thing.

A and B both make $1000 a month. They both own nothing except the clothes on their backs. A has to pay $500 a month rent, while B gets to live with his girlfriend for free. So B gets to spend $1000 a month living large, while A can only spend $500. So B is wealthier than A, even though they have the same net worth.

I wish I could articulate what I am talking about better, but I can't. Maybe the spread between economic utility and market value? Sort of like how I own an old-ass, raggedy car. Its book value is only $1000, and that's even assuming I could find a sucker to pay $1000 for it. But I've got a working car, and that has some inrinsic value besides just its value on paper.

Another scenario. X and Y both own two houses each. Each lives in one. X uses the second house as a weekend getaway, Y rents his second house out. Now along comes the wealth tax, nobody is allowed to own extra houses any more, gotta sell them and pay Uncle Sam. X shrugs his shoulders and just goes camping on the weekends. Y, meanwhile, has lost a stream of income. The same tax cost each person the same net value, but not the same wealth.
posted by gjc at 10:58 AM on August 15, 2011

gjc: your last example is very wut even on your own terms.

Wouldn't Y easily keep his second house -- the rent should easily cover any realistic wealth tax -- leaving X the only one in something of a bind?
posted by hoople at 11:08 AM on August 15, 2011

There is no scenario where taxing wealth doesn't create perverse incentives. It de-incentivizes savings, which is not good.

Fair enough, then. I feel convinced by this thread that a wealth tax (even one time) would either be too under-inclusive (if it focused on liquid assets) or too inefficient (if it didn't). In that case, start with an extra-high top marginal capital gains rate to compensate for years of undertaxation and then bring it down slightly over a few years.

if a significant percentage of government revenues come from the tiny fraction of the population with the most money, variations in that tiny fraction's annual income will have a significant effect on government revenues

This is a legitimate concern as far as it goes, but one of the goals of progressive taxation is to reduce income inequality, leading to a large stable middle class that forms the foundation of the tax base. Ideally we would have, say, a 75-90% top marginal rate that only a tiny number of people would pay each year. Most tax revenue would instead come from a newly bolstered middle class that sees real income gains each year instead of seeing their paltry nominal wage increases almost entirely swallowed by inflation, healthcare, and education costs.

Also, your example of California shows why that's a bad strategy for a state, but the federal government can borrow during lean times to make up for declining tax revenues.
posted by jedicus at 11:43 AM on August 15, 2011 [1 favorite]

It's interesting to see what happened to tax rates during the Great Depression. Hoover raised the top tax bracket to over 60%. How about that? And FDR raised them further to 70+%. They were able to do this despite the strong grip by the super-rich on the levers of power at the time.

This makes me optimistic that we will see higher tax rates on the wealthy and not before too long.

They went up, and for a brief moment, revenue went up for a little as well, then tapered off for the rest of the depression. Why? Because those who could buried their wealth so that it didn't kick out income. (Which, incidentally, is what Buffett does with Berkshire Hathaway. It has never paid a dividend because doing so is tax inefficient for the shareholders. Raise the capital gains tax and be assured that the owners will be slower in selling them off. Gain to IRS - zero. ) Emotionally fulfilling, fiscally useless.

More recent dodges, for lack of a better word, involve getting little noticed provisions slipped into the mammoth taxcode that only you, your congressman, and your accountant know where to find. ("All trusts created on June 23 2005 will be exempt from" etc etc) Nasty, really, and should be fixed. Where there are rats' nests, there are rats.

So what to do? Simplify. Clarify. Throw out the current tax code, settle on a few progressive rates beginning in a middle class range, eliminate deductions (other than dependents, whether children or parents). Make the personal and corporate rates competitive with the rest of the world. Save billions a year on tax lawyers and accountants.

I get the impression, perhaps wrongly, that the idea is gaining a little traction even among the Eat The Rich crowd. You have to ask yourself if you want taxes to be simply a means of funding the government as fairly and painlessly as possible, or do you want it as a means of sticking it to your enemies (a rather Nixonian pov, btw)? Put another way, do you want 70% of nothing or 20% of something?

Final point- money goes where it is most comfortable. The more digital the world becomes, the easier it is for clever workers to pick up and move elsewhere, the more you're going to see them do so. Gnash you teeth all you like, but it's happening already and will continue to do so. People have choice now and America is not necessarily the first.
posted by IndigoJones at 12:04 PM on August 15, 2011 [3 favorites]

Back when there were higher tax rates on the top percent of earners, did we actually see the sort of savings crisis that gjc's hypothesis predicts?

if a significant percentage of government revenues come from the tiny fraction of the population with the most money, variations in that tiny fraction's annual income will have a significant effect on government revenues

"Instead of charging a sliding scale for your services, I ought to pay nothing at all. In the first case, I'll have to pay a variable amount, but in the latter case, I'll never pay anything at all!"
posted by Sticherbeast at 12:06 PM on August 15, 2011

I like IndigoJones' suggestions, because selling 'reforming the tax code' is something that could gain constituencies on both sides as opposed to just 'raising taxes'.
posted by chaz at 12:23 PM on August 15, 2011 [1 favorite]

Raising the tax rates can be tricky, but we aren't talking about confiscatory rates. Enough so that the wealthy don't feel much pain, but enough that money continues to circulate in the economy.

The idea that people move easily isn't exactly true. It costs money to move. It may indicate that the nature of work is changing. But I don't see a lot of Americans moving to Brazil or India or China for work.

Deincentivizing savings for the wealthy is exactly the point - it forces them to put more money into the market quickly rather than hoard it for future investments.
posted by john wilkins at 1:03 PM on August 15, 2011

chaz wrote: I like IndigoJones' suggestions, because selling 'reforming the tax code' is something that could gain constituencies on both sides as opposed to just 'raising taxes'

The problem is that in this political climate, with the nutters refusing to even consider revenue increases, any reform of the tax code will involve shifting more of the burden onto those at the lower end of the income scale and away from those at the higher end. You can be certain that's what the Tea Partyists who argue for tax "reform" have in mind.
posted by wierdo at 1:56 PM on August 15, 2011

How about a tiered national property tax?
$0-$1,000,000 - 0%
$1,000,001 - $10,000,000 - 5%
$10,000,001+ - 10%
posted by blue_beetle at 1:58 PM on August 15, 2011

"Vast stores of accumulated wealth in the hands of a few are not compatible with democracy."

I want to agree with this so bad, but I find myself wondering: what country doesn't have a class of people who own most of the wealth? When we talk about egalitarian nations, we're talking about places with relatively equal incomes, where most citizens consume roughly similar amounts of public and private goods, have roughly equal medical outcomes, etc. But even in those places (Scandianvian countries, for instance) the wealth is still concentrated in roughly the same proportions as in the US.

And if no country has ever avoided the problem of wealth, then are you claiming that no country has ever been a true democracy? I might be persuaded of that..tubut then we're literally talking about Utopias.
posted by anotherpanacea at 2:04 PM on August 15, 2011

Trickle down economics is wrong not because the theory has mathematical defect, but because the super-wealthy don't spend their money.

That is a ridiculous statement. Money that is never spent isn't worth anything, and so it doesn't matter. Trickle down economics hasn't worked for some people for a lot of reasons, but this isn't it.
posted by esprit de l'escalier at 2:21 PM on August 15, 2011

When we talk about egalitarian nations, we're talking about places with relatively equal incomes, where most citizens consume roughly similar amounts of public and private goods, have roughly equal medical outcomes, etc. But even in those places (Scandianvian countries, for instance) the wealth is still concentrated in roughly the same proportions as in the US.

I'll leave it for you to research (it's been covered on the blue), but our GINI coefficient - a measurement of wealth inequality is bad among advanced countries and getting worse.

You can't just say that wealth concentration in Scandinavia, for example, is similar to ours if Scandinavians have cradle-to-grave health care and education and job security and.....

Wealth disparity is much less of an issue if there is a floor under the masses instead of a hole.
posted by Benny Andajetz at 2:25 PM on August 15, 2011 [2 favorites]

The problem with wealth tax is that it alters behaviour so that you want to spend your money as soon as you earn it. Why would you want to live in that kind of world? What's wrong with saving some money for a rainy day? Is the only way to be prepared for a rainy day to be making a boatload of money right up until the rainy day?
posted by esprit de l'escalier at 2:26 PM on August 15, 2011

I've give you a hint: How many media outlets are owned by the poor?

From my cold dead hands.
posted by fullerine at 2:28 PM on August 15, 2011 [1 favorite]

That is a ridiculous statement. Money that is never spent isn't worth anything, and so it doesn't matter. Trickle down economics hasn't worked for some people for a lot of reasons, but this isn't it.

It's not ridiculous; his point was absolutely correct. Disposable income (especially for the majority) is the economic engine in capitalism. The middle class used to have some, now they have much less. Ergo, no demand and dismal economy.
posted by Benny Andajetz at 2:29 PM on August 15, 2011

Pastabagel, your little speech which basically boils down to, "What if we tax his wealth? *crickets*" is not only simplistic, it's completely ignoring what he's written in the very article that was linked here:...

Buffett is agreeing with you! Not only does he say, "Hey, tax me more," he also makes the very good point that raising income taxes isn't going to do much when it comes to the super-rich unless you include dividends and capital gains, because they don't make salaries, they invest.

No he isn't, because you aren't understanding what I am saying. Buffett is talking about top income earners. I am talking about the wealthiest people. They are not the same group. According to Buffett's own math, you could raise the the amount taxed on the top income earners another twenty-percent to 41.5%, and you'd get an additional $18B. Great. You tax the top 400 wealthiest people just 10% on their wealth, and you get $140B. This year.

I don't have to thank Buffett, because his suggestion to raise taxes slightly on the ultrawealthy is idiotically obvious. The reason he is writing this is because he wants to keep the tax debate focused on income. No tax on wealth, no change in inheritance tax, capital gains, etc. Just income. He doesn't want people to start talking about changing the taxes on all the other, bigger, piles of money. that people have.

This man has pledged to give away 99% of his income.

So what? Good for him. Because he's a good person we should follow his proposal on tax policy? So If I pledge to give away 99.1% of my "wealth", you'll listen to my advice? Is it that easy?
posted by Pastabagel at 2:32 PM on August 15, 2011

Actually he did allude to re-classifying capital gains as regular income.
posted by Mister_A at 2:34 PM on August 15, 2011 [1 favorite]

Warren Buffett does already, but that doesn't fit into your personal philosophy of fuck the rich, so by all means conveniently ignore that.
posted by misha at 1:45 PM on August 15

That isn't my personal philosophy. Just ask the endless parade of mefites who've called me a Rand acolyte, a right wing apologist, etc.

My personal philosophy is that over the past 5 years there has been substantial rioting in nearly every major country in Europe. We just had some in London. If you are delusional enough to think these are all very local, isolated incidents with no relationship to each other, that's your business. The way I see it is that the difference between now and full scale riots is a few hundred billion dollars in govt revenue. I would like to pull that together. Fast.

There are 44 million Americans on food stamps. Last year it was 40 million. 10 percent more people can't feed themselves this year than last year. That is a bad situation. They can't all be lazy welfare queens. Something is very wrong in the institutional structure of the economy and the political system, and a billionaire offering to pay a bit more isn't the solution, it's a fucking distraction.
posted by Pastabagel at 2:40 PM on August 15, 2011 [3 favorites]

Benny Andajetz: But even in those places (Scandianvian countries, for instance) the wealth is still concentrated in roughly the same proportions as in the US.

Depends on just how roughly you want to compare them...
Sweden has half the Gini Coefficient of the US:
http://www.visualeconomics.com/income-distribution-by-country/
posted by Hairy Lobster at 2:43 PM on August 15, 2011

I'm sorry Pastabagel, even though I am sure you're just trying to make a point, I think you are significantly oversimplifying things here.

New rule: Tax corporations 35% on cash or short-term holdings in excess of 1 year's operating costs/expenses.

Most startups have a runway longer than 12 months, and a lot of people probably wouldn't trust a company which only has a year - or less - of cash reserves. Say you are Google 10 years ago, and you are raising a round to grow your company. Now you have cash, and immediately a huge chunk of that goes away as tax? That's a lousy deal for the startup, the investors and the economy overall. So you'd probably kill exactly the kind of business (and investment) that can actually bring us growth in the long run. And then there are industries I would completely expect to have larger reserves simply to do business in the first place (cyclicals, pharma, energy, banking, insurance, etc.). I may not be a huge fan of a lot of those, but clearly they are needed for the operation of modern society. On the flip-side, if you only tax cash and short-term holdings, you are just pushing the capital into other investments, which is the opposite of what you want to achieve.

New rule: If a household holds more than $10 million in cash, stock, bond or other securities, tax those holdings at 10%.

What about options? Your 401K? Your IRA? Commodities? Real Estate? Art? Am I allowed to lend out money? Invest it in a company? How about moving it offshore?

New rule: Capital gains tax on derivatives is 50%.
Define "derivatives". Even if you could come up with a reasonable definition, capital would just move into another form of trade-able asset. As long as a group of people with significant wealth can agree on a form of asset that holds an equally agreed upon value between them, they will trade it, and it will escape your "special" tax. Worst case, the capital would simply flow to a more "tax-friendly environment" (i.e. offshore), while investments from the outside would dry up.
posted by CaffeineFree at 2:46 PM on August 15, 2011 [1 favorite]

Depends on just how roughly you want to compare them...
Sweden has half the Gini Coefficient of the US:
http://www.visualeconomics.com/income-distribution-by-country/

I agree. I was responding to his allegation they were roughly equal.
posted by Benny Andajetz at 2:46 PM on August 15, 2011

I get where you're coming from Pastabagel; however, I consider Buffett's modest proposal important because it is a rebuke of the Republican demonization of taxes, especially taxes levied on wealthy corporations and individuals. He also points out the ridiculousness of the assertion that increased taxes on profits will discourage investors and businesspeople from seeking profits.

Getting the Republican party to admit that revenue is as much a part of the problem as spending would be a huge win for common sense, and that is the value of Buffett's piece in my opinion.
posted by Mister_A at 2:49 PM on August 15, 2011 [4 favorites]

If the US's GINI is 45, and Sweden's is 23 the statement
But even in those places (Scandianvian countries, for instance) the wealth is still concentrated in roughly the same proportions as in the US.

Is still pretty much correct. Go look at how the math works. Even the wiki article tells you something of value - 77% of the weath in Sweden is held by the top 5%, now certainly that's better than the US, but it is by no means egalitarian.

The GINI coefficient is something that gets thrown aroud a ton around here. I'd hope that many of you would read up on its strengths and weaknesses as a tool.

Certainly in the US it is telling us society is getting less equal, and the veracity of that statement isn't really in question. Where it falls down is in using it as a metric to compare countries. Or as is often the case here implying a lot more meaning to the absolute values themselves then is really implied by the math.
posted by JPD at 2:58 PM on August 15, 2011

Dude threw his fucking wallet on the ground and said TAKE IT and walked away. Turns around, shouts, FUCKING TAKE IT, MORONS, and keeps walking. Half a block away, WHATS THE MATTER, YOU AFRAID OF SOMETHING? A whole block away, stops and looks back at the wallet just sitting there. Just sitting there. WHAT THE HELL!

Gets into his old beat up pick-up and drives away. Afternoon turns to dusk, turns to night.... wallet just sits there.

crickets....
posted by seanmpuckett at 3:00 PM on August 15, 2011

I thought the point of taxation was to raise money to pay for essential municipal services.

Here's a hint: they could tell the mint to print.
posted by BrotherCaine at 3:05 PM on August 15, 2011

Sweden has half the Gini Coefficient of the US.

Gini is for income, not wealth. The surprising thing is that egalitarian countries still have wide wealth disparities, and I was responding to empath's claim that wealth disparities are incompatible with democracy. I think this might be right, but notice, what's at stake is who owns what, not who consumes what.
posted by anotherpanacea at 3:14 PM on August 15, 2011 [1 favorite]

Certainly in the US it is telling us society is getting less equal, and the veracity of that statement isn't really in question. Where it falls down is in using it as a metric to compare countries. Or as is often the case here implying a lot more meaning to the absolute values themselves then is really implied by the math.

I think that's the point I was trying to make. Wealth disparity is just one factor; it becomes less important if there's a floor through which no citizen will fall regardless of circumstance.

Here in the US the rising GINI coefficient is doubly worrying, because the rising uberrich here have no problem using their money and power to actively dismantle any safety nets or sense of security for everybody else.
posted by Benny Andajetz at 3:16 PM on August 15, 2011

The way I see it is that the difference between now and full scale riots is a few hundred billion dollars in govt revenue. I would like to pull that together. Fast.

Great, and postpone them a few months until the systemic failures that haven't been addressed work their way back to the surface.

That's when everyone flush from "economic recovery" renews their inclination to look the other way.
posted by setanor at 3:21 PM on August 15, 2011

When the Forbes 400 own more wealth than 150 million other Americans combined something has gone off the rails.

As someone said earlier, it all starts with campaign finance reform.

In all honesty though, it's all over but the looting. And we descried the London riots.

Welcome to America.
posted by Max Power at 4:54 PM on August 15, 2011

You know who I blame for this? Disney. That's right. That beloved goddamned mouse. And not just because of the ridiculous war on copyright that they've been fighting for the last half-century; I blame the story-telling in animated films aimed at kids. Because every protagonist of every Disney movie has had everything work out just fine in the end, the entire middle-class world has been instilled with a simplified version of the Just World Theory. That is why the guy with a GED who hangs drywall for 60 hours a week and can barely keep up with the mortgage will happily vote for financial policies that are self-evidently against his own best interests. It's why Facebook feeds are full of barely-coherent ravings against liberals and all that they support, written by people whose lives would be improved instantly by affordable health care. Everyone gets fed a steady stream of bullshit from before they are capable of conscious thought: if you are a good person, everything will turn out OK. Those people who are poor must not have been good people, or else they would not have been punished like they clearly have. Those folks on Wall Street, who made off with millions of dollars at the expense of our pensions? They must have done something karmically fit, and they were rewarded thusly.

I like the cut of your jib, but I don't think you need to reach that far. If you're looking for a mythology to underpin that kind of magical thinking, you don't need to go any further than the Jesus thing to get it.
posted by stavrosthewonderchicken at 4:55 PM on August 15, 2011 [1 favorite]

Because things worked out just fine for Jesus in the end?

Dude was good and got nailed up for his trouble!

That story might mean many things to many people, but it surely isn't a Disney happy ending.
posted by flabdablet at 5:45 PM on August 15, 2011

Depends on if you're a believer or not (and which gospel you prefer, because in some he's less sanguine (pun intended) about the whole process than in others) -- if you believe he got resurrected and got to sit up on a cloud-throne at daddy's right hand, then sure, it's a happy ending. Getting tacked up was just that final, Bruce-Willis-y ultimate hardship before the music swells and the cleansing rain (or snow) starts to fall.
posted by stavrosthewonderchicken at 6:12 PM on August 15, 2011

esprit de l'escalier wrote: The problem with wealth tax is that it alters behaviour so that you want to spend your money as soon as you earn it. Why would you want to live in that kind of world? What's wrong with saving some money for a rainy day? Is the only way to be prepared for a rainy day to be making a boatload of money right up until the rainy day?

You don't think it's possible to, for example, exempt the first (one/five/ten/whatever) million in assets from a wealth tax?
posted by wierdo at 6:42 PM on August 15, 2011 [1 favorite]

This apparently wasn't what stavrosthewonderchicken was thinking of with that comment, but when I first read it, I assumed it was referring to things like the following portion of the Sermon on the Mount:

Therefore I say unto you, Take no thought for your life, what ye shall eat, or what ye shall drink; nor yet for your body, what ye shall put on. Is not the life more than meat, and the body than raiment?

Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they?

Which of you by taking thought can add one cubit unto his stature?

And why take ye thought for raiment? Consider the lilies of the field, how they grow; they toil not, neither do they spin:

And yet I say unto you, That even Solomon in all his glory was not arrayed like one of these.

Wherefore, if God so clothe the grass of the field, which to day is, and to morrow is cast into the oven, shall he not much more clothe you, O ye of little faith?

Therefore take no thought, saying, What shall we eat? or, What shall we drink? or, Wherewithal shall we be clothed?

(For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things.

But seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you.

Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof.

That's pretty much unadulterated "magical thinking" that "if you are a good person, everything will turn out OK", and it's straight from the lips of Jesus.
posted by Flunkie at 6:48 PM on August 15, 2011

But why stop only at tax law? Separate laws entirely for economic brackets.

Maybe you don't understand our tax system. For one thing, tt's based on the assumption that people in the US have social mobility. People are not born rich and do not necessarily stay that way.

For another, it's not that the people are in different brackets, it's the taxable income that's in different brackets. Everyone pays the same rate on any earned income that falls in the first bracket, whether they are rich or not. And everyone pays the same rate on any earned income that falls in the second bracket.

Maybe it's that whole facile cliche about "moving into another tax bracket" that's to blame for the confusion. People don't move into income brackets. They can occupy multiple brackets at the same time. There's nothing unfair about it, given the assumption that people in the US have social mobility. It only starts to look unfair when you assume the existence of permanent, generational economic classes and economic status by birth right.
posted by saulgoodman at 7:06 PM on August 15, 2011

But when it comes down to it, he's arguing for chopping SS and medicare because hopelessness about the deficit is killing th economy? I'm supposed to ignore this because he cares? and is generally a good guy for a big money investor?

He should know better. He should know that the demand side of the equation is weak and cutting government is just going to weaken things further.

I've never seen him argue for cuts to medicare and SS. What he seems to be arguing is that the US is spending too much compared to it's income, and this is a problem. Medicare and SS are a huge part of the US budget but so is defense. If the US government can't afford Medicare/SS in the long run, the US needs either more income or cuts in those programs. SS currently has enough assets to pay itself till 2023 if I remember correctly, so there's need to cut it in the short term, but it probably needs to be adapted because of incoming demographics changes (which are very real and unavoidable).

It's normal to borrow in exceptional circumstances or for big items you know you can pay over the long term but need like to have now (house, car, ...), but in the long run things have to be balanced or you're living above your means. Right now the US is facing an unbalanced budget in a tough economical climate. Which is making things really complicated since one of the fixes for the current situation, lots of government spending, looks so ridiculous because the current balance is way deep in the red Big thanks to the morons who previously occupied the white house for 8 years for that situation...
posted by coust at 7:07 PM on August 15, 2011 [1 favorite]

...so there's NO need to cut it in the short term...'

(sorry about that)
posted by coust at 7:08 PM on August 15, 2011

If your goal is to punish the wealthy,

It isn't and it shouldn't be. The goal is to have a tax system that's fair, economically sound, and keeps economic opportunity and capital circulating. Progressive tax schemes do that. Period. This is not a debate we should have to keep having over and over again, just because we apparently keep spacing out and forgetting what we're doing in the middle of things. That's just stupid.
posted by saulgoodman at 7:12 PM on August 15, 2011 [2 favorites]

This apparently wasn't what stavrosthewonderchicken was thinking of with that comment

I had in mind the magical thinking of believers, not so much the original pronouncements as they've been passed down -- of the devotees of Walt and Mickey, rather than the philosophies of Walt and Mickey themselves, in other words.

But it was mostly just an offhand half-joke, so.
posted by stavrosthewonderchicken at 7:15 PM on August 15, 2011

Here's a hint: they could tell the mint to print.

Yeah, that worked so well for Zimbabwe.
posted by saulgoodman at 7:22 PM on August 15, 2011

this makes me think of that fiction ralph nader book, 'only the super rich can save us'
great read
posted by actionmotionpoet at 7:25 PM on August 15, 2011

Pastabagel: "This man has pledged to give away 99% of his income.

So what? Good for him. Because he's a good person we should follow his proposal on tax policy? So If I pledge to give away 99.1% of my "wealth", you'll listen to my advice? Is it that easy?"

Do it and then we'll talk.

My point is you are Don Quixote and you're tilting at windmills, going after Buffett and ranting at his editorial. He is not the problem, despite his wealth. He's at least trying to channel some of that money back into the economy and to charities and the people who need it, and he can only do that effectively because he is one of the wealthiest people in the U.S. himself; He's part of the club.

I'm not delusional that we need financial reform. We need to pay down the debt and raise taxes, but not just for the wealthiest. We're ALL going to have to accept changes we may not like if we are going to turn this around. Raise the retirement age, cap incomes for Medicare and Social Security eligibility and, though it won't happen, my personal preference would be to cut WAY back on Defense spending.

I'd get rid of the whole No Child Left Behind deal and overhaul education, with tablets and ebook texts instead of textbooks, and I'd also completely overhaul the Patriot Act and Department of Homeland Security (okay, so that last part might not save money, I just want to do it).
posted by misha at 7:31 PM on August 15, 2011

I've been thinking about Buffett's point about future promises:

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.

Buffett has said in his letters to shareholders of Berkshire-Hathaway that long-term growth of the US debt is unsustainable. And I think that he's very savvy about evaluating the costs of future payouts.

I think that in this one line, he's saying "no matter how good the economy gets, we can't afford some of the promises we've made." I assume here that he is talking about means testing for Social Security and Medicare (the headline of such an Op Ed: "Why should I, Warren Buffett, get Social Security?"). He doesn't spell it out here, I suspect, because he wants to focus on taxes for this Op Ed.
posted by zippy at 7:38 PM on August 15, 2011

If it's so impossible to tax the wealthy because then they'll only buy one gold-plated Rolls instead of 3 or flee with all their money and we won't see any of it, why don't we just go the whole hog and just have a giant tip jar where they can toss in what they think the rest of us are worth.

I do hope they like living in compounds and choking on polluted air, because that's what they'll end up with. If a billionaire is pointing out the tax system is seriously screwed and the rich can and should pay more, I think it's a clear sign that the system is profoundly, horrfically screwed up.
posted by lesbiassparrow at 8:04 PM on August 15, 2011

I'm not delusional that we need financial reform.

What we need are stable, sustainable labor markets, and equal protection under the law for labor, consumers and capital.

Currently, all the legal protection's heaped on only one of the three legs of that particular stool.
posted by saulgoodman at 8:11 PM on August 15, 2011

Yeah, that worked so well for Zimbabwe. My point was more along the lines of saying that any tax system, unless it somehow perfectly captures an externality, is economic manipulation and/or wealth redistribution. The argument that it is primarily a revenue collection system ignores both that and that there are other mechanisms for offsetting government spending (stupid or not). 'Wealth redistribution' is a code word for the government is takin' our money in conservative circles, but we need to reclaim the phrase. If the government isn't taking rich people's money it is by definition taking poor people's money. There's no real escape from that short of anarchy.
posted by BrotherCaine at 9:50 PM on August 15, 2011

Also, that's what we were doing with QE 1&2.
posted by BrotherCaine at 9:53 PM on August 15, 2011

Obama: Warren Buffett Is Right On Taxes
posted by anazgnos at 10:02 PM on August 15, 2011

Good point, BrotherCaine.
posted by saulgoodman at 7:17 AM on August 16, 2011

The rational arguments are all well and good, but frankly rational arguments don't sway a lot of people. If the belief of a number of people is "lower tax rates creates jobs," a handful might be swayed by evidence to the contrary, but most will not be.

What's needed is a more compelling story, a better slogan. And I think I've got one:

Income is income.

The idea is simple: a) lump capital gains in with all other forms of income for tax purposes. Tax it at the same rate as "salaries, tips, wages, etc." Income is income.

And b) tax corporate income at the same rate as personal income. (Corporations are people, right? Then they can pay taxes like people.) Income is income.

Sure, [let's say] corporate profits create jobs. So does personal income. When Joe the construction worker spends money earned by the sweat of his brow, that creates jobs too. If he spends it on food, he's creating jobs for farmers and truck drivers and grocery store workers. If he spends it on a car, he's creating jobs for automobile assemblers. His money is just as good as creating jobs as the same amount spent by a multimillionaire which was earned by trading stocks, or the same amount spent by a large corporation. So why should his earnings be taxed at a higher rate? Income is income.

$25000 spent on a new car creates the same number of jobs, regardless of whether it's spent by Warren Buffett or by Warren Buffett's secretary. So why should the secretary pay a higher tax rate than Buffett, just because the secretary's money is earned as a salary, but Buffett's as capital gains? Income is income.
posted by DevilsAdvocate at 7:26 AM on August 16, 2011 [8 favorites]

I heartily agree, DevilsAdvocate. I've been saying "income is income" for a long time but unfortunately my opinion doesn't sway anyone of any import to the debate at hand. Buffett, in the piece linked here, has pretty much come out and said the same thing.
posted by Mister_A at 7:53 AM on August 16, 2011

…but lower corporate taxes do increase foreign investment, which does mean jobs.

Corporations must be taxed differently because every country has to stay competitive with the other countries. Just this year, Germany and France have been trying to bribe Ireland with aid to convince them to increase their low corporate tax rate.

From a fairness perspective corporations don't incur the same social costs as people, so there's no objective reason to tax them the same. In addition to their corporate tax, the profit is taxed again when it is paid as income to employees, or as dividends to shareholders.
posted by esprit de l'escalier at 10:34 AM on August 16, 2011

esprit de l'escalier wrote: In addition to their corporate tax, the profit is taxed again when it is paid as income to employees, or as dividends to shareholders.

Whatever you pay your employees is an expense, not profit, and if shares are owned by non-citizen non-US-residents, dividends aren't taxed, either.
posted by wierdo at 11:29 AM on August 16, 2011

I'm okay with a 0 percent corporate tax rate in principle, as long as all the money is taxed when it goes to people via dividends or capital gains or salary or benefits, etc...

And a flat tax would be absolutely disasterous for low income people without a fairly high standard deduction. (like $30,000 or something)
posted by empath at 11:32 AM on August 16, 2011

yes dividends are taxed. They come out of net income, i.e. after taxes are paid.
posted by JPD at 11:34 AM on August 16, 2011

Also, while corporations should actually pay the statutory tax rate, there just aren't enough profits for fixing the corporate tax code to solve any of the US' fiscal issues.
posted by JPD at 11:35 AM on August 16, 2011

yes dividends are taxed. They come out of net income, i.e. after taxes are paid.

In theory. But lots of corporations use accounting to dodge paying taxes. GE hardly pays any, for example. IMO, it would be simpler to just cut out all the bullshit and just recognize that taxing the money flowing into corporations is fairly unfeasible to implement fairly and dump corporate taxes entirely and tax the money coming out of corporations instead.
posted by empath at 11:41 AM on August 16, 2011

how can you debate the fact that under US tax code the money that is used to pay dividends is taxed? It is - to deny that is just saying the sky is red. Using an example of GE (who are probably one of the biggest abusers of things like accelerated depreciation, IP tax shelters, huge losses as a result of their financial sub, etc , etc) to deny the reality of the US tax code is just dumb.

How about this - go find a study that shows the difference between cash taxes and book taxes. Here I'll even do it for you - Long-Run Corporate Tax Avoidance
Cash taxes are something like 10% lower than the statutory rate over time. Nearly all of the difference derives from accelerated depreciation and other tax breaks written into the code by congress to incentivize certain behaviors. Now is 10% a problem? Yes. Just stop pretending like in aggregate corporations don't pay taxes.
posted by JPD at 11:50 AM on August 16, 2011

actually it isn't 10% lower than statutory - its 5%
posted by JPD at 11:51 AM on August 16, 2011

Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress.
posted by empath at 11:53 AM on August 16, 2011

really - you're gonna go that deep on this? You don't see why the GAO's report isn't pertinent to your argument? Its sample is 1.3 million corporations - do you not see why that not might be a reasonable sample? The fact it includes all forms of corporations as well.

Here again I'll pull out the part that matters:

Either way, the nearly 1,000 largest United States corporations were more likely than smaller ones to pay taxes.

In 2005, one in four large United States corporations paid no taxes on revenue of $1.1 trillion, compared with 66 percent in the overall pool. Large corporations are those with at least $250 million in assets or annual sales of at least $50 million.

Joshua Barro, a staff economist at the Tax Foundation, a conservative research group, told The New York Times that the largest corporations represented only 1 percent of the total number of corporations but more than 90 percent of all corporate assets.

The vast majority of the large corporations that did not pay taxes had net losses, he said, and thus no income on which to pay taxes. “The notion that there is a large pool of untaxed corporate profits is incorrect.”

Now go look at the actual academic study I posted (because I don't really believe what the "Tax Foundation" guy said) and you'll see that 25% of large corps not paying taxes in a single year is not an abnormal outcome, but that tax rate/tax avoidance measurement is something that has to be done over a multiyear time period.
posted by JPD at 12:07 PM on August 16, 2011

oh good NYT commenters read GAO reports so that I don't have to. From the first comment:

The “analysis” here is comedy. Did anyone read the GAO report? First of all, only look at large companies (90%+ of all assets and receipts). In other words, throw out your kid’s lawnmower business that didn’t breakeven last year and thus didn’t pay any taxes. For the time period examined, only 2.7% of large U.S. companies didn’t pay any taxes.
posted by JPD at 12:09 PM on August 16, 2011

The vast majority of the large corporations that did not pay taxes had net losses, he said, and thus no income on which to pay taxes. “The notion that there is a large pool of untaxed corporate profits is incorrect.”

This says nothing about whether or not those same companies had positive net cash-flow. Net income includes a bunch of non-cash (aka fictitious) expenses the largest of which is depreciation. There are all kinds of goofy, imperfect accounting rules that make relying on one measure of profit (the income statement) a really bad idea.

Now, there are reasons that we allow companies be taxed on their net income and let them include these non-cash expenses in that number. Some assets do lose value as they age and accounting for that is fine. Letting companies use that depreciation to offset their tax burden encourages them to make capital investments. In effect, it lowers the cost of building that new factory.

However, I'd also assert that it makes buying things like robots artificially less expensive and costs jobs.

It also puts a proportionately larger tax burden on industries without the need for as much capital. Service focused businesses that rely mostly on human labor are a good example.

I like the idea of taxing straight revenue. After all, if I spend more than I make in any given year I still have to pay taxes on my income. However, this also means that high revenue, low margin businesses will pay a lot more in taxes than high margin, low revenue businesses.

I like this idea of taxing money that comes out of a business so long as it gets treated the same way. That way companies won't have a preference for stock buy-backs vs. dividends, at least not for tax reasons. They'll keep reinvesting in the business until investors start demanding their returns. The only issue I can think of right now is that it still encourage business. As things stand now, we at least have the option to give a tax break to companies for U.S. based labor to make it cheaper to hire domestically.
posted by VTX at 12:39 PM on August 16, 2011

Pastabagel writes "I don't have to thank Buffett, because his suggestion to raise taxes slightly on the ultrawealthy is idiotically obvious. The reason he is writing this is because he wants to keep the tax debate focused on income. No tax on wealth, no change in inheritance tax, capital gains, etc. Just income. He doesn't want people to start talking about changing the taxes on all the other, bigger, piles of money. that people have."

Warren Buffet is in favour of inheritance taxes both as revenue stream and as a drag on dynasties.
posted by Mitheral at 12:45 PM on August 16, 2011 [1 favorite]

VTX: "I like the idea of taxing straight revenue. After all, if I spend more than I make in any given year I still have to pay taxes on my income. However, this also means that high revenue, low margin businesses will pay a lot more in taxes than high margin, low revenue businesses."

This idea is completely impractical- it discourages anyone from selling finished products. If Person A buys a bag of rocks for $1 and sells it for $2, he makes $1. If Person B buys a polished stone for $9 and sells it for $10, he's also made $1. Why make Person B pay more in taxes simply because he sells a higher-cost good?
posted by mkultra at 12:46 PM on August 16, 2011

I know, I said as much, you're just providing an example. I guess I mean that I like one aspect of the idea from an ideological standpoints. The government doesn't care what my expenses are, why should they care about a business' expenses?

Maybe (and I'm just tossing this out there) if the if the rates progressed for both revenue and net income or maybe you get a small flat tax on revenue and an additional progressive tax on net income or something?
posted by VTX at 1:00 PM on August 16, 2011

VTX - the reason is actually so so much simpler - the sample includes s-corps - which are both the most common form of corporation in the US, and also a form of corporation that don't pay taxes because the income flows to the shareholder - usually a sole proprietor - where it is taxed as income.
posted by JPD at 1:17 PM on August 16, 2011

ETA- and in the case of large companies, accelerated depreciation is what accounts for the vast majority of the 5% differential between cash and statutory tax rates.
posted by JPD at 1:18 PM on August 16, 2011

Ezra Klein: Finding opportunity in an economic crisis

Infrastructure and the economic recovery
posted by homunculus at 1:20 PM on August 16, 2011

VTX: "The government doesn't care what my expenses are, why should they care about a business' expenses?"

For one thing, businesses need to continuously spend a lot of money just to operate; you as a person don't have to pay salaries, buy inventory, etc. To the extent that you require basic food and services, that's the idea of the "standard deduction" on your taxes.

The government also deliberately gives tax deductions to individual expenses to encourage specific behaviors (mortgage interest, various capital improvements, energy efficient appliances).
posted by mkultra at 1:31 PM on August 16, 2011

And I get that, I'm just saying that the idea has a kind of visceral appeal to me in a knee-jerk kind of way. I don't think it should implemented for the reasons that you, me, and others have laid out here.
posted by VTX at 1:57 PM on August 16, 2011

rich people who don't want to participate in this should be given enough time to start their own state and be exempt from it. but if they do that, they can't visit the rest of America without being taxed heavily during their visit. Also, tax them heavily when they want to order a product from mainstream America if they choose to live in such a state / country in which they don't have to be taxed for being wealthy.
posted by Hi Dan at 3:23 PM on August 16, 2011 [1 favorite]

A wealth tax is an interesting idea, and we already have something like that in the form of property taxes. But administering such a tax would be much more complex then an income tax. In part because it would require having accurate valuations of all assets. What happens if someone puts all their money in rare artwork or classic cars. What's to stop the rich from travailing to Macau and 'gambling away' millions of dollars? What about corporate wealth used as slush funds? What about bitcoin wallets sitting in safety deposit boxes?

It's easier to hide wealth then income, I think.

Also, tax them heavily when they want to order a product from mainstream America if they choose to live in such a state / country

There are plenty of countries willing to take in high-worth individuals and not tax them, and most products aren't made in the U.S anyway.
posted by delmoi at 9:23 PM on August 16, 2011 [1 favorite]

Does Warren Buffett write an additional check to the government each year to close the fairness gap?

Warren Buffett shouldn't have to. Nobody should have to.

Warren Buffett as an individual is of course free to be as philanthropic as his conscience dictates, in whichever way pleases him. Berkshire Hathaway, on the other hand, is competing with other businesses within an environment defined in part by current tax law. Diverting more of its revenue stream to public funding than taxation law requires it to puts it at a disadvantage with respect to those competitors unless they're all doing likewise; any such gentlemen's agreement would crumble when faced with a very small number of non-gentlemen.

The point of having taxation law is to (a) create enough taxation revenue over the the long term to sustain payment for those things that are generally held to be appropriate for public funding (b) define the taxation obligations applying to all persons (natural and corporate) in a manner that's generally held to be fair and reasonable.

The Bush tax cuts ran counter to both of those principles. They need to be unwound.

If the people's representatives can't run the country with the revenue available, it should not be up to individuals to treat their own governments as charity cases. It should be up to those governments to fix their broken taxation law.
posted by flabdablet at 5:17 PM on August 17, 2011 [1 favorite]

Jon Stewart: World of Class Warfare - Warren Buffett vs. Wealthy Conservatives
posted by homunculus at 1:01 AM on August 19, 2011 [2 favorites]

We all knew it was only a matter of time before Fox News started calling the country's pre-eminent investor a Socialist.
posted by mkultra at 8:14 AM on August 19, 2011

Ben Stein Destroys Bill O'Reilly's Idea Taxing The Rich Hurts The Economy
posted by homunculus at 5:51 PM on August 23, 2011 [1 favorite]

Executive Excess 2011: The Massive CEO Rewards for Tax Dodging. CEOs rake it in while their corporations dodge taxes.
posted by homunculus at 9:09 AM on August 31, 2011

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