Does Mr Buffett employ an accountant to do his taxes? Does said accountant employ any tax avoidance strategies?
However, that's not the point. He's not saying "I want to personally pay more tax", he's saying "Why are people like me not being required to pay the same percentage tax as middle-income earners"?
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States...
Personally I would prefer a flat percentage rate of tax with an exception for very low incomes where it just isn't worth the governments time trying to collect it.
This would probably raise most peoples tax and lower rich peoples tax but I believe it is "fairer" for everybody to pay the same fixed proportion of their income. At the same time though I would simplify business taxes as well, get rid of loopholes, stop companies that do business in a country off shoring their profits. It is insane that some companies view their accounting departments as profit centers.
Flat tax economies boom, and they are progressive in the sense that there is no penalty for trying to earn more money.
That's not a flat tax, then, is it? It's progressive with two bands, 0% and x%.
There is a real case for tax simplification, but the progressive nature of income tax is probably the simplest thing in the entire tax code! It's the classification of different kinds of income and capital gains, exemptions and penalties for particular uses of money/assets that makes it challenging and is the reason there is real money in tax avoidance. Don't throw out the baby with the bath water.
Finally, a progressive tax means higher earners pay a larger proportion of their income than lower earners. It's hard to gauge the validity of your argument when your assertions run contrary to the definitions of the words you use.
Yes two bands, with the focus on making it attractive for people to earn money and pay tax, ideally the 0% band would be just enough to clothe, feed yourself and pay rent in a bad neighbourhood.
Progressive is a word that seems to mean different things to the left and the right, I notice you didn't define it.
As I said a flat tax is economically progressive because it doesn't discourage people from trying to earn more money.
At the moment you have people buying houses they don't need or using complex financial instruments just to do something with their money because if they don't they will get taxed more. Investing this money for the sake of it is not always beneficial to the economy or society, I favour a persons right to choose what to do with their own money.
I am coming from this from a libertarian perspective, whether you earn 50k a year or 500k the government should not be taking a higher percentage from you than other people. Especially considering that with a percentage rate whilst the proportion is the same, the actual amount of tax high earners pay is greater (which is socially progressive enough for me, but perhaps not for you). I believe I am using the word proportion correctly here, but if not please feel free to let me know how I have got it wrong.
Here in the UK the top rate of tax is 50%. I doubt I will ever be taxed at that rate but the government taking half a persons income scares me a little, no wonder people try to move their money around so the taxman can't get at it.
I don't understand the line of thinking which effectively says "people don't want to earn £2 if they have to pay £1 in tax". Erm, you're still richer than you were if you didn't earn more. The only possible argument against this is if earning another £100k takes more amount of effort it took to earn your first £100k. But if you know anything about making money it doesn't work that way. With more capital comes greater opportunities. You can afford an accountant to manage your money, you have more investment options, and so forth; and you still have enough to spare for a comfortable lifestyle.
A flat tax implies that a dollar is worth just as much to Warren Buffett as it is to someone flipping burgers, which demonstrates a complete lack of perspective.
Put it this way: everyone's living expenses are, say, £12k. now if you're earning a median wage that leaves you £10k to invest how you like. If you're earning £50k you get to invest £38k. assuming the schemes offer the same rate of return, guess who is going to amass £50k first? Hint: it's not the guy who has to get a 5x return on his investment.
The higher rate income tax is an incentive to invest the money you receive back into the economy via business or charity, where it is taxed at a lower rate or even not at all, rather than spent on your own personal gain. Why should it scare you that the government would take that money? BTW, investment in financial instruments of dubious benefit is giving money to the financial system (this should really be obvious...) so it does contribute to the economy, but there are almost certainly better ways to do so.
The problem with the libertarian perspective is that it irrationally assumes the best of people when there is no incentive for them to do so. If a billionnaire can afford to fund all the services he requires that someone on the poverty line would depend on government for, why should the billionnaire give his money away? If you want a society you have an obligation to provide for one, if you believe it is unfair that someone with broader shoulders should carry more weight, then perhaps you should consider how fair it is that he has broader shoulders and others do not.
> The problem with the libertarian perspective is that it irrationally assumes the best of people when there is no incentive for them to do so.
I assume no such thing about people regardless of whether they are rich or poor.
I think crux of our disagreement is about the involvement of government in peoples lives. I heard a quote recently, "The more the government tries to do the less well it does everything", I might have mangled that slightly.
Your supposition is that we need the government to force us to be nice and act in a way that is beneficial to society, if so isn't that a losing proposition from the outset?. Who is the moral arbiter here?, I would really like to minimize the amount of situations where government passes judgement on its citizens.
What I am really against is mob rule, the state is a necessary evil, a large state is a larger evil.
I am convinced that while the last century's politics was dominated by left versus right, this century will be dominated by authoritarian versus libertarian. The world isn't black and white, in certain situations we can't avoid making those kind of judgements but where we can avoid it we should.
The involvement of government in particular does not concern me.
My concern is the involvement of any powerful group.
If all you seek is a reduction of the state, you leave a void waiting to be filled by corporatocracy.
The argument of left vs. right, authoritarian vs. libertarianism is a red herring, what really matters is the distribution of power. Given that money is approximately power and that the government is more accountable to me than an individual, I have no qualms about the higher tax rate.
I think one of the major themes of politics to come will be the separation of business and state (much like how America pioneered the separation of church and state).
This will require a shift in society though, most voters see it as the governments job to manage the economy and help it grow. But corporate welfare is as damaging to business as social welfare is to individuals.
This is unfortunately a very gray area, at what point do tax breaks stop "encouraging" business versus at what point do businesses become dependent on them?. The inequality is what bothers me most, small businesses paying a higher percentage of tax than big businesses, the percentage should be the same.
I don't believe we can get there by regulation alone, citizens have to care as well, although I do concede that regulation may be necessary to a certain extent.
That's not the issue. The issue is that the 2nd 100k is worth less in terms of happiness than the first.
Various studies have shown that after around 80,000 peoples happiness is proportional to the amount of money they earn, and after that it levels out.
Thus if one didn't really care too much about that 2nd 100k, making it merely 50k might just be enough for the person to throw up their hands and say "its not worth it, I'll spend the weekends at home instead of at work".
"Progressive" has a very specific meaning when you're discussing tax structure, independent of its political meaning. Specifically, a progressive tax is one in which the effective rate you pay rises with income.
It is not 'progressive' as in 'progressive politics' or 'economic progress' or any other left or right politics.
Saying something is a 'pregressive tax' isn't a value judgement , it is just a description of the curve of the tax rate, i.e. the opposite of a regressive tax. As for 'discouraging people from trying to earn more money', that is a debate about rates but remember marginal tax rates never allow a situation where making a higher salary would leave you with less net income.
Buffet's talking about setting the rules of the game, not about optimizing within the rules that have been set.
1) The payroll tax is capped, so a guy making exactly the income it is capped at, and a guy making 100x that, pay exactly the same payroll tax. No accountant required and it is an enormous difference. For Warren, that is millions of dollars right there.
2) Money made from investments is taxed at a lower rate than salary, EVEN IF INVESTING IS YOUR JOB. I personally believe that money you have paid taxes on before should never have capital gains taxes on it - basically you are getting taxed twice. If I choose to take my money and invest it and then buy a car later I pay more tax than a guy who just takes his money and buys a car. So i'm not fan of capital gains taxes. But a guy who gets paid by investing and has no other income should be paying income taxes, not capital gains taxes. How you distinguish the two is definitely hard, but smarter people than me can figure out a way to make that happen.
At worst, though, it's a shell game that distracts from what's really going on in the tax code. In everything I've seen, taxes occur on transactions, not on stored wealth. So it's pretty easy to point at any income and outflow and argue that the money itself is being taxed twice. One could argue that the sales tax is a double tax - I'm paying income tax when I earn my paycheck, and then sales tax on the same paycheck when I spend it on groceries.
Anyway - in your example, the non-investor pays taxes on, let's say, $50k of income, then buys a car with it. The investor pays taxes on, let's say, $40k of income, invests it shrewdly, then takes the final $50k out of the investment and buys a car. The non-investor pays income tax on his $50k; the investor pays income tax on $40k, then capital gains on the $10k he made on the market.
The government could have easily taxed the investor on the entire amount withdrawn. That would obviously be pretty dumb, though.
At $100k I can't buy a nice house with 1 year's income, but at $10M I clearly can.
What was the point of your response, anyway? Please elaborate.
"He did the bookkeeping himself and prepared his own tax returns. With its numbers, accuracy, and the measuring of results, the recordkeeping aspect of the job pleased him."
[...]
"Warren was still handling all the money and doing all the clerical work himself: filing the tax returns,..."
[...]
"'Bill started trying to convince me to get a computer. I said, I don’t know what it’s going to do for me. I don’t care how my stock portfolio is doing every five minutes. And I can do my income taxes in my head.'"
Seems like indeed he is doing them himself (his personal tax bill; to do it for Berkshire, they surely have hired help)
But lets not forget, he has to act in the interests of shareholders, not just himself, in his business interests.