
A Minimum Tax for the Wealthy - swohns
http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html?smid=fb-share&_r=0
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nhebb
> _I support President Obama’s proposal to eliminate the Bush tax cuts for
> high-income taxpayers. However, I prefer a cutoff point somewhat above
> $250,000 — maybe $500,000 or so._

Personally, I don't care if the wealthy pay higher taxes. In the recent
election, 8/10 of the wealthiest counties in the US voted for President Obama,
and his stance on tax rates was clear. If those voters are willing to pay
higher taxes, I'm fine with that.

But what I really hate is the class warfare and populist messages driving
fiscal policy. With the threshold at $250k, the tax hikes would still only
bring in enough added revenue to cover 8 days of federal spending. And "fair
share"? The top 5% pay 40% of the federal income taxes collected. In order to
generate the kind of revenues that would make a significant impact on the
deficit, taxes would have to go up across the board, which in turn would lead
to an economic slow down.

~~~
notJim
This seems like a willfully ignorant reading of the op-ed. There is context
here which any reasonably well-informed person should be aware of, which is
that the gains made by top earners far outstrip the gains made by middle and
lower income people. As a result, those people are worse off than they were in
the past (their income has failed to increase relative to cost of living
increases in recent decades.) So the reason people focus on the wealthy is
that middle and lower income people are _already at their breaking point._

Also, it isn't clear to me if you're referring to the "Buffet Rule", or to a
scheme like the one proposed by Buffet here. In any case, he admits that even
if we did the first part of what he is proposing (the minimum tax for the
wealthy), there would still be work to be done.

~~~
a5seo
For more context:

"You hear a lot, in books, in the blogosphere, among pundits that the middle
class is being hollowed out, the incomes for all but the top 1% or maybe the
top 20% are stagnating; that the gap between rich and poor has grown
inexorably; that the American dream is dead"

"[these claims] are basically wrong. And that's what 10 years of research by
myself and James Sullivan at Notre Dame has shown. If you measure incomes
better, accounting properly for inflation, median incomes have gone up by
about 50% since 1980. And if you look at consumption, it's gone up by a
similar amount over that whole period--though exactly when it went up is
slightly different from the income pattern."

<http://www.econtalk.org/archives/2011/10/bruce_meyer_on.html>

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nugget
Government is the least efficient allocator of resources. For every dollar put
to use, many more dollars are wasted due to incompetence or fraud.
California's Proposition 30 was a wake-up call for me; despite all the
political advertisements to the contrary, the many billions raised for
"education" went entirely to shore up the teacher's bloated pensions and
benefits fund.

Entrepreneurs are some of the most efficient allocators, because they are
decision makers with a vested interest in the outcome. This concept is so rare
as to practically not exist in the public sector.

I'm not opposed to higher taxes. I am opposed to throwing money, mine or
anyone else's, into a black hole. Convince me that the extra tax dollars will
be spent wisely and that society will see a net positive return at some point
in the future, and you have my support.

~~~
ballstothewalls
Government is the least efficient allocator of resources? Says who? How many
wealthy individuals are sitting on piles of money right now because they are
unsure of the economic climate and therefore are not going to invest? Who
better than the government to take it away from them and then invest it into
public infrastructure and consequently stimulate the economy?

~~~
nhangen
What gives the government the right to 'take it away from them?'

~~~
mitchty
They have the guns normally. Force tends to be its own right.

That said, Californians complaining about government isn't surprising, they
have the worst possible state government of the union. Their bias is
understandable, but entirely their own doing.

~~~
nhangen
"Potentially, a government is the most dangerous threat to man's rights: it
holds a legal monopoly on the use of physical force against legally disarmed
victims."

~~~
forensic
Like everything Ayn Rand, that's completely upside down, since government is
also the only entity that has ever succeeded in guaranteeing people's rights.

So government is the best friend of man's rights, while libertarianism is the
biggest enemy. Libertarianism = corporate feudalism.

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anigbrowl
This thread is a sad example of why articles on politics are discouraged on
HN. None of the comments engage substantively with the article and most
consist of unsupported assertions, as well as failing at staatistics.

~~~
tinco
Haha is this comment meant to be self referential?

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AnthonyMouse
>But what I really hate is the class warfare and populist messages driving
fiscal policy.

This.

The thing that really gets me are the people who should know better, like
Warren Buffet. You read the article and he's making straw man arguments about
billionaires stuffing their cash in mattresses because their taxes are too
high -- nobody is arguing that. The real problem is that taxation is
economically distortionary and the higher you raise the rates, the greater the
distortion. Because taxes are only due when assets are sold (and in the
meantime the owner is collecting asset appreciation on the portion of the
value that would have been due in taxes), capital gains tax encourages
investors to hold their existing assets rather than seeking out more
economically efficient ones. It encourages them to invest in more stable
assets that can be held for a long period of time to defer taxes, rather than
taking a risk on a startup that could cause tax to be due sooner when there is
an IPO etc.

Or the tired numbers about how the rich are a lot richer now than they used to
be and their taxes are lower, without providing evidence of causation rather
than correlation. I mean sure, the richest might have 4.5X as much as they did
twenty years ago instead of 5X, but is that really the big problem? Or is the
real problem the regulatory capture and Wall St. shenanigans that allow the
rich to double their money every five or ten years while Main St. loses their
retirement fund to the same stock market?

At the same time, everybody just _assumes_ that if you want to collect more
tax money from the rich, raising the capital gains tax is the way to do it. Or
the same with corporations and corporate income tax. But both of them are way,
way too easy to avoid and for the same reason -- they depend on measuring
profit, and it's gotten to be trivial to make an entity look unprofitable on
paper. Raising the rates won't help that, it'll just push more people into tax
shelters.

If you want to tax the rich and corporate entities then you have to tax the
stuff they don't have a choice about doing. Sales tax, but the tax is paid by
the seller not the customer. Income tax, but the tax is paid by the employer,
not the employee. If you want to do business you need employees and customers,
so they can't avoid paying taxes with shelters and loopholes. That's how you
tax the rich. Capital gains tax is just a shell game that encourages
accounting tricks and offshore banking.

~~~
ianb
I'd kind of dismissed the idea of a consumption/sales tax as terribly
regressive, but it doesn't have to be, and lately I've been wondering what the
distribution might look like. To make a sales tax more progressive, you might
in effect say that the first $20,000 you spend is tax-free. If you have a 10%
tax, then you just give every individual $2,000 cash (and ignore that some
people spend less than $20,000 – that's the sort of loophole that can never
grow very large).

Given a system like that I'd be curious what the numbers might really look
like. How high a tax would we need? What would the actual tax burden look like
for different amounts of cash-back? Could we replicate something similar to
the progressivity we have now?

But there's still distortions. Consider high Shipping & Handling fees – these
are often done because S&H is considered a service, and so sales tax is not
levied on that portion of the cost. But a $0.01 book with $7 S&H is clearly
bullshit. But who is there to call the seller on that bullshit? Why are goods
taxed but not services? I've never been clear on that.

~~~
rdl
One interesting form of taxation might be to tax purely status purchases. e.g.
in countries like Singapore, where you don't really need a car, they tax cars
heavily -- yet rich people still go out of their way to get super expensive
cars to show off. Progressive real estate taxes, luxury taxes on vehicles,
expensive types of clothing or jewelry, etc. wouldn't deter purchases much,
but would raise money.

The most awesome tax I have ever seen is auctioning short license plates (done
in the middle east and Hong Kong) -- pure profit for the state, and artificial
scarcity created by the state. In fact, it's "better" for me to own the "1"
license plate if everyone knows I spent $10mm on it than if they thought I got
it by being lucky.

(In general, I'd like to see more VAT + poll + etc. taxes vs. income or
investment taxes. And taxes on things we want to discourage, like pollution.)

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jaggederest
Hmm, if only such a thing already existed...

<http://en.wikipedia.org/wiki/Alternative_Minimum_Tax>

Although when anyone in my lowly tax bracket has to worry about it, it's
pretty sad.

~~~
jcampbell1
AMT + Deduction Cap would be the same thing effectively, assuming the
deduction cap applied to _everything_. Right now the reason people make
millions and pay no taxes is because they give generously to charities, and
their investments are tax-free muni bonds. AMT still allows too many
deductions to force all the top earners into paying taxes.

~~~
rdl
The big deal is that AMT doesn't apply to capital gains (at least not
directly; it can cause you to blow the exemption cap though)

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tsotha
Hey Warren, instead of an income tax, don't you think a wealth tax would be
better?

Oh, I thought not.

~~~
ianterrell
At taxable income nearing $40 MM in recent years, I'd say he's a decent
candidate for speaking on income tax.

[http://www.huffingtonpost.com/2011/10/12/warren-buffetts-
inc...](http://www.huffingtonpost.com/2011/10/12/warren-buffetts-
income_n_1007516.html)

~~~
tsotha
Yes, well, with 1000x that in assets I'd say he's an _even better_ candidate
for a wealth tax.

------
sunsu
_“Well, it all depends on what my tax rate will be on the gain you’re saying
we’re going to make. If the taxes are too high, I would rather leave the money
in my savings account, earning a quarter of 1 percent.” Only in Grover
Norquist’s imagination does such a response exist._

The problem is not that the wealthy won't invest if they are taxed at higher
rates. Its that they will have LESS to reinvest with after gains are taxed.
Its strictly a matter of who you believe distributes resources more
efficiently: the government or the people.

~~~
hackinthebochs
Of course "efficiently" depends completely on what property you're trying to
optimize for. Individuals work for themselves, government (theoretically)
works for the people. It is not a given that "the people" will be more
efficient for all such properties.

~~~
w3pm
You misunderstand the context of efficiency. We're talking about efficiently
allocating limited capital resources. This is done by 'prices.' The government
by definition cannot efficiently allocate capital because there exists no
market signal from capital consumers as to how the scarce resources should be
best utilized. The government can only guess and spend.

~~~
hackinthebochs
I don't think I misunderstand the context. The definition that people
generally use when discussing this is making some fundamental assumptions that
simply do not hold up. Efficiency for efficiency's sake is meaningless--its
always in the pursuit of some greater goal. For the private citizen, that goal
is different than for a government. It is a flawed argument to assume that the
government does, or should, have the same goal as a private citizen.

~~~
w3pm
There's a fixed amount of labor capital in the US. Who decides how it should
be allocated? Let's pretend you believe we need to hire more teachers. Are you
right? If you were the government, you'd wave your hands and make it so. But
are you wasting labor on teachers we don't fully utilize? Perhaps we could
have really benefited from additional plumbers. How can we know?

The only known way to answer those questions is by asking the capital markets.
We all share the goal of best utilizing every citizen to raise our collective
standard of living. More broadly, it is in everyone's best interest to
efficiently use every type of scare capital resource we are afforded. Waste
helps no one.

Now, the fact that the capital markets are distorted and borderline useless
today is another discussion. Higher taxes won't solve that problem either.

~~~
hackinthebochs
The capital markets also tell us that we shouldn't invest in clean energy, or
basic scientific research. I would hate to see what education would look like
in some parts of the country if we let capital markets determine resource
allocation. The point is there are certain things that the market simply
cannot value correctly, but clearly do hold value to society. These are the
types of things that government is well suited for.

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mtgx
> Our government’s goal should be to bring in revenues of 18.5 percent of
> G.D.P. and spend about 21 percent of G.D.P

Makes sense, but _only_ after you've paid off all or the vast majority of your
debt, which means for a decade or two you'll need to have the income be
significantly higher than spending, and pay off the debt with the difference.

~~~
r00fus
Yeah, back before Bush's looting of the US treasury for his rich pals, we had
budget surpluses. In fact, it might have been possible that we would now have
paid off the debt if Bush never took office.

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ghouse
If small government advocates really wanted a broad base of support, they'd
insist that tax rates always cover government expenditures. Then people would
be upset about big government.

However, the current attack against raising taxes (from their current
historically low rates) only raises the debt and weakens our fiscal
foundation.

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neilkelty
If Mr. Buffet is so concerned about the amount of taxes paid by the wealthy he
should use this simple form
([https://www.pay.gov/paygov/forms/formInstance.html?agencyFor...](https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454))
to set an example.

~~~
arn
This is an absurd (yet common) response.

And if you are for a war, why don't you buy a gun and go fight?

~~~
mhartl
A more apt analogy would be, if you're for a war, why don't you enlist? But
lots of people in favor of wars do just that. What Buffett is saying is
essentially, "Let's institute a draft." Lots of wars have had that, too, of
course—which is not necessarily a good thing.

~~~
MaysonL
Of course, if there were a US draft (again), there might be fewer American
troops overseas, and more protest against the wars we do have. [Disclosure:
about 48 years ago, I tore up my draft card and mailed it back to the draft
board]

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bravura
Is it possible for non-investors (i.e. small business owners) to avoid taxes
using strategies like a "Cayman Islands mail drop"?

If so, I propose this HACK to solve the tax issue:

Create a site that disseminates information on how small businesses can avoid
(not _evade_ ) taxes using these approaches that are typically only known to
advanced acolytes. Evolve processes that significantly reduces the cost for
avoiding taxes effectively. (I imagine that that these complicated loopholes
aren't actually that complicated, just that the knowledge is rarified.)

If _many_ people, including a large portion of the upper-middle class, reduced
their tax liability, this would significantly increase the amount of attention
paid to this issue.

~~~
prostoalex
Small business owners are least affected by capital gains increase, since the
capital gains tax event is triggered only during sale. The proposed terms of
sale (taxation included) don't make sense for you as the business owner? Then
either ask for a higher price or don't sell.

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001sky
A major problem is income != wealth.

\-- And it took a constitutional amendment to tax income.

