Buffett: Raise Taxes on ‘Coddled’ Billionaires

[Simon_Jester]

Overally they do, but that's just because the wealthy own a disproportionate amount of stocks full stop. Once we allow for that, dividends are actually a far better means of return for smaller investors, either directly (retail) or through their pension funds, because they lack the insider information (now rebranded as 'expert networks') to make the real money in price appreciation (i.e. a killing on pump-and-dump scams).

They're better, so you don't want to preemptively tax them since it's in the public interest for small investors (individually or collectively) to move to them... is that what you're saying?

On top of that, even retail investors are mostly members of the middle and upper class, not the lower;

What happened to all the agnst about the death of the American middle class? Or when enough people drop out of it is it ok to envy-hate the remainder? Regardless, see above about dividends from mature companies being traditionally the best way for pension funds to have secure earnings.

A tax which hits the middle and upper classes, but not the lower, is less bad than one which hits all classes. Which was the point of the rest of my sentence.

People who at least have a pension plan to worry about are better off than underemployed people who can only live paycheck to paycheck because of the charity of whoever's subsidizing their rent, for example.

So when we talk about the regressive nature of a tax, we must distinguish between very regressive taxes (such as a flat 'head tax' paid per capita, which could totally eat the income of a poor enough citizen), moderately regressive taxes (such as a sales tax which impacts everyone but can never take away a large share of your income as long as the tax rate is low), and 'insufficiently progressive' taxes.

A tax on corporate profits which impacts dividends is 'insufficiently progressive,' by your argument. Paupers pay effectively zero of that tax since they receive no dividends. The middle class pays some, the upper class more... and corporations will reliably be paying the tax all the time, which reduces the funds they have available to dick with the economy.

[Starglider]

They're better, so you don't want to preemptively tax them since it's in the public interest for small investors (individually or collectively) to move to them... is that what you're saying?

I am saying that;
(a) we should encourage corporations to pay dividends instead of ludicrous exec salaries and disruptive and wasteful (but very lucrative for investment bankers) merger activity
(b) we should endeavour to make taxation on investment income at least as progressive as taxation on earned income, arguably more so because the American middle class really needs to be encouraged to save

I would in principle advocate a whole raft of tax incentives to direct investment away from unproductive speculation and into job-creating industries, on condition that the US tax code is vastly simplified first to give some complexity breathing room. There isn't much point going into detail though because the political feasibility is basically zero.

A tax which hits the middle and upper classes, but not the lower, is less bad than one which hits all classes. Which was the point of the rest of my sentence.

Neither corporation nor capital gains taxes directly impact low income earners. As others have pointed out high corporation tax does cause companies to headquarter abroad, wheras high capital gains tax causes individuals to try and shelter more of their income offshore. Since individuals are frankly easier to target than multinational corporations this is another reason to tax at the point of transfer to the individual rather than trying to get at the money while is still circulating the byzantine financial plumbing of large corporate treasuries. Rich individuals can afford pretty good tax accountants, but corporations can (and do) employ orders of magnitude more to optimise their tax dodges.

[Simon_Jester]

They're better, so you don't want to preemptively tax them since it's in the public interest for small investors (individually or collectively) to move to them... is that what you're saying?

I am saying that;
(a) we should encourage corporations to pay dividends instead of ludicrous exec salaries and disruptive and wasteful (but very lucrative for investment bankers) merger activity
(b) we should endeavour to make taxation on investment income at least as progressive as taxation on earned income, arguably more so because the American middle class really needs to be encouraged to save

Okay. Cool.

I would in principle advocate a whole raft of tax incentives to direct investment away from unproductive speculation and into job-creating industries, on condition that the US tax code is vastly simplified first to give some complexity breathing room. There isn't much point going into detail though because the political feasibility is basically zero.

By "complexity breathing room," you mean... let me guess...

...That the code should be simplified so that compliance becomes easier, making it easier for entities to file taxes, and easier for auditors to check tax paperwork, so that the new tax incentives could be introduced in a 'paperwork-neutral' way.

Am I right?

Neither corporation nor capital gains taxes directly impact low income earners. As others have pointed out high corporation tax does cause companies to headquarter abroad, wheras high capital gains tax causes individuals to try and shelter more of their income offshore. Since individuals are frankly easier to target than multinational corporations this is another reason to tax at the point of transfer to the individual rather than trying to get at the money while is still circulating the byzantine financial plumbing of large corporate treasuries. Rich individuals can afford pretty good tax accountants, but corporations can (and do) employ orders of magnitude more to optimise their tax dodges.

Yep. Makes sense.

[ArmorPierce]

The article illustrates for me the amount of indirect taxation you guys get. The US income tax might be low, but a mean of 36% tax isn't really that much lower than Australia, where the top bracket is 48% and only the very rich will get that on more than a very small amount of their income. I'm actually very surprised that even the wealthy professionals Buffett works with pay such a large proportion of their income as tax.

Is American tax law more easily evaded than other countries?

Even though the top tax rate is 36%, the way the tax system works is that they pay way less than that. I believe it actually was buffet who stated that he pays a smaller percentage of his income in taxes than his secretary and he challenged others to demonstrate them paying more than their own secretaries.

[ArmorPierce]

Seems to me like Buffet is the exception. Most American billionaires don't agree with him.

Actually, I believe there was a survey that showed that the billionaires were liberal leaning. It's the Multi-millionaires that are the greedy conservatives.

[Stark]

Even though the top tax rate is 36%, the way the tax system works is that they pay way less than that. I believe it actually was buffet who stated that he pays a smaller percentage of his income in taxes than his secretary and he challenged others to demonstrate them paying more than their own secretaries.

Did you read the article? He's talking about effective tax; what his employees actually paid. Buffet paid about 17% in tax, his mean employee paid 36%. The (I assume) includes all the non-income taxes, and so is a better measure of the tax load than the raw tax rates.

My point is that it's a lol that American tax really isn't that much lower than a heavy socialised nation like Australia, and yet they have a small fraction of the social services.

[ArmorPierce]

Did you read the article? He's talking about effective tax; what his employees actually paid. Buffet paid about 17% in tax, his mean employee paid 36%.The (I assume) includes all the non-income taxes, and so is a better measure of the tax load than the raw tax rates.

Yes I realize this this is what I am referring to. What do you think I'm talking about? Did you read my post?

My point is that it's a lol that American tax really isn't that much lower than a heavy socialised nation like Australia, and yet they have a small fraction of the social services.

Agreed that Americans get little bang for it buck, but my point was that the rich pay a lot less than in taxes in terms of percentage than many making way less.

[Stark]

Are you fucking stupid?

Even though the top tax rate is 36%, the way the tax system works is that they pay way less than that.

I have no idea what the top tax rate is and I don't care. Saying 'they pay way less than that', when he just said that's the mean tax paid by employees is pretty strange.

[KrauserKrauser]

Well, the easiest way he is able to get a low tax rate is through all of his income coming not in the form of salary but in long terms capital gains. At a flat 18% it is easy to get that down lower through various tax shelters etc. I am surprised he pays that high of a rate, I would think that he could reach 12% or lower with the various loopholes that exist. His employees might be paid large salaries but salaries are the highest taxed form.of income.

Until.they get rid of differentiating investment income from.salaries and institute a significant estate tax, our landed gentry is going to continue in their harmonic rule.

[Napoleon the Clown]

Thing is, Buffet doesn't make use of any fancy loopholes. He claims that he just does basic deductions. Do keep in mind, of course, that he doles out tons of money to various charities, so he does get breaks there. If he were in the mood to dodge taxes he could. He doesn't seem to overly care about doing so.

Of course, he's been saying that the top income brackets are taxed way too low for years now, saying that the middle class and lower class get too much in taxes. This isn't news so much as Buffet reiterating something he has said dozens of times.

[Darth Wong]

A lot of the problem is cultural. Japan, Canada, and European nations are not overrun with corporations which pay obscene monies to their executives, but they generally don't have special rules to discourage that sort of thing. Instead, people just don't seem to try to do it in the first place. But in America, there seems to be no shame. I don't know if this is contagious; a lot of American cultural ideas do eventually spread to other countries.

[Shroom Man 777]

Could it be a cultural thing? Europe and Japan have established cultures and their wealthy families run back for a long time and might have ingrained values and shit. Whereas in America, their culture is predicated on sudden rises and booms due to opportunistic guys making it big back in the days of cowboys and pilgrims and gold prospectors, so instead of some kind of respectful establishment that's lasted for forever while co-existing with the rest of the nation and the government, American rich guys are not quite as respectful of the institutions and don't temper themselves and instead just fixate on getting more and more money.

[Edi]

Because as it stands now the [corporate tax] rate itself is too high - 2nd highest in the world.

This here is an outright falsehood. It takes less than two minutes of googling to find several nations where the corporate tax rate is higher than in the US.

You are right about the tax loophole stuff, though, since the taxes paid by corporations as a share of GDP in the US is the lowest in the OECD countries, and that is as of 2003. We all know there have been more tax cuts after that.

If any lowering of the corporate tax rate is to be done, say to Finland's levels (28%), it should be a strict on/off condition with the loopholes: Tax cut only if all loopholes are unequivocally and permanently closed. No loophole closures, no tax cuts of any sort.

[Rogue 9]

Seems to me like Buffet is the exception. Most American billionaires don't agree with him.

Actually, I believe there was a survey that showed that the billionaires were liberal leaning. It's the Multi-millionaires that are the greedy conservatives.

In fact, I seem to recall Buffett and Bill Gates co-signing a statement saying basically this same thing during the Bush administration. He's not the only one.

[J]

Perhaps he should put his money where his mouth is.
And maybe he can pay back all the money he stole made from the government via the bailouts given to Wells-Fargo, of which he's the largest shareholder.

[Rogue 9]

Perhaps he should put his money where his mouth is.

That isn't the point. Buffett himself doesn't have enough money to bail out the government, even though he has a lot. The point is that there needs to be some taxation of top earners generally for the good of the country. Over the long term, accumulation of wealth at the top at the expense of the lower economic strata of society is bad for everybody, including those doing the accumulating. You can only do that so long before conditions get desperate enough to prompt a less-than-civilized reaction. We're not close to that yet, but I think everyone would rather we didn't get close.

A better use of his money to achieve his objective would be to heavily lobby Congress for tax increases at the top, perhaps with the addition of another tax bracket or two. I don't know if he's doing that, but it would certainly be more productive than giving his wealth to the Treasury and having nothing long-term result from it.

[TheHammer]

Because as it stands now the [corporate tax] rate itself is too high - 2nd highest in the world.

This here is an outright falsehood. It takes less than two minutes of googling to find several nations where the corporate tax rate is higher than in the US.

Outside of Japan, you won't find a higher corporate tax rate amongst the industrialized world - which would be potential competitors for corporations to make their HQ's. Perhaps I could have been clearer, but its not really an "outright falsehood". The statement I made has been made by many others from all accross the political spectrum.

http://dailycaller.com/2011/03/16/ameri ... -in-april/

You are right about the tax loophole stuff, though, since the taxes paid by corporations as a share of GDP in the US is the lowest in the OECD countries, and that is as of 2003. We all know there have been more tax cuts after that.

If any lowering of the corporate tax rate is to be done, say to Finland's levels (28%), it should be a strict on/off condition with the loopholes: Tax cut only if all loopholes are unequivocally and permanently closed. No loophole closures, no tax cuts of any sort.

That's exactly what I'm saying. The rate itself is too high, but the tax loopholes need to be closed so that large corporations with the resources to relocated off shore aren't able to fuck over the government while corporations in U.S. soil are left to shoulder an unncessary burden. Lowering the rate and closing the loopholes levels the playing field in that regard.

[Phantasee]

It's still a little early for me so forgive me if I get this backwards, but would a lower tax rate lead to less borrowing by corporations? Since debt-financing is so beneficial from the tax planning perspective, and it would be less attractive if the potential savings became less, to the point where the costs and issues of more debt-financing would outweigh the benefit, leading to more building up of equity?

[Darth Wong]

It's still a little early for me so forgive me if I get this backwards, but would a lower tax rate lead to less borrowing by corporations? Since debt-financing is so beneficial from the tax planning perspective, and it would be less attractive if the potential savings became less, to the point where the costs and issues of more debt-financing would outweigh the benefit, leading to more building up of equity?

Is there some reason to believe that the problem with the economy is excessive corporate borrowing?

[mr friendly guy]

A lot of the problem is cultural. Japan, Canada, and European nations are not overrun with corporations which pay obscene monies to their executives, but they generally don't have special rules to discourage that sort of thing. Instead, people just don't seem to try to do it in the first place. But in America, there seems to be no shame. I don't know if this is contagious; a lot of American cultural ideas do eventually spread to other countries.

We seem to have the same idea with our CEOs as well with the same apologetic arguments (eg if you pay peanuts, you get elephants) used. Of course we like to be America mark II, but with socialised medicine and no capital punishment.

[ComradeClaus]

Could it be a cultural thing? Europe and Japan have established cultures and their wealthy families run back for a long time and might have ingrained values and shit. Whereas in America, their culture is predicated on sudden rises and booms due to opportunistic guys making it big back in the days of cowboys and pilgrims and gold prospectors, so instead of some kind of respectful establishment that's lasted for forever while co-existing with the rest of the nation and the government, American rich guys are not quite as respectful of the institutions and don't temper themselves and instead just fixate on getting more and more money.

Does make sense. Also in the context of making big risks, which leads to a lot of the disasters that befell wallstreet.

[Phantasee]

It's still a little early for me so forgive me if I get this backwards, but would a lower tax rate lead to less borrowing by corporations? Since debt-financing is so beneficial from the tax planning perspective, and it would be less attractive if the potential savings became less, to the point where the costs and issues of more debt-financing would outweigh the benefit, leading to more building up of equity?

Is there some reason to believe that the problem with the economy is excessive corporate borrowing?

Not corporate borrowing, as far as I can tell. I'm just thinking out a possible effect of a lower corporate tax rate.

[Darth Wong]

It's still a little early for me so forgive me if I get this backwards, but would a lower tax rate lead to less borrowing by corporations? Since debt-financing is so beneficial from the tax planning perspective, and it would be less attractive if the potential savings became less, to the point where the costs and issues of more debt-financing would outweigh the benefit, leading to more building up of equity?

Is there some reason to believe that the problem with the economy is excessive corporate borrowing?

Not corporate borrowing, as far as I can tell. I'm just thinking out a possible effect of a lower corporate tax rate.

Ah. Well in that case, since employee salaries are tax-deductible, it seems that another potential consequence of lower corporate tax rates is that there is even less incentive to create new jobs.

[ArmorPierce]

Are you ******* ******?

Even though the top tax rate is 36%, the way the tax system works is that they pay way less than that.

I have no idea what the top tax rate is and I don't care. Saying 'they pay way less than that', when he just said that's the mean tax paid by employees is pretty strange.

I see what he is saying, I was confused as to what he was talking about since he mentioned tax bracket and effective tax in the same sentence and I thought he simply misspoke.

Don't be silly. Regardless of that, my post was in reply to his questioning of whether their a tax loops and such that get exploited which lowers one's effective tax while he did mention their own highest tax bracket, which there is (loopholes that). Or did you miss that part

[phongn]

A lot of the problem is cultural. Japan, Canada, and European nations are not overrun with corporations which pay obscene monies to their executives, but they generally don't have special rules to discourage that sort of thing. Instead, people just don't seem to try to do it in the first place. But in America, there seems to be no shame. I don't know if this is contagious; a lot of American cultural ideas do eventually spread to other countries.

The rise of the large multinational conglomerate is indeed starting to drive this - executive compensation has to be seen as competitive with American executive pay.