One has to ask, if any super rich person really considered the U.S. Government a worthwhile investment, why are they donating to various charities instead of to the Treasury?
The problem is that gifts to charity aren't coercive. I know, it's strange to say that it's a problem if it isn't coercive, and I'd agree that many of the inefficiencies of government stem from the coercive nature of taxes (no need to convince people to give you money if you can just take it by force). But I'm really a moderate in all of this - I personally don't think a modern state can survive on donations, or a "pay only if you think the government will do a good job with the money" tax code. We're gonna have to collect some taxes, rich people (in my opinion) should pay more than poor people, and there's no way people, rich or poor, are just going to pony up out of a deep affection and fondness for the federal government.
If tax rates are going to be paid and progressive (they actually aren't), then they'll have to be coercive. I think what Mr. Buffet is arguing here is that the rich need to be coerced into paying more in taxes than they currently do. I'm inclined to agree with him, even if I have to hold my nose as I do.
It's not just that - even when we're talking Warren Buffett here, the scale of the US govt is totally different. Buffett's entire fortune ($50B according to Wikipedia) would only cover a few weeks' worth of borrowing and then we're right back where we started only Warren Buffett has no more fortune. It's silly to say we should expect him to do that.
What he's saying by advocating tax raises is "I will pay more if I know that everyone else will also pay more." He's not interested in paying $XM to reduce the debt by $XM, but he would happily pay a personal cost of $XM if it meant reducing the debt by $XB.
(This is called "collective action," and it's also Groupon's business model.)
Why not? It's not like it's all or nothing. The taxes paid by the others today will be at least somewhat useful to the federal government before the billionaires pay their "fair share". If Buffet pitches in, it's just that much better for the federal government, and an example to set for his friends.
>What he's saying by advocating tax raises is "I will pay more if I know that everyone else will also pay more."
No he isn't. He's saying precisely the opposite:
"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...But for those making more than $1 million...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...I would suggest an additional increase in rate."
Even at the current tax rates, Buffet properly pays more than you do. And he certainly pay more than those who are on the various forms of government relief.
More is a relative term, for instance he's not being taxed out of a holiday, eating out one or two times a month, having enough food to support his family, etc.
The utility on that 7million is much lower for him than say 20k a year would be for someone making less than 100,000 a year.
That is a stupid way to measure how much one should pay in tax, honestly.
You rent, electricity, food and clothing doesn't go up because you double your income (unless you move, but then you presumably get better housing too). Why should your tax?
I'll assume you're trolling but the relatively inelastic nature of fix costs like room and board, food, entertainment etc. is part of the reasons for promoting a progressive tax system. Those who have made fortunes here in the us are likely those who have benefited from federal and state oversight and infrastructure, which is an additional justification behind taxing the wealthier members of society at a progressive rate.
For the anecdotal insight on this: paying about 20k a year in federal taxes with my current annual salary is nothing compared to the impact of the 5k or so a year in taxes I paid when I was a poor waiter/college student in terms of its impact on my budget. At this point I could easily pay out an extra 10 or 20k with out severely impacting my quality of life or rate of savings; corollary, a few extra thousand back when I wasn't making all that much money would have been the difference between sleeping on an air mattress versus a real bed, or having enough good (as in nutritionally worth while) food to eat.
Most people do move to better housing, buy more expensive food/clothes and use more electricity when they double their income. And as that doubled income doubles, the amount they are willing to pay for/use those items also goes up. Just as the amount they are willing to haggle for these items goes down (note: I'm talking about majority, I know there are exceptions).
I was a little worried that when I wrote that the rich should pay "more" without specifying that I meant a higher tax rate, someone would point out that they would pay "more" in the absolute even at a lower tax rate (as if I'm unaware that 10,000,000 * .24 > 100,000 * .24).
I really like open debate and discussion, but why do we go through this charade of nitpicking? It's clear that my post supports progressive taxation, so why get all crapped up about some non-existent ambiguity around the word more. If you're opposed to progressive taxation, and you think that warren buffet pays so much "more" in the absolute under a regressive or flat tax that it's fair to tax him at a lower rate than your average middle class worker, by all means, express your opinion. I certainly wouldn't downmod someone for disagreeing with me, and I think that probably goes for most of the people on hacker news.
It is a logical fallacy to equate the statement "I believe the rich should be obligated to pay more in taxes" to "I believe I alone should pay more in taxes."
Most decent charities deliver far more per unit donated than the US government could ever wish to achieve. If you're interested in pure charity, you're not going to get much bang for your buck at the federal level.
really? I thought that there was something of a problem with some charities spending the bulk of their budget on marketing and CEO salaries.
as greenspun says:
"The federal government funds roads and airports that we all enjoy using. The feds pay for health care for the poor and the old. Our tax dollars pay for intrepid military personnel who go out and kill angry foreigners (in most cases) before they can arrive on U.S. soil and kill Americans here at home. For a non-profit organization of its size, the federal government is surprisingly efficient. Most federal employees work in big box-like office buildings, not in $300 million monuments to an architect's ego. George W. Bush gets paid only $400,000 per year, less than half of what a lot of university presidents earn."[1]
I personally have a somewhat less charitable view of effects of military action, at least the military action during my lifetime, but I do think that most of the personnel involved do believe that they are doing the right thing, and those other things, roads and healthcare and stuff; those are pretty great to have.
Now, I'm too lazy to dig up non-greenspun references, but it seems that many non-profits serve up rather nice salaries, for rather inefficient work[2]
My point exactly. It's easy to consider who's paying what taxes and thinking about if that's fair, but the right question to ask is, "Is this a worthwhile investment?"
Since when is the US government a charity? Taxes are not optional.
Most major donors contribute to things they can put their name on like buildings (see Stanford campus). It's difficult for even most charities to cover operating costs (i.e. labor) with only donations. Most have to apply for grants or do lots of funny numbers to keep their administration costs (i.e. labor) low.
Using government data, Robert L. Woodson calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner cites regional studies supporting this 70/30 split.
The U.S. Government could be a worthwhile investment (as a charity), but it's not doing so right now. We could raise taxes to invest in infrastructure, which would increase future GDP. A charity cannot do this owing to eminent domain issues.
That's the real rub about this deficit/debt limit drama: it wouldn't be so bad if the government spent in areas to increase future GDP. However, the government is basically an old-age insurance program with a large army. I don't see these expenditures contributing greatly to future GDP.
http://www.fms.treas.gov/faq/moretopics_gifts.html
One has to ask, if any super rich person really considered the U.S. Government a worthwhile investment, why are they donating to various charities instead of to the Treasury?