Warren Buffett - "stop coddling the super-rich"

[GwynnInTheHall]

It's quite simple, really. Some of us believe that the concept of personal liberty extends to how people choose to dispose of the wealth they have rightfully earned. And we are equally astonished that you have no moral issue with confiscating wealth from people who have rightfully earned it and distributing it to people who have no valid claim to it whatsoever.

I guess here's the rub. Though some/most people abide by a moral code that prevents them from taking advantage of the system, some do not. not every penny earned by everyone is "rightfully earned". Some people lie, cheat and steal (not all or even most, but some) to make profit. Some use the loopholes in the tax system to prevent paying their "fair share" some use a broken system which allows them to increase profits, while keeping wages down. There are many scenarios that show, not all people have 'Rightfully earned" their income. If everyone played by finite rule, designed to protect the integrity of the system and were forced to pay their fair share of taxes rather than being allowed to pay others to find ways to legally avoid them, I'd totally agree with your premise of allowing people to do anything they want with their own money.

It's a lot like Poker Sheep, would you play in a game that allowed collusion? Angle shooting? No you wouldn't because it isn't fair. That;'s why the best games are those with rules that protect the integrity of play and make the competition as fair for everyone as they can-- so that is your ability/skill, that wins the day and not the depth of your wallet, the extent of your collaboration/collusion with another or your ability to skirt the intent of the rules to gain an advantage.

Find a way to make the realm of finances, income and taxes an even playing field for everyone--and then people like myself won't have any issue with how you choose to spend your 'Rightfully Earned' income.

[Judge Jude]

The economic collapse and the reasons for it do tend to weigh against the "rightfully earned" concept. "Moneyball" author Michael Lewis laid it out masterfully in "The Big Short' book of last year.

[OaklandA's]

First, despite the 23 vs 27% argument, the fact remains that the weatlhy do pay the greatest share - by far - than any of the rest of us peasants to maintain the system you mention. In 2008, the top 1% of earners paid 38% of all income taxes and earned 20% of all income. That means they paid almost double (1.9:1) their share in income taxes relative to income earned. This ratio is slightly lower (1.85:1) for the "super-rich", or top 0.1% earners.

This distribution is a natural consequence of a progressive tax system. A simplified example - assume we have 1,000 people making $10K a year, and 1 person making $4M/year. The table below shows the total revenue, tax collected, share of income, and share of the tax burden. (Note: this assumes one rate for all income, which isn't true, but doesn't change the conclusion.)

In this example, yes the top bracket is earning 28.6% and paying 48.3%, but that is exactly how the system is supposed to work.

People	Income/Person	Rate	Total Rev	Tax Collected	AGI %	Tax %
1000	   10,000   	15%	10,000,000	1,500,000	71.4%	51.7%
1	4,000,000	35%	4,000,000	1,400,000	28.6%	48.3%

When the total income distribution between the brackets changes, the burden on each side changes too. But the system hasn't become less fair. Suppose we change the number of people in the lower bracket to 5000.

People	Income/Person	Rate	Total Rev	Tax Collected	AGI %	Tax %
5000	   10,000   	15%	50,000,000	7,500,000	92.6%	84.3%
1	4,000,000	35%	4,000,000	1,400,000	7.4%	15.7%

The top bracket's income share would drop to 7.4% and their tax burden is now 15.7%. By your logic, the system is now less fair, because the ratio of 15.7/7.4 = 2.12 is higher than the previous case of 48.3/28.6=1.69. But the system hasn't changed - it's just that the income distribution between brackets has shifted.

For the right wing, this second situation is a moral outrage, because their tax ratio has shifted upward. But what actually happened? There are more poor people than before.

[Judge Jude]

I do find the OaklandA's analysis intriguing.

[amcg]

This distribution is a natural consequence of a progressive tax system. A simplified example - assume we have 1,000 people making $10K a year, and 1 person making $4M/year. The table below shows the total revenue, tax collected, share of income, and share of the tax burden. (Note: this assumes one rate for all income, which isn't true, but doesn't change the conclusion.)

In this example, yes the top bracket is earning 28.6% and paying 48.3%, but that is exactly how the system is supposed to work.

People	Income/Person	Rate	Total Rev	Tax Collected	AGI %	Tax %
1000	   10,000   	15%	10,000,000	1,500,000	71.4%	51.7%
1	4,000,000	35%	4,000,000	1,400,000	28.6%	48.3%

When the total income distribution between the brackets changes, the burden on each side changes too. But the system hasn't become less fair. Suppose we change the number of people in the lower bracket to 5000.

People	Income/Person	Rate	Total Rev	Tax Collected	AGI %	Tax %
5000	   10,000   	15%	50,000,000	7,500,000	92.6%	84.3%
1	4,000,000	35%	4,000,000	1,400,000	7.4%	15.7%

The top bracket's income share would drop to 7.4% and their tax burden is now 15.7%. By your logic, the system is now less fair, because the ratio of 15.7/7.4 = 2.12 is higher than the previous case of 48.3/28.6=1.69. But the system hasn't changed - it's just that the income distribution between brackets has shifted.

For the right wing, this second situation is a moral outrage, because their tax ratio has shifted upward. But what actually happened? There are more poor people than before.

Excellent post.

[Moonlight J]

I wish there were a "like" button so I could break the sumbitch with what Oakland A's just posted.

[onejayhawk]

I guess here's the rub. Though some/most people abide by a moral code that prevents them from taking advantage of the system, some do not. not every penny earned by everyone is "rightfully earned". Some people lie, cheat and steal (not all or even most, but some) to make profit. Some use the loopholes in the tax system to prevent paying their "fair share" some use a broken system which allows them to increase profits, while keeping wages down. There are many scenarios that show, not all people have 'Rightfully earned" their income. If everyone played by finite rule, designed to protect the integrity of the system and were forced to pay their fair share of taxes rather than being allowed to pay others to find ways to legally avoid them, I'd totally agree with your premise of allowing people to do anything they want with their own money.

It's a lot like Poker Sheep, would you play in a game that allowed collusion? Angle shooting? No you wouldn't because it isn't fair. That;'s why the best games are those with rules that protect the integrity of play and make the competition as fair for everyone as they can-- so that is your ability/skill, that wins the day and not the depth of your wallet, the extent of your collaboration/collusion with another or your ability to skirt the intent of the rules to gain an advantage.

Find a way to make the realm of finances, income and taxes an even playing field for everyone--and then people like myself won't have any issue with how you choose to spend your 'Rightfully Earned' income.

There is a fundamental problem with this. Leaving aside that what you are saying is so general that it comes under the heading of "Life is unfair, then you die.", a level field is purely illusionary.

For example, take Affirmative Action. When the Nixon Administration started the concept, it was just a guideline. Hiring agents were to make an extra effort to find qualified candidates among black applicants. This quickly became a quota system. Reverse discrimination became a buzz word. The issue is no where near settling, 40 years later. Every loophole in the IRS code was put there to level the field in some way. Once it is there, it is available to any who qualify.

J

[GwynnInTheHall]

Just because people screw up the practical application of something doesn't make it an Bad idea. If the field is unfair, then get used to people trying to even it out.

Either make it fair or take the corrections as they come--OR admit you just don't give a **** about anyone else but yourself (not meaning you personally, just anyone who adheres to this 'Tough ****" mantra).

It really is that simple.

[Wonderboy]

Economics is certainly not my strong suit so all I can do is add random thoughts. I don't agree with Chancellors feeling that the system is unfair to the rich since they pay the greatest share. It seems like they pay the greatest share because they make the greatest amount of money. Their lot has been getting better and better under the current system while it's gotten worse for everyone else. I'm having a difficult time working up any moral outrage at the tough situation the rich have in this country.

I agree with Judge Jude that their wealth was not "rightfully earned", at least in many cases. I honestly don't begrudge them their wealth, especially the guys like Jobs and Gates and others who innovated their way into their wealth. But many of the wealthy got their wealth the old fashioned way -- they inherited it. And the ones who earned it during the last decade hardly earned it rightfully in many cases. I'm in the mortgage business and believe me, there wasn't much rightful about it. The system was gamed from A to Z. I have a problem with that group claiming the moral high ground.

I agree with the applause for Oakland A's post. Very nice and even I could follow it.

But mostly I agree with GwynnInTheHall, in that we are either all in this together or at least let's drop the hypocrisy and admit it's every man for themselves in a Darwinian economic and political system. Personally, I think an interstate highway system is good for all of us. I think every person getting the chance at a decent education is good for all of us. I think health care for every child is good for all us. I think giving the elderly a modicum of economic security is good for all of us. I truly believe we are all in this together.

I've paid my fair share of taxes. My bet is that I've paid far more than most here. And I don't begrudge one penny of it because this country has been very good to me and my family. So I'm not asking for the upper income levels to pay more than their fair share. I just want them to pay their fair share and I don't think they are doing that now.

[cardboardbox]

Sheep will probably state his points more succinctly and eloquently than I will, but I'd like to take my own shot.

First, despite the 23 vs 27% argument, the fact remains that the weatlhy do pay the greatest share - by far - than any of the rest of us peasants to maintain the system you mention. In 2008, the top 1% of earners paid 38% of all income taxes and earned 20% of all income. That means they paid almost double (1.9:1) their share in income taxes relative to income earned. This ratio is slightly lower (1.85:1) for the "super-rich", or top 0.1% earners.

This is the key area which Sheep and I differ with the Left Wing Boys Choir (and, Sheep, that's was brilliant, I hope you don't mind me using it...). I find someone whose burden of taxes is double what he earns to be fair and progressive. Our LWBC does not.

Second, the myth that the government will redistribute additional income in some equitable fashion is laughable to the core. That myth is even more laughable when we consider that the federal government might redistribute that income equitably among the poor. The federal government - regardless of party in power - will redistribute money in a method it feels will best propagate itself in power. If you for some reason think the present administration is different, I'll open the bidding with "green jobs".

Third, our federal government has not proven worthy of receiving greater income from anyone. The deficit levels under the Bush administration weren't good. Under the Obama administration, they're the equivalent of nuclear waste on future generations. Our deficit spending is pushing 40 cents on the dollar. As I've noted previously, show me a trillion per year in spending cuts, and I'll be all for the $200 billion per year or so you'd get from eliminating the Bush tax cuts - and that total of $1.2 trillion per year in spending cuts and tax increases would simply get us to deficit levels similar to the GW Bush era. But first, show me some real spending cuts, not this piddly pissing in the wind stuff from the last agreement.

Fourth, the concept that extreme income redistribution provides long term benefits to the poor has been historically repudiated so often that it staggers the mind that it could be brought up again. We have extreme cases - West Germany vs. East Germany in the years from 1946-1986, for example. We have recent evidence - Britain has far more "progressive" tax rates than the US, yet has even higher underemployment and social unrest than we have. Finland has the legendary Scandanavian social net - and 22% unemployment and ridiculous levels of alcoholism. Heck, even smart left-wingers like Lula in Brazil get it - he's managed to cut government spending and get inflation under control..and voila, jobs and income per job increases.

Post of the Month right here.

[TranaGreg]

Post of the Month right here.

personally I like DMT's better.

What is the priority in this country? Protecting millionaires' ability to afford a 3rd home or a 4th car, or ensuring that children don't starve and have access to quality education? (it's obviously not that black and white but I just don't understand how people who will never sniff the levels of income we are talking about are so protective of those who have it).

[DMT]

Sheep will probably state his points more succinctly and eloquently than I will, but I'd like to take my own shot.

First, despite the 23 vs 27% argument, the fact remains that the weatlhy do pay the greatest share - by far - than any of the rest of us peasants to maintain the system you mention. In 2008, the top 1% of earners paid 38% of all income taxes and earned 20% of all income. That means they paid almost double (1.9:1) their share in income taxes relative to income earned. This ratio is slightly lower (1.85:1) for the "super-rich", or top 0.1% earners.

This is the key area which Sheep and I differ with the Left Wing Boys Choir (and, Sheep, that's was brilliant, I hope you don't mind me using it...). I find someone whose burden of taxes is double what he earns to be fair and progressive. Our LWBC does not.

Second, the myth that the government will redistribute additional income in some equitable fashion is laughable to the core. That myth is even more laughable when we consider that the federal government might redistribute that income equitably among the poor. The federal government - regardless of party in power - will redistribute money in a method it feels will best propagate itself in power. If you for some reason think the present administration is different, I'll open the bidding with "green jobs".

Third, our federal government has not proven worthy of receiving greater income from anyone. The deficit levels under the Bush administration weren't good. Under the Obama administration, they're the equivalent of nuclear waste on future generations. Our deficit spending is pushing 40 cents on the dollar. As I've noted previously, show me a trillion per year in spending cuts, and I'll be all for the $200 billion per year or so you'd get from eliminating the Bush tax cuts - and that total of $1.2 trillion per year in spending cuts and tax increases would simply get us to deficit levels similar to the GW Bush era. But first, show me some real spending cuts, not this piddly pissing in the wind stuff from the last agreement.

Fourth, the concept that extreme income redistribution provides long term benefits to the poor has been historically repudiated so often that it staggers the mind that it could be brought up again. We have extreme cases - West Germany vs. East Germany in the years from 1946-1986, for example. We have recent evidence - Britain has far more "progressive" tax rates than the US, yet has even higher underemployment and social unrest than we have. Finland has the legendary Scandanavian social net - and 22% unemployment and ridiculous levels of alcoholism. Heck, even smart left-wingers like Lula in Brazil get it - he's managed to cut government spending and get inflation under control..and voila, jobs and income per job increases.

Sorry to burst CBB's bubble, but your 1st point has already been debunked by OaklandAs.

No one was claiming your 2nd point; inefficiency in redistribution of resources is a given and an acceptable cost IMO.

Your 3rd point I mostly agree with. Ending the wars will also significantly cut costs and there is no excuse for them to continue IMO (except that Obama doesn't want sh*t hitting the fan until after he's re-elected, which is inexcusable).

How did we get to 'extreme income redistribution' by proposing modest tax hikes for the wealthy? The capital gains tax could easily be restored to prior levels without turning us into Britain or Finland, no?

[Moonlight J]

Zandi was on POTUS today on SXM radio and went into about how he'd leave the tax rates alone and first attack the loopholes the upper 5% get to avoid paying into the system

[PaleoMan]

The economic collapse and the reasons for it do tend to weigh against the "rightfully earned" concept. "Moneyball" author Michael Lewis laid it out masterfully in "The Big Short' book of last year.

But the dirty little secret is that these bandits could have never pulled off such a massive, far-reaching heist without the aid and support of the federal government. That's what everyone continues to ignore. Think of our federal government as a giant web that grabs together capital, labor, & assets, that the private sector in their wildest dreams would never be able to consolidate. That's why it needs to be handcuffed to a manageable size.

[senorsheep]

Zandi was on POTUS today on SXM radio and went into about how he'd leave the tax rates alone and first attack the loopholes the upper 5% get to avoid paying into the system

Now, see, why not make this the first point of attack? This is a simple fairness concept that people of any political stripe can get behind - "It's not right for the wealthy to use their money and influence to carve out tax loopholes for themselves." Start with obvious low-hanging fruit that majorities on both sides would like to see picked. Why didn't Obama and his Democratic majority go after this when they had the chance - can you imagine any politician trying to defend this practice in the court of public opinion? These are the kinds of obvious wrongs I was hoping Obama would right as president, vs. initiatives like ramming through an unpopular healthcare boondoggle that was ultimately stripped down to the point of near uselessness.