Buffett: Raise Taxes on ‘Coddled’ Billionaires

[Zaune]

The large number of staff the insurance companies will end up laying off are going to need something else to do for a living, TheHammer is right about that much. After all, most of them are perfectly ordinary people who probably don't like company policy any more than we do but have to keep a roof over their heads somehow.

Fortunately, however, this will not present a huge problem. Taking the NHS as a rough guide, the US government would have to employ almost ten million people to provide the same level of healthcare provision as British residents receive, of which not even half are medical staff.

[Darth Wong]

The large number of staff the insurance companies will end up laying off are going to need something else to do for a living, TheHammer is right about that much. After all, most of them are perfectly ordinary people who probably don't like company policy any more than we do but have to keep a roof over their heads somehow.

You could say this about any socially harmful activity which generates money for individuals. For example, if you outlaw robbery, then robbers need some other way to make a living. If you outlaw the Nigerian money fraud scheme, then Nigerian money scammers will need some other way to make a living. Just think of their children!

[Stark]

You can also say that about any activity that becomes economically useless - after all, stagecoach drivers, zeppelin manufacturers and witch-doctors all need to put a roof over their heads. The difference is if the government competes in an industry, there's somewhere to move, rather than the many industries that have simply disappeared throughout history.

The modern career doesn't involve staying in one job for 50 years anymore anyway, so the issue is probably overstated - unlike the profiteering of an industry so corrupt that EVEN THE GOVERNMENT can do it cheaper.

[D.Turtle]

Hell, all those people losing their jobs at those health insurance companies would probably be a net benefit, because then they could actually work in an area that is not actively harmful to the people and economy of the US.

[kaeneth]

...
The modern career doesn't involve staying in one job for 50 years anymore anyway, so the issue is probably overstated - unlike the profiteering of an industry so corrupt that EVEN THE GOVERNMENT can do it cheaper.

I'm agreeing with Stark...wtf.

In all seriousness tho, there is a various obvious solution for dealing with the unemployed caused by taking over the health insurance system:

Hire those that become unemployed. Promise salary (up to $40k for a single year while they find new jobs) for everyone the Government makes unemployed. Of course, the costs of this would go straight to the deficit...so no one would sign off on it. :/

[Rogue 9]

Investment risk is one thing, but the notion of an elected government stepping in and essentially seizing an industry is something else entirely. If it is to be done, there should be some sort of compensation.

Funny ... this is exactly what the South said about slavery, almost to the letter.

Actually, when offered compensation in return for emancipating their slaves, the slaveholding border states that remained in the Union refused to accept the deal, electing to keep their slave system all the way until the passage of the 13th Amendment, at which point they lost their slaves and got jack shit for it. Rightfully so, but they had the opportunity to be paid full market value by the government and turned it down.

Anyway, the Daily Show still wins.

[Darth Wong]

Well, I guess you learn something new every day. I knew they thought it was an injustice that their slaves were just taken away without compensation, but I didn't know that the government had actually offered to give them full compensation before.

[Simon_Jester]

It was easier than getting into a political fight over it.

Also, in the northern states that had already abolished slavery there were a lot of similar provisions with similar motives in the laws, though the states there didn't outright buy up slaves from private owners. Consider the way that Pennsylvania handled emancipation: under an emancipation law passed in 1780, a slave woman born in 1779 could remain enslaved for her entire life, and her daughter remain enslaved until 1848.

[Darth Wong]

In any case, the basic equation is the same: people who do something abhorrent for profit, demanding compensation when this means of income is taken away. And as it turns out, the mollycoddling of such people is the same too.

[Simon_Jester]

Yeah. When you've got a custom of saying that it's basically legitimate for people to make a living doing something, changing that takes either a generational shift or a revolution. People don't easily do a quick about-face from "these people are a valid part of society" to "fuck them, let them starve!"

When it comes to American health care, there are a lot of Americans who, if informed their brother is getting a job at an insurance company, will not react as if he were taking up a life of crime. Those Americans are flat out not going to say "fuck the insurance companies," and aren't going to be happy with anyone who says it. And it'd take a while to change that.

[Darth Wong]

Yeah. When you've got a custom of saying that it's basically legitimate for people to make a living doing something, changing that takes either a generational shift or a revolution. People don't easily do a quick about-face from "these people are a valid part of society" to "fuck them, let them starve!"

Oh yes they do, if they're blue-collar workers in factories. America has shed millions of those kinds of jobs in the last 30 years, with economists and right-leaning politicians standing there clapping the whole damned time. Apparently, we just don't find it tolerable if they're farmers or suit-wearing paper pushers.

When it comes to American health care, there are a lot of Americans who, if informed their brother is getting a job at an insurance company, will not react as if he were taking up a life of crime. Those Americans are flat out not going to say "fuck the insurance companies," and aren't going to be happy with anyone who says it. And it'd take a while to change that.

There would still be health insurance companies after a government takeover; they would just be a lot smaller. There will always be those who want a higher level of service than the government insurer provides, or more perks. That kind of "supplemental" health insurance is provided by almost every large employer here in Canada, to pay for things like eyeglasses, dental work, etc. Not every kind of health care is what you would call life-sustaining.

[TheHammer]

Its a big step to go from saying there should be regulation and government oversight of corporations, which I'm in favor of, and putting them out of business.

Of course that's a big step. The amount of public interest involved in the case of health care is huge, and it justifies such a big step. Moreover, because the public option was deleted, this health care reform bill actually forces people to buy their product; not only does it fail to eliminate these parasites, but it actually forces people to enrich them.

The HCRA also forces insurance companies to comply with some basic standards of service and protection for people to prevent termination of coverage that did not exist previously. And did extend care to many Americans who did not have coverage. That's a net positive in my view.

Just because someone works for an insurance company doesn't neccessarily mean they are a bloodsucker. Granted, many of them probably are, but for the most part they are just people trying to make a living. If the government is going to step in put all of those people out of work and take over a multi billion dollar industry then its not unreasonable to have ask the question "what about the companies" in that industry. The answer to that question didn't have to be "They'll be just fine" or "fuck 'em", it simply needed to be a course of action to compensate people who did invest in the industry, and a plan to handle the people who will invariably lose their job.

Why? Every single day that these companies are in operation, they are hurting people. Why should we take our time to avoid pain to the people who profit from this injury, rather than hurrying to reduce the pain to the people who are suffering from it?

In many cases the insurance companies pay the claims they are supposed to pay. This system has and does work for a large number of people. Obviously, there were problems with certain unscrupulous business practices and with people unable to find affordable coverage. But again, that's what the HCR legislation took a big step towards addressing.

Investment risk is one thing, but the notion of an elected government stepping in and essentially seizing an industry is something else entirely. If it is to be done, there should be some sort of compensation.

Funny ... this is exactly what the South said about slavery, almost to the letter.

Well we did fight a rather bloody civil war over that issue too.

I know the system is fucked up. But it was always too big to be something that could be fixed overnight. By no means do I view recently passed HCR as the final evolution of healthcare. However, it was a big first step. The final iterations of this will I feel lead to the end of the insurance industry, but there needs be a plan in place to deal with the investors and employees of that industry. That plan can not be to simply say "fuck em".

Yes it can. Let the heavens fall, but fuck 'em.

Well let me rephrase, a plan that is going to be accepted by the American people can't be to simply say "fuck em".

Also, take note of Surlethe's post just before yours. He points out (quite rightly) that conservatives have absolutely no problem with the idea of eliminating other kinds of economically parasitic jobs.

If anything, all you're doing is exemplifying the problem I described before: pro-corporatism is so deeply entrenched in America that people have internalized it, and you are demonstrating that syndrome in action: you are trying to manufacture reasons why the elimination of economically parasitic jobs is a bad thing when they're corporate, even though it's almost universally agreed to be a good thing when they're public.

This isn't a liberal/conservative concern that I have. Personally, I don't have a problem with government taking over the industry for the public good, so long as the plan is in place to compensate the employees and investors in that industry.

[Darth Wong]

The HCRA also forces insurance companies to comply with some basic standards of service and protection for people to prevent termination of coverage that did not exist previously. And did extend care to many Americans who did not have coverage. That's a net positive in my view.

Regardless of whether you feel it's a net positive, it still has the effect of further enriching an industry which regularly profits by denying people the health care they thought they had paid for.

In many cases the insurance companies pay the claims they are supposed to pay. This system has and does work for a large number of people. Obviously, there were problems with certain unscrupulous business practices and with people unable to find affordable coverage. But again, that's what the HCR legislation took a big step towards addressing.

And as I said, it creates an offense/defense situation. As long as the profit motive is there, the problem will persist. Lawyers and lobbyists will punch this gargantuan regulation so full of loopholes that it will look like a sieve. Do you know how many pages long the Canada Health Act is? 14 pages, including a French translation. Compare this to your health plan, weighing in at over 2000 pages with only one language.

Funny ... this is exactly what the South said about slavery, almost to the letter.

Well we did fight a rather bloody civil war over that issue too.

The point is that it was wrong to act as if those who benefit from unethical conduct should be compensated when they lose it.

Well let me rephrase, a plan that is going to be accepted by the American people can't be to simply say "fuck em".

Don't turn this into a debate over political popularity. You made this your own position as well, so you should defend it yourself instead of saying that the American people wouldn't accept it. The American people won't accept a lot of things that would otherwise make sense.

This isn't a liberal/conservative concern that I have. Personally, I don't have a problem with government taking over the industry for the public good, so long as the plan is in place to compensate the employees and investors in that industry.

And you still have not explained why they deserve to be compensated. You simply keep saying it as an assumption, and acting as if I will agree to it if you repeat it enough times.

[Simon_Jester]

Yeah. When you've got a custom of saying that it's basically legitimate for people to make a living doing something, changing that takes either a generational shift or a revolution. People don't easily do a quick about-face from "these people are a valid part of society" to "fuck them, let them starve!"

Oh yes they do, if they're blue-collar workers in factories. America has shed millions of those kinds of jobs in the last 30 years, with economists and right-leaning politicians standing there clapping the whole damned time. Apparently, we just don't find it tolerable if they're farmers or suit-wearing paper pushers.

True, but not quite what I was getting at.

The dismantling of the American industrial base wasn't something politicians came out in favor of, not explicitly. No one got elected by saying "fuck factory workers!" Not even the people who did fuck factory workers and let them starve.

Likewise, no one will get elected by saying "fuck insurance company employees!" Even if they privately don't give a damn whether insurance companies survive or not.

So you won't see people saying, in American public discourse, "fuck insurance company employees, let them starve, or find some more honest trade like 'card shark.'" Because it's not a popular position. The insurance companies aren't viewed as illegitimate enterprises the way drug dealers or pimps are.

That's the part that takes big social shifts to change.

And I say this even though I know damn well it'd be for the best if the shift happened. I'd love to see America circa 2015 or 2020 as a place where fat cats and greedheads who make money at the expense of the general public are viewed as parasites rather than upstanding captains of industry. I hope I'll live to see it sooner or later, if not quite so soon. But I don't want to underestimate how big a paradigm shift it'll take to make that happen.

[TheHammer]

Funny ... this is exactly what the South said about slavery, almost to the letter.

Well we did fight a rather bloody civil war over that issue too.

The point is that it was wrong to act as if those who benefit from unethical conduct should be compensated when they lose it.

Health insurance companies are not morally equivalent to slavery. No one is saying unethical behavior should go unpunished, but companies out there that have provided the services they have been paid to provide shouldn't be simply "put out of business" by the government with no compensation whatsoever. The incidents of wrongfully denied coverage are the exception, not the norm.

Well let me rephrase, a plan that is going to be accepted by the American people can't be to simply say "fuck em".

Don't turn this into a debate over political popularity. You made this your own position as well, so you should defend it yourself instead of saying that the American people wouldn't accept it. The American people won't accept a lot of things that would otherwise make sense.

I'm just giving you the pragmatic approach to actually getting things changed. I already cited the practice of eminent domain where on occaisions when government takes private property for the public good, the owners of that property are justly compensated. Property isn't just seized and the owners told to "fuck off" simply because its in the public good. I think the parallel there is obvious.

This isn't a liberal/conservative concern that I have. Personally, I don't have a problem with government taking over the industry for the public good, so long as the plan is in place to compensate the employees and investors in that industry.

And you still have not explained why they deserve to be compensated. You simply keep saying it as an assumption, and acting as if I will agree to it if you repeat it enough times.

I don't expect you to agree with me. But I feel that when you invest in an industry in good faith, then you should not be punished by your elected government stepping in and essentially taking your investment with no compensation whatsoever. If you work in a buisness then if the government is seeking to end that business they should have a plan in place to retrain, or otherwise assist you in finding employment in another industry. To speak nothing of the repurcussions of doing such a thing. After all, why would someone then invest in another company with the thought that government may some day decide to step in and take that over? Why bother trying to innovate a new product if the government can simply step in and take it from you?

All that being said, I'm not opposed to a public option in healthcare, but it has to be done right. If the government is going to nationalize the industry for the "sake of the public good" it had better have all its ducks in a row.

[Phantasee]

Read this earlier today:

Warren Buffett wants to be taxed on this, so you won’t tax him on that.
Posted on August 15, 2011 by Pastabagel

Warren Buffett wants us to stop coddling the super-rich. He argues for superlatively higher taxes on those with incomes greater than $1 million a year.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

Let’s say we take Buffett’s advice, and we raise taxes so that those highest 400 income earners pay an additional 20% more in income taxes (i.e. 41.5 instead of 21.5). That would mean an additional $18 billion in revenue. Nice, right?

That other list of 400 people–the Forbes 400–represents a total net worth in excess of $1.4 trillion. The US doesn’t tax wealth, but other countries do. If we did, at a modest 10%, it would mean an additional $140 billion in revenue every year.

But we never talk about taxing wealth, only income. The class warfare lines are clearly drawn, the playbook is well-worn, and the media knows their lines by heart. Even the magnanimous super-rich, represented here by Buffett, know their part. Sure, tax us rich guys another dozen percent on our income. Don’t worry, we can take it.

Thanks, Warren. So I guess you won’t mind if we tax you on your net worth. Hello? Is thing on?

The moment someone with $45 billion dollars volunteers to be taxed over here on his paltry income, you can bet it’s because they don’t want you looking over there at their accumulated wealth.

There are of course lots of arguments against taxing wealth–many from the European experience–such as issues of fairness and double taxation, the incentivization of tax-avoidance and sheltering schemes, incentivization of leverage, etc. But none of that really matters.

The situation as it stands is objectively pretty serious. $14 trillion in debt, slow to no economic growth, 9% unemployment, a surprising number of insufferable baby boomers surviving unkilled into retirement, etc. And yet, we continue to have the same debates over taxation we’ve always had.

I don’t think those debates will lead anywhere productive, because any point on the income tax solution space is one that has already been tried in the past and is a point on the path that has led inexorably to where we are now. And where we are now, in human terms, is rioting in London, anti-immigrant radicalization and violence in Europe, civil wars in the oil-producing Middle East, and 44 million Americans on food stamps (a full 10% more than last year).

The problem is not more revenue, the problem is a lot more revenue very quickly. And the only way you are going to get this is by getting at the cash and wealth hoards held by individuals and corporations. You can’t tweak personal income taxes to get enough money fast enough, because there isn’t enough income. You can’t raise corporate income taxes because our faceless overlords will just pass the negative savings onto us.

And while you could cut entitlements, how long do you think it will be before those 44 million Americans Jean Valjean their way through Walmart windows all across America?

We need to change the rules about what we tax and how, and we need to get much more comfortable with the idea of constructing radically different rules for radically different levels of wealth. The assumption underlying the Reagan-era tax cuts that dramatically altered all post-war taxation in the US was that if you let more people at the top keep their money, it would work it’s way through the system. This is certainly true of the $200,000 income earners who spend their money on more expensive cars, countertops, Apple products and anti-depressants for their kids. But it is not true of the super-wealthy. Most of Buffett’s wealth is tied up in Berkshire Hathaway stock, which does not even pay a dividend. If he were to sell some of it and undertake an historic cocaine-and-stripper fueled orgy, that at least be a good example of wealth tricking down to the “differently-advantaged” segments of the economy. But Buffett insists on being frugal, thrifty, and from what I can tell entirely devoid of any chemical dependency. The same is true of Bill Gates, Steve Jobs, and the rest. So trickle down economics doesn’t work, at least not for the super duper rich.

So if the problem is we need a lot of money fast and the conventional ways of getting it don’t work, then the obvious thing to do is to try some unconventional ones. With that I propose the following crazy ideas that become slightly less crazy with each new car fire:

New rule: Tax corporations 35% on cash or short-term holdings in excess of 1 year’s operating costs/expenses.

New rule: If a household holds more than $10 million in cash, stock, bond or other securities, tax those holdings at 10%.

New rule: Income below the median US income of the previous year is exempt from federal income and social security taxes in the current year.

New rule: Set the short-term capital gains tax on derivatives to 75%.

New rule: Ban all commodity ETFs.

What’s the worst that can happen, that wasn’t going to happen anyway?

[Lord Zentei]

What’s the worst that can happen, that wasn’t going to happen anyway?

Capital flight.

BTW, derivatives are a more reliable way of getting profits down to the average shareholder than profits from trading is, since the average shareholder doesn't have either the experience nor the information that the bigwigs do. The 75% tax on those is not a good idea if you're thinking about leveling the playing field.

[Simon_Jester]

The second half of the question, though- "...that isn't going to happen anyway?"

That's the tricky bit, Zentei. We can't eliminate welfare entirely because we then have umpty million people with no food and/or desperately sick grandparents to support. We'd be very hard pressed to raise income taxes high enough to close the structural deficit, let alone to do anything else that might cost money in an attempt to jar the economy out of the doldrums.

So what happens if we don't actively tax the rich to fix the problem? Will things just revert to 'normal' in a few years, so that 2015 looks pleasantly like 2005 did?

[Lord Zentei]

Of course the rich should be taxed more. But I'm voicing concern about what happens with a significant property tax being imposed to address the problem as suggested by the article. As opposed to, say, repealing the Bush tax cuts for a start, and cutting back on military adventurism.

The US is not going to close the budget in a hurry, at least not safely. Here's how I see the situation:

There are these three things that need to be done:

• Measures enacted in the hopes of improving welfare.
• Measures enacted in the hopes of achieving a quickly balanced budget.
• No capital flight.

Pick two.

[Zaune]

Capital flight.

Frankly, so what? What are most people in the United States with ten million dollars or more doing with it? Are they investing it in new and existing businesses so they can expand, making large donations to charity, even spending it on shit they don't need? If their capital is just sitting in a bank account or stock portfolio, accumulating more interest than they can spend and serving no purpose for its owner except as a way of keeping score, it doesn't matter one way or another if they do offshore it.

[Lord Zentei]

Capital flight would critically undermine the dollar and cause a massive spike in inflation.

[J]

Let’s say we take Buffett’s advice, and we raise taxes so that those highest 400 income earners pay an additional 20% more in income taxes (i.e. 41.5 instead of 21.5). That would mean an additional $18 billion in revenue. Nice, right?

Wrong. Those people would find a way to make a larger portion of their income disappear or become non-taxable. There will be more revenue, but not on a linear 1:1 scale.

That other list of 400 people–the Forbes 400–represents a total net worth in excess of $1.4 trillion. The US doesn’t tax wealth, but other countries do. If we did, at a modest 10%, it would mean an additional $140 billion in revenue every year.

Only if their wealth replenishes itself at that same rate or a higher rate.

New rule: Tax corporations 35% on cash or short-term holdings in excess of 1 year’s operating costs/expenses.

Congratulations, you've just destroyed most long term capital investments. If Exxon-Mobil for example didn't have a bajillion dollars of cash it would not be able to continue its massive exploration program. Not enough exploration, oil runs out, company downsizes and goes bankrupt, countless lost jobs.

The other problem is it provides a strong incentive for corporations to rely heavily on loans & financing for all of their capital projects, if a company wants to build a new factory for example it's encouraged to go through a bank(s) to arrange everything instead of paying for it out of its own pocket. It adds needless complication to the process.

New rule: If a household holds more than $10 million in cash, stock, bond or other securities, tax those holdings at 10%.

Time to buy precious metals & gems.

New rule: Income below the median US income of the previous year is exempt from federal income and social security taxes in the current year.

Awesome! I'll move to a podunk town with a low cost of living, stick a couple million in the bank to collect interest and never work nor pay another cent of taxes for the rest of my life.

New rule: Set the short-term capital gains tax on derivatives to 75%.

Derivatives? Does he mean dividends or derivatives? Because the latter doesn't make much sense.

New rule: Ban all commodity ETFs.

Won't make a difference. As long as Goldman-Sachs & friends have their computers running the price will be what they want it to be.

What’s the worst that can happen, that wasn’t going to happen anyway?

Not much, really, except things will get worse faster and stay permanently broken with no hope of recovery.

[Starglider]

Are they investing it in new and existing businesses so they can expand, making large donations to charity, even spending it on shit they don't need?

To a large extent yes. Although the 'existing businesses expanding' part is mostly in China, or via merger activity (raising profits through 'efficiencies' aka job losses).

If their capital is just sitting in a bank account or stock portfolio, accumulating more interest than they can spend and serving no purpose for its owner except as a way of keeping score, it doesn't matter one way or another if they do offshore it.

If the capital was actually passive and not participating in the economic system, having the government confiscate and spend it would be exactly the same as printing money. As such you might as well just print the money outright and avoid the hassle of confiscating it. Of course in reality we have fractional reserve banking and the money in a bank account is not passive; it only earns that interest because it has been lent out to supposedly productive use. Confiscation of wealth on this scale would cause massive bank failures, no if buts or maybes. The banking system is teetering on the brink as it is, a government-imposed bank run would kick off a crash very effectively.

Stocks on the other hand are not money at all. The government can confiscate stock certificates, but it can't spend them on welfare and defence, it has to convert them into cash first i.e. sell them. However selling on that scale will crash stock prices (which will already be plunging from capital flight), which will destroy pension funds and also blow up a good fraction of investment banks.

Wrong. Those people would find a way to make a larger portion of their income disappear or become non-taxable. There will be more revenue, but not on a linear 1:1 scale.

So cruel, scaring the poor little socialists like that, they so desperately want to believe that the Laffer curve is a mythical monster.

Congratulations, you've just destroyed most long term capital investments. If Exxon-Mobil for example didn't have a bajillion dollars of cash it would not be able to continue its massive exploration program.

Never mind the megacorporations, economic growth in general (beyond the blip the US could get by restoring full employment) comes via investment in productive assets. Private investment is inherently a store of wealth; the original purpose of the finance industry was to facilitate trade and investment. What we need to do is steer stored wealth wealth into productive local investment rather than global investment, rent-seeking behavior or speculation. Confiscation does not achieve this, particularly if the government blows all the confiscated funds on wars and welfare.

Derivatives? Does he mean dividends or derivatives? Because the latter doesn't make much sense.

Frankly the former doesn't make much sense either given that we'd prefer to have dividends and some sembelence of price stability vs everyone seeking capital appreciation at all costs.

New rule: Ban all commodity ETFs.

Won't make a difference.

Certainly it would make a difference. Specifically it would deny small retail investors the chance to own this asset classes, while anyone with more than $100K of capital can continue to hedge and speculate with futures contracts as they did prior to the invention of ETFs.

[Simon_Jester]

Wrong. Those people would find a way to make a larger portion of their income disappear or become non-taxable. There will be more revenue, but not on a linear 1:1 scale.

So cruel, scaring the poor little socialists like that, they so desperately want to believe that the Laffer curve is a mythical monster.

Do you believe that the United States of America isn't already over onto the 'low-tax' side of the peak on the Laffer curve?

[Lord Zentei]

Wrong. Those people would find a way to make a larger portion of their income disappear or become non-taxable. There will be more revenue, but not on a linear 1:1 scale.

So cruel, scaring the poor little socialists like that, they so desperately want to believe that the Laffer curve is a mythical monster.

Do you believe that the United States of America isn't already over onto the 'low-tax' side of the peak on the Laffer curve?

It's pretty obvious that it is. But that's not what he or J are arguing. They're not saying that there will be less revenue. They're saying that the revenue, while greater, will not be increased on a 1:1 scale.