Harvey Golub's Response To Warren Buffett | Hacker News Reader

Harvey Golub's Response To Warren Buffett

online.wsj.com

18 pointsnhebb35 comments

I don't understand the often-repeated conservative talking point that "almost half of all filers pay no income taxes at all". There are only two kinds of people who pay no income taxes at all: the desperately poor and the super-rich (who are taxed on investments at the 15% long-term capital gains rate). Is the conservative proposal really that we should tax the desperately poor? Because that seems not only a terrible public policy choice, but an extremely inefficient way to close our budget gap.

I did a little googling for you, from 2009:

"About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization."

...

"In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax."

http://finance.yahoo.com/news/Nearly-half-of-US-households-a...

Low- and middle-income families pay most of their taxes in the form of payroll taxes, which are a mandatory 15% tax (shared by the employer, who also pays their salary) on all income. Consumption taxes also apply to everyone, and for those who spend most of their income each year, this amounts to at a 5-10% additional tax.

Virtually nobody, with the exception of the very poor who qualify for the EITC, are safe from these tax. The "50% pay no tax" is a right-wing talking point that is intentionally dishonest.

What makes Golub's point so misleading is that he counts consumption taxes, payroll taxes, state taxes, and even future estate taxes when he pays them, but only looks at federal income tax to get the "half the people pay nothing" line.

Ah, thank you for clarifying on that. I was wondering how he came up with the figure that 90% of his income would be taxed.

I wonder how much the average lower and middle class person would be taxed according to this accounting scheme.

I don't think it's possible to come up with the 80 to 90 percent that he claimed. The top marginal rate for federal tax is 35%. State taxes and sales taxes can be deducted from income for federal tax. Social Security tops out at $106,800.00, and Medicare taxes are 1.45% on all income. As far as the estate tax, he won't pay that - unless he inherited the money. His heirs will pay an estate tax on anything over 5 million dollars that they inherit from him

The federal estate tax tops out at 35%, but also excludes some property and deductions. New York state's estate tax is also capped at 35%.

Finally, the estate tax is seldom actual double taxation since a large percentage of estates subject to taxation are in the form of stocks or property which are not taxed until they are actually sold.

50k for 4 people might not be "desperately" poor. But, it's awfully damn close.

This response is nothing more than political talking points, whereas Warren Buffett's article was a thoughtful and meaningful piece about a simple positive change the country could make to help control the deficit. I'm not saying some of his points aren't possibly valid, but nothing as written in this article is deep enough to be meaningful.

Tax rates were higher under Clinton and the economy was booming. Oh, and there was a budget surplus.

Along comes W, we end up in multiple confrontations over seas, cut incoming revenues (of which I will admit to benefiting), and end up with huge deficits?

Clearly going back to anything in the Clinton era would tank the economy. The particular article is particularly fluffy in the "private enterprise will solve all problems" with comments about infrastructure programs like trains, etc. The fact that we are spending less on infrastructure (roads, rail, fiber, etc) is one reason we are seeing an overall quality of service decline.

I will certainly admit there are issues with the US tax code and there needs to be more efficiency in the system. It is pretty clear that relying on private industry for infrastructure (especially where there is a (or near) monopoly, the companies do NOT do what's write for the country. Another local to California example PG&E and the gas pipeline debacle.

The problem isn't taxation, it's spending. If we went back to Clinton levels of spending we'd have a massive surplus. The big cuts that are coming due to the debt ceiling negotiations aren't actually cuts, they're decreases in predicted spending increases -- we can't even hold the budget steady. This is complete madness.

The problem is neither taxation nor spending. It's a failure to correlate revenue to our financial commitments. We will not be able to cut our way to deficit reduction in our lifetimes; there's just too much deficit there. The superstitious belief that we can balance our books by cuts alone (thereby likely throwing the country into a second recession, which would make matters worse) is the real madness in this discussion.

There are multiple problems, some of which interrelated.

You could go all the way back to the constitution of the USA. The US has non-compulsory voting, because in theory this ensures only well-informed, conscientious voters turn up. In reality, it leads to pork barrelling. Let's say you are a chicken farmer, in a chicken farming district, and Congress is considering a subsidy (or tax) on chicken farms. You and the boys at the chicken farmer's club have an incentive to mobilize, and try to get people to vote for the party (or candidates) with chicken-friendly views. But the apathetic masses would rather just not vote, because this pork barreling debate will not hurt their wallets that much.

Whereas in Australia (which has compulsory voting), a politician who runs an anti-pork campaign can get a fair bit of support from apathetic voters who don't want to be at the polling booth, but have a sneaking suspicion that government spending is not always wise.

Indeed. The bigest spending areas right now are - our "obligations" in the middle east and stimulus/spending related to the recession. If I had to cut one of those two, I know where I would certainly cut, and it isn't anything domestic.

We should be building infrastructure. I hear a lot in the news about roads/bridges/etc. But, here in CA, after one of the earthquakes a few years ago, the contractor came in way under their time estimate and got a bonus. There is a way to structure infrastructure projects so that they can be more efficient/cost effective. Granted, there does need to be someone who looks at feasability -- a train between norcal and socal makes sense, the bridge that they wanted to build in alaska? Less so.

Another item, and I am being selfish here, that should be put into policy -- the amount of money states "get back" in federal $$ should be closer to what they contribute. This would make it much clearer to states that contribute much less, just how much they are living off the teet of the federal govt and other states in the union.

If the states get back what they contribute, why have the federal government collect it at all?

The problem is, that in almost all of the west, without government spending, 30% to 50% of society would be in deep poverty. To me it looks like the elite and the government collude to pacate the vast majority of have-nothings. A large percentage of a nation's income lands in the bags of a few thousands. In the mean time the government borrows money from the future in order to pay off the millions who get nothing.

You're both right.

...and slightly off topic.

There are a number of huge problems with this argument, but the most important problems are the common ones:

1. There's just so much waste!

The byline reads: "Before you ask for more tax money from me, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely." This is then supported by a few examples which don't address any of the big entitlement programs necessary for nontrivial tax-reform.

2. I pay such a large percent of the taxes!

He draws authority from the fact that "Today, top earners—the 250,000 people who earn $1 million or more—pay 20% of all income taxes, and the 3% who earn more than $200,000 pay almost half. Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too."

This is clearly a less meaningful statistic than percentage of income paid, which was the crux of Buffett's argument. If I posses say, 90% of the assets in some country X, certainly it doesn't make sense for me to yell, 'hey, I pay like, 60% of the taxes in this place, and all of you Xonian slackers in the bottom 5% are skating by on a free ride.' It particularly doesn't make sense if, as he proposes, there is no tax on gifting money to your (grand)children, and so perhaps I just inherited the wealth.

The top 250,000 people basically run the government, so his polemic needs to be addressed at them.

All the special interests he talks about are from his cohort of the top .1%

Basically, this article amounts to "Let Them Eat Cake"

Or it, as other articles have said, says that talk is cheap and if Buffet really thinks he should pay more taxes, stop trying so hard not to pay taxes.

The rest of the article says that the government is wasting his money. He lists a few good examples.

care to elaborate "The top 250,000 people basically run the government"?

Look up the citizens united case. The supreme court essentially said that money = speech, and therefore, spending money to influence political campaigns and elections is protected by the first amendment.

but i think the 250000 people is just the poor with a good life.... isn't that about the <1% you are taking about?

Not sure I understand. The top 1% have little in common with the poor, especially when it comes to political interests. Due to the supreme court case, they can now spend unlimited amounts of money to try and influence politics, which means that despite their significant difference in population sizes, they are over-represented in our government.

the top 1% buys peanuts that cost 250.000 each.

Did he actually read Buffett's article? Warren Buffett points out that while the rich do pay quite a bit of income tax, they often don't pay the same share of other taxes.

Then he claims he pay's 80%+ tax. Um, really? I guess if you had massive losses of lowly taxed income, and a really high salary, they could balance each other out and you could pay unbounded taxes. But over 80% does not seem typical.

What strikes me as most odd is the fact that conservative'ŝ constantly point out that 50% of people pay no taxes at all.

They use this figure to illustrate a demand for raising taxes on these people.

I never heard a conservative ask the question: Why are there such large income disparities within our society? And how can we fix them?

The answer would not be raising the taxes on the poorest, but to lift them out of poverty. However, most people know damn well that this would not work without some major adjustments to the way we do business.

I do agree with you, but I feel I should provide a slight correction. The claim is that 50% of people pay no federal income tax. They still pay payroll tax, state tax, and sales tax. So when conservatives make the '50% claim' they are being fairly deceptive.

"Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes."

Huh? What is he possibly doing that warrants this high of a tax on his income?

It's particularly odd that he's planning on paying estate taxes (unless he plans to die this year). Estate taxes are paid by the estates of decedents, not by living people.

I think he needs to get a new tax accountant. Either that or he is lying, or using some really deceptive stats.

He pays 30% income tax, 15% payroll, 15% social security and medicare, then accrue a tax of 30% on his estate. That adds up to 90%. Don't question it.

Or maybe he has untaxed (or lowly taxed) assets that are crashing, and moderately taxed salary. Lose 3 million due to crashing assets (untaxed), make 4 million salary with a 25% tax rate, and your total tax rate is 100%. But that wouldn't be a typical year.

There is a useful and effective fiction called "property" that I continue to support. However, when 3% of the people earn 50% of the money, and use this fact to complain about paying 50% of the taxes, then it may be time to demonstrate that this fiction exists only as long as it is mutually beneficial, as opposed to some God given right or a fact of nature.

Jon Stewart recently took down the argument to tax the poor rather effectively:

http://www.thedailyshow.com/watch/thu-august-18-2011/world-o...

Yeah, "you earned it". Not your children. Why should they get free ride?

Estate taxes exist to encourage doing something productive with your immeanse wealth rather than just hoarding it.

Reply on news.ycombinator.com