Stop Coddling the Super-Rich

[Martinus]

Well, that's an argumentum ad absurdum - no one wants to live in Almaty but if a choice between London and Paris yielded a 5% tax difference I suppose it could play a role.

From my experience with rich clients, however, what matters more than the tax rate on the face value is the possibility of tax planning (or as some would say the existence of tax loopholes). Rich people who live in London do not pay the same tax rates as you, Arky, because they can afford sophisticated tax advice.

[Grey Fox]

You are a bunch of envious socialists.

If he has a gazillion dollars of income, it means he pays 15% of gazillion as tax. While poor people pay 15% of their meager income. Everyone participates equally. I know the "rich has more to spare", but that's the road on which you can eventually arrive to the "omg he is not poor! the bastard! where did he get it?!!!!!" society, which is NOT fun to live in, trust me.

His point is that poor people pay 40%.

[Warspite]

Well, that's an argumentum ad absurdum - no one wants to live in Almaty but if a choice between London and Paris yielded a 5% tax difference I suppose it could play a role.

Sure, but no one ever factors in the analysis whether the city's language or quality of life or one of the other millions reasons the rest of us will consider.

I'm not denying that tax regimes can have a role, but rather no one has really ever really put forth a persuasive argument

From my experience with rich clients, however, what matters more than the tax rate on the face value is the possibility of tax planning (or as some would say the existence of tax loopholes). Rich people who live in London do not pay the same tax rates as you, Arky, because they can afford sophisticated tax advice.

Sure, but my experience with rich peers is that they choose to stay in London because it's where Boujis and Whisky Mist are, and Wimbledon and the Arsenal, and you're bloody close to Paris, Berlin and Barecelona. and because Singapore's a sterile hole in the ground (albeit a pretty one). Plus they can send their kids off to Winchester or Eton and still be conveniently nearby to become reaquainted with them twice a year.

Of course, the point you raise is sound. Now that would be an interesting political sell: we cannot close tax loopholes because it will chase all the rich away.

[Tamas]

With that argumentation, you shouldn't argue for a flat rate, but rather a flat absolute amount. A flat rate is just as unfair as a progressive rate and has no real advantages in the field of tax evasion, punishing success or keeping the socialist mindset.

a flat absolute amount punishes poverty. It is only a flat rate which is fair.

The problem is that the middle class, the ones that actually matter for a healthy society, are the ones being shafted. Both by the poor that they need to subsidize and by the rich that freeride.

Not only you will not see me disagree there, but I tend to think that wraps up the welfare state quite conviniently. Because, in a way, it is about the rich taxing the middle class to keep the poor content. Why? The REALLY rich can go by. They can hire Marty to find tax loopholes, get government grants from pals in offices etc. The poor gets stabilized on a level where they are dependant on the rich keeping them subsidized, and those of them who wish to climb out regardless, encounter the same barriers the middle class do: sure, you can make it, but you have to endure the state which is making you subsidize the poor, and protects the "aristocrats" from competition.

[Tamas]

You are a bunch of envious socialists.

If he has a gazillion dollars of income, it means he pays 15% of gazillion as tax. While poor people pay 15% of their meager income. Everyone participates equally. I know the "rich has more to spare", but that's the road on which you can eventually arrive to the "omg he is not poor! the bastard! where did he get it?!!!!!" society, which is NOT fun to live in, trust me.

His point is that poor people pay 40%.

Cry me a river, I see less than 50% of what I cost my employer.

[DGuller]

   The point was that the rich paid 15%, while the middle class paid 40%.  That's not flat, that's regressive.  Buffet wasn't doing it to compare against Hungary.

[Scipio]

You are a bunch of envious socialists.

If he has a gazillion dollars of income, it means he pays 15% of gazillion as tax. While poor people pay 15% of their meager income. Everyone participates equally. I know the "rich has more to spare", but that's the road on which you can eventually arrive to the "omg he is not poor! the bastard! where did he get it?!!!!!" society, which is NOT fun to live in, trust me.

His point is that poor people pay 40%.

They don't, though.

http://taxvox.taxpolicycenter.org/2011/07/27/why-do-people-pay-no-federal-income-tax-2/

It's a much more complicated question than you or Buffett want it to seem.  The fact of the matter is that you can make voluntary additional donations to the US government, if you're a taxpayer.  Yet I've never heard of the super-rich like Buffett volunteering their money.  Nothing stops the super-rich from doing this.  Except, of course, their own self-interest.

Buffett's employees who pay top marginal tax rates on their income are by no means poor.  By the numbers Buffett quotes, the total amount paid at the lower rate in 2008 by the super-rich exceeded their amount earned in 1992.  In 1992, the super-rich paid 4.9 billion in taxes on their income.  In 2008, they paid over 18 billion in taxes on their income.  That's a four-fold increase in capital gains tax receipts on the top 400 incomes in the country, on a five-fold increase in income.  If the tax rate had remained higher, that would have been an additional 8 billion dollars in 2008 in taxes.  That would have paid for a few hours of the federal government's operation over the year.  Huzzah, what a solution.

There's nothing in there about means testing social security or Medicare, which Buffett and the 400 richest American's don't fucking need.  Nor is there anything about shifting the payroll tax burden higher, by exempting the first $25k paid in wages from payroll tax.  That would help employers hire more entry-level workers, and help wage earners retain more of their earnings.  The fact of the matter is that a 100% tax on the income of the rich would not solve the problem.  Taxes have to go up for everyone; the tax burden needs to be shifted upwards; but we can't assume that taxing the rich more heavily is by itself going to do a whole lot of good.

Of course, taxing them more will take the spotlight off of them.  Maybe that's what Buffett really wants.

[Neil]

  The point was that the rich paid 15%, while the middle class paid 40%.  That's not flat, that's regressive.  Buffet wasn't doing it to compare against Hungary.

That's the price you pay for allowing income tax deductions.  The wealthy will always be able to take better advantage, due to their ability to afford tax lawyers and their ability to move their money in such a way as to present a more limited profile for taxation.  Do you think Buffett didn't take full advantage of any deduction that he could?

[Viking]

Buffet has already made his money and is giving the rest away. His kids are not getting inheritances, they are getting seed capital for a medium sized business.

[DGuller]

  The point was that the rich paid 15%, while the middle class paid 40%.  That's not flat, that's regressive.  Buffet wasn't doing it to compare against Hungary.

That's the price you pay for allowing income tax deductions.  The wealthy will always be able to take better advantage, due to their ability to afford tax lawyers and their ability to move their money in such a way as to present a more limited profile for taxation.  Do you think Buffett didn't take full advantage of any deduction that he could?

That's not a result of deductions.  That's a result of some obscene interpretation of the tax law that allows people who make money from money get taxes at capital gains rate of 15%, rather than get taxed like people who actually do work, at up to twice that rate.  It's also a result of highly regressive nature of payroll tax, which cuts out completely after about $100K of income (forget the exact figure for 2011).

[Faeelin]

It's a much more complicated question than you or Buffett want it to seem.  The fact of the matter is that you can make voluntary additional donations to the US government, if you're a taxpayer.  Yet I've never heard of the super-rich like Buffett volunteering their money.  Nothing stops the super-rich from doing this.  Except, of course, their own self-interest.

I don't get your point here. Isn't this a bit like saying "Bachmann can't criticize government spending, because her family's benefited from it?"

[DGuller]

That whole "you can't advocate higher taxation if you haven't voluntarily paid more in taxes" line is dumb beyond belief.

[Berkut]

You know what else is dumb?

The whole "We cannot solve the problem of debt by just taxing the rich, so lets not raise any taxes at all..."

It is almost as dumb as the "We can solve our debt problem if only we taxed people with private jets more!"

[Tamas]

the first $25k paid in wages from payroll tax.

Oh goodie! We had that for almost a decade! Minimum wage was income tax free. Boy, did we become the land of the minimum wage or what! ALMOST EVERYONE, save for the employees of the companies too big to cook the books, have been working on nominal minimal wages and payed the rest of the worker's salary to their pocket.

[DGuller]

the first $25k paid in wages from payroll tax.

Oh goodie! We had that for almost a decade! Minimum wage was income tax free. Boy, did we become the land of the minimum wage or what! ALMOST EVERYONE, save for the employees of the companies too big to cook the books, have been working on nominal minimal wages and payed the rest of the worker's salary to their pocket.

You know, the rest of the world is not like Hungary.  We do have rule of law here, and rampant cheating of that kind just doesn't exist here.  That rule of law in fact is probably the biggest contributor to the relative wealth of US.  You're evaluating suggested changes to US policy through Hungarian point of view, and that's just illogical.