Comment by tzs | Hacker News Reader

Comment by tzs | Hacker News Reader

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Here's where the author gets lost:

   Either Buffett is making a point so fine I have missed it,
   or he's just blowing smoke up my ass. He doesn't know people
   who don't invest when you decrease their return by a
   significant percentage? What? If he's not fighting for
   each percentage point here and there, just what the
   heck kind of investing is he doing? Can I get in on
   some of this action?

This is in response to this statement of Buffet's:

   I didn't refuse, nor did others. I have worked with
   investors for 60 years and I have yet to see anyone
   -- not even when capital gains rates were 39.9 percent
   in 1976-77 -- shy away from a sensible investment
   because of the tax rate on the potential gain.
   People invest to make money, and potential taxes have
   never scared them off...

What the author has overlooked is that taxes lower the effective return on all investments. If capital gains generating investment X is better than capital gains generating investment Y when capital gains is taxed at 15%, X will still be better than Y if capital gains is raise to 20% or even to the 39.9% it was in 1976, and so in choosing between X and Y, the rational investor will still choose X.

What the author has overlooked is that taxes lower the effective return on all investments. If capital gains generating investment X is better than capital gains generating investment Y when capital gains is taxed at 15%, X will still be better than Y if capital gains is raise to 20% or even to the 39.9% it was in 1976, and so in choosing between X and Y, the rational investor will still choose X.

This certainly might be a true statement, or not, depending on the specific tax policy. Can you tell me exactly what policy Buffett was advocating? Because I couldn't find it.

There are 3 possible arguments here.

Argument 1: I, being rich, should pay more money. I don't think Buffett is saying that, because if he felt that way he would just pay more.

Argument 2: The government needs money. We have it. They should come and take it. I couldn't find any mention of government need. He's not saying that the super rich should pay more because it's needed. He's saying they should pay because it's the right thing to do.

Argument 3: The rules should change so that things are "fairer". If this is his argument, which I think it is, then what, exactly does he want to change? Without knowing that, you can't make heads or tails of whether or not tax policy would effect everybody the same or not. Note that if he's arguing for specific policy, it might be that he personally ends up paying no more, or even less. If this is his thesis, then how much he or his buddies actually end up paying has nothing to do with it. He should describe what exactly would be "fair".

There's no argument here, really. It's just Buffett saying he should pay more of his fair share and some friendly poking at the Republicans. His piece seeks to convey feeling, not make a case and support it (Note the folksy telling of how much experience he has and how rates don't matter.) That't great -- it could still be an awesome article. But it doesn't hold together well to try to take the ideas and go somewhere with them.

"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."

That is his recommendation. Is it not specific enough?

By how much? 1 Percent? 20 Percent? Does "taxable income" include muni bonds? Ex-pat VCs? Enterprise zones? Minority-owned businesses? Sales of primary residences? And so on.

I'm not trying to be pedantic. The tax code is a mess. Simply saying you'd raise taxes on folks making more than a million of taxable income a year doesn't really say very much.

Something like an elimination of capital gains for startup investors and an increase to 35% of gains made over $5 Million per year would at least have some meat to it. Heck, just come up with a number. 20% rates good enough?

How can I evaluate "fair" based on that statement? Could you? I could make assumptions -- such as the definition of "taxable income" staying the same or perhaps the capital gains tax matching the income tax rate, but then I'm arguing with myself, because I'm adding detail that wasn't present.

Nobody needs a 30-page whitepaper. A couple of paragraphs with specifics isn't too much to ask. After all, it's the core of his argument.

> I'm not trying to be pedantic. The tax code is a mess. Simply saying you'd raise taxes on folks making more than a million of taxable income a year doesn't really say very much.

It's saying a huge amount. The Republican position is that tax increases are COMPLETELY off the table (and they are defining closing tax loopholes as tax increases). Buffet is saying that tax increases should be on the table, and that the current tax system results in people at his wealth level paying a smaller percentage of their income as taxes than people in the middle class and that he doesn't think this is fair and that it should be possible to change this without dire consequences.

You seem to be dismissing this because he has not proposed detailed legislation to overhaul the tax code.

He posits that people making over a certain amount should be ponying up more in taxes. A reasonable assumption to make is that taxes would be raised in such a way that those people would be taxed more, and people who make less, wouldn't be. The specifics are irrelevant to the general argument.

You asked me a specific question: was that detailed enough?

The answer was no. Simply because it's detailed enough for you doesn't enter into it.

Unless you're prepared to say that those folks paying one dollar more is fair, then we have to have a number.

And note: Buffett didn't say they should pay more. He said the rates should be raised. These are two completely different concepts. You could raise the rates and have people move their money in such a way as to not pay any more at all. From Buffett's position, simply talking about rates, this would be an acceptable outcome.

I think we're at a spot where we can agree to disagree. Whether or not rich folks owe their fair share or not is a meaningless conversation unless and until you can actually start describing what you mean by "fair share." Without those details, it's just political feel-good bullshit, sadly. I expected more from Buffett.

Let's say I have a buddy, Bill, and we go out for dinner every so often. He doesn't make as much as me, but he fights me for the bill every time. I end up paying less than he does most of the time.

I tell my wife, "You know what, it's not fair that Bill pays so much all the time. I should pay more."

My wife then says, "Your argument is confusing, and what's more, it's feel-good bullshit. You didn't give me a specific number on how many dollars you'd want to pay. Would you pay with a credit card? Traveler's Cheque? Based on total after tip or before?"

The supposition between reasonable people should be that I pay some reasonable amount more than I have been paying, but I don't go over the top and foot the entire bill. Is it fair to ask how much more I'd be paying? Of course, and the final justification of just how fair the arrangement is would depend on that number, as you've said. However, it's perfectly reasonable to say someone should be paying more, and have a discussion on that topic, without having to go deep into the specifics of how much more.

> And note: Buffett didn't say they should pay more. He said the rates should be raised. These are two completely different concepts. You could raise the rates and have people move their money in such a way as to not pay any more at all. From Buffett's position, simply talking about rates, this would be an acceptable outcome.

He said that a rich individuals' total tax burden, by percentage of all income, should be brought more in line with what the middle class pays. I am reasonably sure you're being purposefully obtuse here. The only way for a person to "move their money in such a way as to not pay any more at all", and still meet Buffett's criteria is to make less money, on purpose.

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