I think the author is making a small fallacy regarding investments. He assumes that as the capital gains tax rises, investment will fall because the investor will make less money. This seems true for small investors, who might decide to "not invest" their money, and instead find starting their own business will have a higher return than buying GOOG stock.
But if I have $1 billion to invest, then I don't have the option of "not investing" that money. It has to sit in stocks, bonds, or some other financial instrument. A higher capital gains tax may change which instruments I choose to invest in, but that money will all still be invested.
A legitimate argument against higher capital gains taxes is that really great investors (i.e. the kind you want selecting investments, such as Buffet) will have less money to invest. This would hurt the economy, unless the corresponding good caused by government spending is greater.
I think everyone would agree there is a happy equilibrium somewhere. Most rich people think it lies on the side of less taxation. Buffet, in contrast, seems to think that quality investors don't add as much value as they want to believe.
> If I have $1 billion to invest, then I don't have the option of "not investing" that money. It has to sit in stocks, bonds, or some other financial instrument.
No it doesn't. I could buy an extensive auto collection. Or a yacht or some paintings. Something that is pretty much guaranteed to depreciate, but at least I'll get some use value out of it in the meantime. (This is why when Britain had top tax rates close to 100%, people bought Bentleys and Rolls-Royces.) When investment is taxed at punitive rates, consumption becomes more attractive.
First, I suspect most mega-rich find investing in all conditions far more enjoyable than anything that money might be able to buy.
Second, even if they wanted to buy, it takes time to spend billions of dollars. In the mean time, that money will be put to work in some form of financial instrument. Even if it's only sitting in a bank, the bank will make a more lucrative investment with it.
Third, it's not like buying an expensive auto collection is wasted money. That money will be used to build the infrastructure of those companies. This has the same shocking benefits of "pure" investment, although it is probably mildly less efficient.
> First, I suspect most mega-rich find investing in all conditions far more enjoyable than anything that money might be able to buy.
Um, why would you suspect that? Do you find investing just to be investing more enjoyable than anything money could buy? Why would the mega-rich be any different?
> Third, it's not like buying an expensive auto collection is wasted money. That money will be used to build the infrastructure of those companies.
What I had in mind was an antique auto collection of the sort featured in reddit a few days ago. Buying a warehouse full of deusenbergs, corvairs, the taxi from seinfeld and a batmobile doesn't really "build the infrastructure of those companies" Anyway, by that logic wouldn't all consumption be beneficial? Going on a round-the-world cruise builds the infrastucture of the cruise company, right? Heck, pay a prostitute enough and she might buy a house with the income - that also "builds infrastructure"...
Um, why would you suspect that? Do you find investing just to be investing more enjoyable than anything money could buy? Why would the mega-rich be any different?
I picked my job because it is very enjoyable to me. I would do it for free if I had too. The job of the mega-rich is to invest. They are under no financial pressure (like say a Mexican immigrant) that forces them to take that job.
Anyway, by that logic...
I totally agree that it's not the best use of the money, and would definitely rather see it invested wisely. At the same time, it's not like the money's just being burned. It adds a small inefficiency into the investment cycle, but apparently Buffet thinks this inefficiency is not as big as most other people do.
If you are interested in an auto collection or yachts or paintings, you'd already be buying those. You aren't going to say "Dang...I was going to invest my $1 billion and earn $200 million/year, but these new taxes mean I'll only earn $180 million so screw that--I'm going to quit investing and become a car collector".
It's quite possible for a small amount of additional tax to have a big impact on the expected value of investing. When you invest, you don't know you're going to make a specific positive rate of return; you have to make a guess as to whether the net benefit is positive. Depending on your risk profile, it might just be slightly positive net expected value, in which case adding just a bit more tax makes it neutral or negative.
BTW, if you're talking risk-free investment, that's around 2% now, not 20%. So the question is whether to invest $1 billion and earn $20 million. which would be $17 million under the existing capital gains tax (15%), but if you raised capital gains to match income tax rates it'd be less than $14 million. Which doesn't seem like much of a return on a billion dollar investment.
The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last decade).
In fact, if you read this article closely, it really doesn't present an argument, it just says "I don't wanna."
Buffett pays a lower percentage of income by choice. Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high.
Rather than punishing the rich for making smart decisions, let's instead educate the other people so they can make the same good decisions.
Tell me how people should choose to not to get born into poverty or a family that can't afford college.
You seem to think people should make their money from investment rather than production, which has little value for a society. We should encourage people to make money from actual productive work, rather than shuffling paper around. Having higher taxes on wages (actual work) rather than capital (shuffling paper) doesn't do it.
By that argument, you might as well push for a 99% capital gains tax. After all, people invest by choice. They're free to make money by other means, or not to make money at all.
he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high
The average citizen making $50k a year doesn't have the cash to buy that house and car (or even the other lifestyle purchases). They have a mortgage, a car payment, and a few thousand dollars in credit card debt. You couldn't use the money used to fund those purchases to invest in something that would allow you to draw income taxed at the capital gains rate. You'd need a lot more cash for the amount of investment that would net you enough to replace a salary.
You conveniently ignore the huge wealth discrepancies that allow the mega-rich the ability to derive the majority of their income from investments, rather than payroll. If you read Buffett's op-ed, his co-workers, who presumably make a good salary and are probably very savvy investors, pay effective tax rates nearly twice as high as Buffet. The only reason that Buffet and the mega-rich have a "choice" to pay lower effective tax rates is because they are mega-rich to begin with.
No one is 'punishing' the mega-rich. We are asking them to pay their fair share. They derive much greater benefit from the social stability provided by a strong government than does the average person. As such, they should be required to contribute accordingly.
I think you're missing the point of Buffett's argument. He's not paid a huge salary, he's making the vast majority of his money off of investments, and because he invests for the long-term, it means that when he does take profits, they'll be taxed at the long term capital gains rate, which is 15%, instead of the income rate of >35%. To "choose" otherwise, he would have to go out of his way to create short-term capital gains while maintaining a long view, which doesn't make any sense.
When the blog author argues that "Warren Buffet should write a check" he is not oblivious to the fact that asking everyone in your tax bracket to pay more taxes generates more revenue than making a voluntary contribution. Rather, he is arguing that Warren Buffet feeling guilty about not paying enough taxes is not a good basis for rasiing taxes on everyone in that category.
Rather, taxes should be placed where they will do the least harm to the economy. Check out http://en.wikipedia.org/wiki/Optimal_tax. Ideally, taxes should be placed where they will not distort people's behavior. So, the relevant question is whether increasing taxes on capital gains will have a change investors behavior making the economy less efficient. Buffet says "My rich friends will invest no matter what!" But, he provides no evidence to support this. On the margin, some investments will not be worth it with a higher tax (as described by lionhearted). How big of a problem this is up for debate. But we shouldn't make tax decisions based on Buffet's anecdotal experience with rich friends.
> So, the relevant question is whether increasing taxes on capital gains will have a change investors behavior making the economy less efficient.
This presumes that we currently have an optimally efficient economy. You're not allowing for the possibility that increasing the capital gains tax will make the economy more efficient, seeing as how, in your own view, the system is plenty distorted.
> Investing is the science and art of placing money where it does the most good
Err, no it isn't. It's the science and art of placing money where it will grow the most. That is neither equivalent nor synonymous with "does the most good".
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.
I think this post may understate the economic impact of low taxes on high incomes. While I agree that in the short term, the deficit actually isn't the biggest threat to the US economy, I do think we need to close it long term, and the main options are 1) spending less and 2) raising revenues. If you can get the second through growth, that's much better, but you have to be realistic about how much growth you're going to get.
If you agree that some revenues are an inevitable part of good governance, then taxes become inevitable. So while I'd agree that taxes (usually) deter desirable behavior such as work, investing, saving, spending, and so forth, it doesn't really make sense to talk about how taxes are innately bad. You need to think about what level of taxation you can get away with, and where taxation will do the least damage.
This is where I tend to part ways with most fiscal conservatives (though I like to think of myself as one).
My take on it is: estate tax? No, I don't like it. I'd much rather allow a person who has created great wealth to decide who to give it to.
Payroll taxes? No, don't like them. I'd much rather not deter work and put an immediate regressive tax burden on people who get off their asses and work poorly paid jobs.
So which is worse. A 10% tax on estates above $5 million, or a 13% tax on the lowest income workers in America?
Which tax cut provides more benefit to the economy? A decrease in capital gains from 15% to 10%, or a decrease in marginal tax rates for the middle class? Which one would lead to more spending if you need to jump start the economy?
You can tell which way I lean, I'm sure, but I consider these good questions for reasonable debate. But I do think that a higher tax rate on very wealthy individuals that enables a lower tax rate on low income individuals (through, say, a reduction in the payroll tax) could bring a lot of tax relief where it is needed most, and might be a better jump start to the economy than "trickle down" economics.
If there is more demand for government bonds (due to higher capital gains taxes, for example), I imagine the yields on government bonds will decrease. That would probably help the economy more than hurt it.
Taxes (in general) apply to _gains_, inflation applies to _principal_. If 30-year Treasuries start paying 2%, capital gains could be taxed at 50% and people would still invest in equities just to have a shot of not having the real value of their wealth cut in half over the next 20 years.
The apocalyptic vision expressed in the article (nobody will invest in bonds! and nobody will invest in stocks!) is overblown. The market will adjust to demand, and the fear of inflation will grow as bond interest rates decrease.
Buffet says the mega rich aren't being taxed enough.
Daniel assumes this means "raise the capital gains tax" and argues that it'd hurt a lot more than the mega rich.
If there's anything government can do well, it's the ability to tax creatively. A simple solution (and I'm not saying it's the best solution) would be to expand the income tax to cover all forms of income (lowering it in the process) and eliminate the capital gains tax.
I didn't want to get into the discussion here on HN -- seems like everybody wants to fight the battle of taxes 2012.
But I did want to point out that the purpose of my article was to demonstrate my confusion and ask you guys for help, not necessarily to state that policy would hurt more than the mega rich. I understand the reasons pro and con for tax reform -- it's a great topic. What I didn't understand is what the hell Buffett was trying to argue: fairness, social efficiency, marxist philosophy, what?
As part of that, I felt that I had to come clean and show my position -- I think the entire debate is phony and just a way to control the masses. But I really, really didn't want to get into the politics. My interest as a writer and outhouse philosopher was the clarity of his piece, not the validity of the argument. (Commenter Ron came by the blog and made a great defense of Buffett's position. You should read it if you're interested.) Once we state our case clearly, then productive discussion has a chance to begin.
And it beats the living shit out of me how asking questions can somehow be taken as challenging Buffett or talking outside my expertise. The whole idea of asking questions is to demonstrate you don't have knowledge and to ask for help. People act as if I somehow called Buffett out. Geesh.
You said "I understand that people want higher taxes on the rich. I think it's stupid, but I'm not going to argue about it." This is not a question, it's a statement, and a provocative one at that. Saying you're not going to argue about it is not going to stop discussion on exactly that point.
You also said "His real argument is probably too snooty of an argument to make in print, but something tells me that's what he's really getting at. I wished he'd have just come out with it, though. It would have been a lot more honest."
This strongly implies that the author (Buffett) is dishonest in his arguments. I'd say that's calling him out.
"Honest" as in "straightforward," "direct" As opposed to convoluted or hard-to-interpret. Not honest as in telling the truth. If I tell you that it was about time to make an honest offer on a house, that doesn't mean that somehow you have been lying all along. The social utility argument was, in my mind, his best one. He should have been more direct about making it.
The first part was simply an expression of my bias. I owed that to the reader.
Last comment: this has long ago passed the point of diminishing returns.
I originally wrote "intellectually dishonest" mostly out of habit. It's a phrase I like. But then I looked at it and realized that was way too harsh of a statement. Buffett is not lying here. He's just a nice old man (probably a little on the cranky side) who wants to play at politics a bit.
I don't think there was any subterfuge or lying at all going on. What I think is that he could have used a good editor, but probably when you are worth 3 kazillion dollars it's tough to get somebody to take you out to the woodshed and tell you to tighten up your piece, make a thesis, and then support it. I have structural problems with the article, not concerns about the honesty of the author.
Note bene: since the effective tax rate on the wealthiest Americans is lower than that of almost everyone else because of how tax law treats investment income, Buffett's argument is for the time being indifferent between progressive and flat taxation.
For people saying "It won't make a difference on capital investment" I point you to the Windfall Profits Tax in Mongolia. It was a 68% tax on any mining deposits found.
Well, so what? If you're profitable, who cares if some is taken off the top?
But if you thought that, you'd be mistaken. Simplified example:
You're thinking of building a mine. It's going to cost you $100M. There's a 50% chance the mine contains $220M in deposits and a 50% chance it's a total dud.
With no windfall profit tax, your average return is:
.5(-$100M) + .5($220M-$100M) = +$65M profit, for a 65% return.
Of course, you'll never get $65M. You'll either wind up -$100M or +$120M.
Buuuut, if the government taxes that at 50%, your new EV is:
.5(-$100M) + .5[($220M-100M)/2] = -$40M average return, for -40%.
Those aren't funny numbers. A 50% tax on profits drives capital out of risky-but-lucrative industries, since you're holding the bill if it fails but you're writing a fat check if it succeeds.
It's a simplification. In theory, you could maybe create a conglomerate that averages all sorts of bets like that together. But in reality, there will be some companies that have a 50% chance of losing everything, and a 50% chance of more than doubling your money... that work out mathematically with low-ish taxes, but aren't endeavored with higher taxes.
Mongolia repealed the windfall profits tax a few years ago, by the way, and billions of investment capital went in almost immediately into mining.
That doesn't seem correct. For the second case, where the mine contains $220M in deposits, shouldn't it be:
-$100M cost to build mine
+$220M revenue from sale of deposits
------------------------------------
$110M profit
That leaves you with $220M from the sale of deposits less $55 million for the 50% tax on the $110M profit, so you end up with $165 million.
So, starting with $100M to invest, half the time you end up with $0, half the time you end up with $165M, giving an average outcome of $82.5M, for an average return of -17.5%.
Without a tax, half the time you end up with $0, and half the time you end up with $220M, so the average outcome is $110M, for an average return of 10%.
I agree with the reduction in expected value, and on its effect in reducing investment in risky-but-lucrative industries, but I think even as a simplified calculation you should consider the tax deduction from the capital loss which can usually be carried over several years.
If I have (say) a 5 year period to carry forward capital losses and that over that time I can open several mines (as you suggest), then the tax is essentially applied to the average profit as opposed to the peak profit. I suspect this tax-efficiency of scale is a significant reason for why you end up with huge corporations in such industries (oil and gas, minerals). Opening a single "mine", the failure of which results in bankruptcy and no future profits from which to deduct losses, is essentially taxed out of viability in an expected-value sense, whereas a large portfolio in an enduring profitable company is profitable in an expected sense.
I think my group should pay its fair share (paraphrasing)
OK, lets do little example.
Suppose a large group of your friends a pizza and half the people just hadn't paid. Would you say "hey, I'll pay for all these people" or "hey, we all need to pay our fair share".
You missed the point. That's exactly what Buffet wants. In the pizza example, the people who are not paying their fair share are not the minimum-wagers, but rather the mega-rich who pay only 15% capital gains.
The post I'm replying to placed "pay my fair share" in opposition to paying for the pizza eaten by the people who didn't pay for themselves. I'm pretty sure that the point you're making is not the point he was making, which to me sounded like the standard argument against progressive taxation.
Let's start with the first argument:
"His message seems to be 'I'm rich, and I want the super-rich like me to pay more in taxes.'
That's great. Write a check."
But him writing a check isn't the point. If Warren writes a check, we get that check's worth of new government income. If taxes are raised, for Warren's contribution of the same check, we get much larger pool of spending. Put more simply: plan (a) warren donates $10 and we get $10 of government income; plan (b) warren is taxed +$10 and we get $10K of new government income.
The rest of the blog is well characterized as Dunning Kruger in action.
You picked the least interesting point of Markham's to disagree with.
These two were more interesting:
> Ok, I'm calling bullshit. What does "sensible investment" mean? Does it mean the amount invested, the risk, and the amount expected in return? Because last I checked, you'd take the amount you're getting in return and decrease it by your tax rate.
He then goes on to note tax-deferred and tax-advantaged investments will see capital move to them if tax rates are changed.
Which is a good point. And yes, every serious investor calculates their after-tax return and makes it one of their decisionmaking criteria. That's a crucial point that's obvious when written out, but many people miss it.
> The rest of the blog is well characterized as Dunning Kruger in action.
This should be Godwin's Law II: Whoever accuses someone else of Dunning Kruger loses the argument. There were interesting points in there. You apparently disagree, but that's not a good reason to be flippant. Just address the points you disagree with. Changing tax laws changes the suitability of investments and changes the allocation of investments made and legal structures used. Those are good points and seem correct on a glance.
Well said. The guy also makes a good point that Buffett isn't clear what he is advocating. Does he want to raise the capital gains tax only on the mega rich or raise capital gains taxes for everyone which would have a disproportionate impact on the mega rich who get most of their income from capital gains? The former wouldn't raise that much revenue. The latter would encourage people to consume instead of investing their money.
"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."
Anyone who has the imprudence to argue with Warren Buffett, the savviest investor of all-time, is most likely a victim of the Dunning-Kruger effect. If you can't understand why, then you also may be a victim of the same effect.
Being a savvy investor does not necessarily imply being an expert on public policy. And your statement pretty much nullifies any attempt to ever argue with anything Warren Buffett says, which isn't a very productive stance to take.
> Anyone who has the imprudence to argue with Warren Buffett, the savviest investor of all-time, is most likely a victim of the Dunning-Kruger effect.
So you can't argue with him about...
-Parenting?
-Philosophy?
-Regulation?
-Physical fitness?
> If you can't understand why, then you also may be a victim of the same effect.
Markham pointed out that capital is going to be invested differently if tax laws change.
I mean, duh, right? It's an obvious, correct, and important point that was overlooked in the OpEd for some reason.
If you disagree that changing tax laws is going to change capital investment, the burden is firmly on you to explain why instead of just saying "Dunning Kruger" which is basically a sophisticated way of calling someone an idiot.
So I'm holding by the "Godwin's Law II" suggestion - if you try to call someone out on Dunning Kruger, you lose. If you've got a good argument, just make it instead of calling names.
I am still waiting for someone to make a good argument that effectively counters Buffett's OpEd.
'changing tax laws is going to change capital investment' is not an argument against changing tax laws. Capital investment is affected daily by economic growth, interest rates, investor confidence, and a large number of other factors. Buffett points out in his OpEd that when capital gains tax were much higher in the past than they are currently, economic growth was higher than it is now. This implies that higher capital gains results in more effective investment. Until you can counter that, you do not have a point to make (and please, no more comparisons to Mongolia).
Also, only someone affiliated with the Nazi party would try to come up with an addendum to Godwin's Law. Sorry, I had to.
Force is unethical. The government's fundamental tool--which distinguishes it from most other organizations--is that it forces people to do stuff under the threat of violence (and it often actually employs violence to demonstrate that it is serious). The government is therefore unethical. Taxes shouldn't exist at all, because it just a protection racket from a scaled up version of the mafia. The answer is not to scale the taxes on the rich up, but to scale the taxes on everyone down to zero. Exchanges between people should be voluntary only. This is the only ethical solution. This will require a cultural change where everyone realizes how unethical it is to employ force to get things done.
This is not initiation of force. It is enforcement of contract, in this case an explicit social contract. Many libertarians make a big deal of "men with guns" enforcing laws, yet try to overlook the fact that "men with guns" are the basis of enforcement of any complete social system. Even if libertarians reduced all law to "don't commit fraud or initiate force", they would still enforce with guns.
It's explicit? Great! Can you tell me exactly what this explicit contract says, who signed it, and how it is that whoever signed it managed to get my power of attorney?
The constitution and the laws are our written contracts with the government.
There are several explicit means by which people make the social contract with government. The commonest is when your parents choose your residency and/or citizenship after your birth. In that case, your parents or guardians are contracting for you, exercising their power of custody. No further explicit action is required on your part to continue the agreement, and you may end it at any time by departing and renouncing your citizenship.
Immigrants, residents, and visitors contract through the oath of citizenship (swearing to uphold the laws and constitution), residency permits, and visas. Citizens reaffirm it in whole or part when they take political office, join the armed forces, etc. This contract has a fairly common form: once entered into, it is implicitly continued until explicitly revoked. Many other contracts have this form: some leases, most utility services (such as phone and electricity), etc.
wikipedia quote: "Spooner bolstered his argument by noting that the federal government, as established by a legal contract, could not legally bind all persons living in the nation since none had ever signed their names or given their consent to it - that consent had always been assumed, which fails one of the most basic burdens of proof for a valid contract in the courtroom."
Adding "and the laws" is problematic because "the laws" are vague, unknowable, constantly changing and in fair part contradictory with one another and with the constitution.
The argument that the government contract even could work this way pretty much assumes what needs proving: that the government "owns" the country and all the land and people in it. If the government doesn't automatically own your land and your kids, it can't be assumed that you've contracted with the government by virtue of buying a house or being born. But if the government does own your land and your kids, no social contract is needed - your allegiance is already mandated without it.
Actually read my post this time. The argument clearly addresses Spooner's argument that there is no signing of names or giving consent. Your parents explicitly give consent by making you a citizen of the United States when you are born or, if you immigrated, by explicitly pledging allegiance.
Also,
"No Treason" is a lengthy rant that doesn't take longer than the first paragraph to begin its egregious errors.
For example, in the first paragraph: "It [The Constitution] purports, at most, to be only a contract between persons living eighty years ago." Thus he focuses his attention on the Preamble, and evidently ignores Article VII, which says EXACTLY who contracted for the Constitution:
"The ratification of the conventions of nine States shall be sufficient for the establishment of this Constitution between the States so ratifying the same. Done in Convention, by the unanimous consent of the States present, the seventeenth day of September, in the year of our Lord one thousand seven hundred and eighty-seven, and of the Independence of the United States of America the twelfth. In Witness whereof, we have hereunto subscribed our names."
[signatories FOR STATES omitted.]
He's wrong on this simple matter of fact: the constitution says who contracted with whom. But then he goes on to make a big deal about the people of that era being dead, as if contracts between organizations lapse when their office holders depart.
The rest of his "analysis" is equally shoddy, and consists largely of calling government a collection of thieves and murderers at least 75 times. David Friedman, in "The Machinery of Freedom", says Spooner "attacks the contract theory of government like a lawyer arguing a case": but REAL presentations of cases have to cope with counterarguments, and can't depend so heavily on invalid presumptions which are easily shot full of holes.
As for the argument that the laws are vague, unknowable and constantly changing -- part of the law is that the law will be interpreted by the courts. Yes this does mean that you can be in unknowing violation of the law. However, it was part of the contract that you agreed to. By staying in the US as a US citizen you are continuing to re-up your contract. If you don't like this contract then you are free to emigrate.
Look, if I wanted to read Huben's "non-libertarian FAQ", I'd do that. I don't need you quoting random snippets at me (without linking to it) as if they contained actual information.
But tell you what, two can play at that game. I wrote a counter-FAQ a decade ago. I'll quote from that. :-)
> He's wrong on this simple matter of fact: the constitution says who contracted with whom.
What the constitution says regarding its own ratification procedure is essentially irrelevant to the argument that Spooner is making. Spooner's comments speak to the question of who this contract should be considered binding upon. Article VII is not overlooked, it is simply irrelevant to this question.
To illustrate: Suppose I wrote a document which I called the "NNL Constitution" that included the line, "Glen Raphael hereby has the legal right to seize Mike Huben's television and automobile."
In Article VII of this document I would write this: "The ratification of the conventions of three Fiefdoms shall be sufficient for the establishment of this Constitution between the Fiefdoms so ratifying the same. Done in Convention, by the unanimous consent of the Fiefdoms present, the nineteenth day of January, in the year one thousand nine hundred and ninety-six. In Witness whereof, we have hereunto subscribed our names."
[signatories FOR FIEFDOMS omitted.]
"I'd sign this as a representative of my fiefdom. I'd get a couple other libertarians to sign for the other two fiefdoms, one of which is defined to include Huben and his property. The head of the fiefdom having jurisdiction over Huben would have been duly chosen for that role in a "popular vote" that didn't happen to include Huben . Now, is the NNL a valid document with respect to Huben? The answer is clearly no. No matter what the document says, the people who signed that document didn't have his power of attorney so they have no ability to contract on his behalf. They can make binding contracts with each other but not with him, without his consent.
Googling up and regurgitating talking points made by people "on your side" is no substitute for thinking about what the person you're talking to is saying. If you want to see where Spooner is right or wrong, there's no substitute for reading Spooner. Reading Huben's dismissive take on Spooner is not going to make you more informed.
Just as one can't use what it says in the bible as evidence that we are bound by what the bible says, you can't use what it says in the constitution as evidence that we are bound by what the constitution says. It's a document. Anybody can write a document and make claims about it. The question is: are those claims reasonable and legally binding? Spooner had interesting things to say about this. Huben...not so much.
>By staying in the US as a US citizen you are continuing to re-up your contract. If you don't like this contract then you are free to emigrate.
Suppose I live in a bad neighborhood where my car regularly gets broken into or my apartment burgled. You could say that by staying in that neighborhood, I agree to a "social contract" that includes these sort of infrigements. And if I don't like it, I could move. That is the "contract" we have with the US - essentially the same one might have with a local mafiosa. The organization lets you keep your livelihood as long as you stay in line, under threat of force if you step out of line. Don't try to pretty it up.
It's not an explicit contract, it's an implicit one and it is coerced. The idea of a "social contract" is a theory about how consent could have been acquired in some society, but it's not relevant to any actual society - the governments we've got generally got in through terror and force and the populace tacitly putting-up-with-it. We "consent" because we don't want to go to jail, because we want to go along with the crowd, or because we don't see any other options. Not because our parents made some grand gesture they didn't even realize they were making. The random assortment of actions you say constitute signing a contract all have in common that they don't involve actually, you know, signing a contract.
There's a difference between "refuted" and "dubiously asserted, ignoring all arguments to the contrary". :-)
Looking back on this exchange, the core of our disagreement is the word "explicit". A contract is an agreement. If I sign a piece of paper saying I agree to something, that is an "explicit" contract. But if you merely infer based on my actions in some context that I've agreed to something, you are arguing for the existence of an implied contract.
Huben's text confuses the agreement with the terms being agreed to. The legal codes might be written down explicitly but my consent to them is not written down - it is at best implied. There is no explicit social contract. If you claim there is, what's the basis for your claim? When you say agreement is established by doing X or Y, how do you know that? Just because Huben said so? What is the source of your knowledge that these ten acts establish a contract and some other set of acts don't? Could I not with equal justification claim that, say, picking your nose makes you a citizen of Hackerstan and subject to some random set of laws I've written down?
> Your citizenship is the explicit signature on the contract.
A "citizenship" is not a tangible thing. I didn't do anything specific to get a "citizenship", so how can my allegedly "having" one constitute an explicit anything?
Do you not see how circular the argument is? Is your claim really that (a) I'm bound to the US legal code because I "have a citizenship", and (b) I "have a citizenship" because the US legal code says I do? Are you sure you've thought this through?
> As long as you are a citizen you are a signatory.
I'm sorry, but to me the word "signatory" implies having signed something. Your claim makes about as much sense as saying "as long as you have red hair you are a signatory".
> You can remove your name at any time.
That is not actually true; you can't renounce citizenship without the government's consent which it only grants in limited circumstances. You can't do it while residing in the US and if you have significant assets or income in many cases you need to either keep paying income tax for TEN YEARS after you leave or are required to pay a huge one-time lump sum. The practicality of the situation is a bit like being born a slave and having the (limited) right to purchase your freedom later in life.
But if I have $1 billion to invest, then I don't have the option of "not investing" that money. It has to sit in stocks, bonds, or some other financial instrument. A higher capital gains tax may change which instruments I choose to invest in, but that money will all still be invested.
A legitimate argument against higher capital gains taxes is that really great investors (i.e. the kind you want selecting investments, such as Buffet) will have less money to invest. This would hurt the economy, unless the corresponding good caused by government spending is greater.
I think everyone would agree there is a happy equilibrium somewhere. Most rich people think it lies on the side of less taxation. Buffet, in contrast, seems to think that quality investors don't add as much value as they want to believe.