JONATHAN CHAIT AUGUST 17, 2011
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Warren Buffet's New York Times op-ed arguing that the rich are undertaxed provoked the conservative auto-response to any argument by a rich person that the rich are undertaxed -- they should write a check to the Treasury. Michele Bachmann:
I have a suggestion. Mr. Buffett, write a big check today," said Bachmann. "There’s nothing you have to wait for. As a matter of fact the president has redefined millionaires and billionaires as any company that makes over $200,000 a year. That’s his definition of a millionaire and billionaire. So perhaps Mr. Buffett would like to give away his entire fortune above $200,000. That’s what you want to do? Have at it. Give it to the federal government. But don’t ask the rest of us to have our taxes increased because you want to have a soundbyte.
The Wall Street Journal editorial page:
If he's worried about being undertaxed, we'd suggest he simply write a big check to Uncle Sam and go back to his day job of picking investments.
Obviously this fails to grasp the fundamental collective action problem that's the entire basis for taxation. You obviously can't fund the government on the basis of voluntary donations. Buffett and other wealthy people who favor higher taxes on the rich don't just believe they should pay more taxes. They believe the government needs more revenue. It's amazing how many conservatives continue to think this just-pay-more response constitutes some kind of slam dunk rebuttal. Plus, of course, if a non-rich person proposes raising taxes on the rich, then it's "envy" and "class warfare." So, really, nobody has any business ever arguing that the rich should pay higher taxes.
Perhaps the most interesting point in the Journal's editorial refudiating Buffett was this bit of sociological analysis:
Barney Kilgore, the man who made the Wall Street Journal into a national publication, was once asked why so many rich people favored higher taxes. That's easy, he replied. They already have their money.
I think there's a lot of truth to that. But does the Journal realize that this observation dynamites the entire intellectual rationale for lower taxes on the rich? Kilgore's observation suggests that the very rich have obtained sufficient material comfort that they are motivated by things other than material gain -- the desire to build or invent or out-compete others. They are motivated, in other words, by non-financial goals. That means that raising their tax rate would not dampen their work incentive. I am waiting for the Journal to apply this insight toward its model of the effect of marginal tax rates on the rich... never.
17 comments
Rush Limbaugh made the same suggestion to Mr. Buffett. Therecommended figure was $5 billion. And for crying out loud Jon - stop referring to the "rich". They're "job creators".
- dubyadoubte
August 17, 2011 at 10:05am
that's "the recommended"
- dubyadoubte
August 17, 2011 at 10:05am
The next time some neocon suggests we go to war, we should simply invite them to parachute into said country on their own and start shooting the locals.
- Tristan
August 17, 2011 at 10:19am
I thought 'refudiating' was a Palinism, not a real word. I love that Bachmann and the WSJ can't respond to the substance of Buffett's argument so they just scoff at him. All bluster, no substance.
- aylwards
August 17, 2011 at 10:32am
This "you can always send more to the IRS if you want" canard is also in two NYT letters today--including one from the Vice President of the Club For Growth. http://www.nytimes.com/2011/08/17/opinion/answering-warren-buffett-should-the-wealthy-pay-higher-taxes.html Even rampant libertarians realize the necessity of mandatory taxation as a means of avoiding the free rider problem. (I think there are lots of military programs that are unnecessary. Why don't those who think they're necessary just pay for them themselves? How about that bridge over there?) The idea that those who advocate higher taxes should just pay them voluntarily belies their deeper motive of advocating lower taxes, period. By the way, one letter claims that taxing the top 1% of earners at 100% "would net $938 billion, which would barely make a dent in the nation’s multitrillion-dollar annual budget." As Chait has pointed out, there are two numerical deceptions going on. First, we're not looking at the wealthy to fund the entire federal budget; we're looking for its effects on resolving our deficit problem. Second, we're not looking to solve the problem in one year but over a decade or more. And in those terms, taxing the wealthy a little more would have a substantial impact. Just returning capital gains to a 20% rate and taxing dividends as ordinary income would bring in $340 billion over the next 10 years, http://www.nytimes.com/2011/08/16/business/buffett-calls-on-congress-to-raise-taxes-on-the-rich.html which is a fair chunk of what the congressional deficit reduction "supercommittee" has to come up with. I don't know what it says about the proponents of these arguments that they are so easily refuted. Is their commitment to ideology so strong that they can't see how thin their positions are due to selection bias? Or is it a cynical hope that people won't think for more than the 5 seconds it takes to see through their fallacies? Some of them certainly sound sincere....
- dsimon
August 17, 2011 at 10:48am
"They are motivated, in other words, by non-financial goals. That means that raising their tax rate would not dampen their work incentive." Warren Buffet and other private jet-owning millionaires and billionaires? Maybe not. But the entrepreneur/employer in the $250K - $500K range, you darn betcha higher taxes dampens incentive. Why expand when the government will get most of it? Why not continue to work short-staffed to help make up for the tax hit? Why do Dems want to *de-incentivize* the largest employer group in the country? I am waiting for TNR to apply this insight toward its model of the effect of marginal tax rates on the successful small business owner..... never.
- vox_mater
August 17, 2011 at 11:14am
Tristan beat me to it. Why propose a whole national or international war strategy? No need to get *all* taxpayers involved. When the idea strikes, if you're in the mood for it, go ahead and invade away, conservatives. I didn't vote for these wars, but I'll be glad to read about and possibly enjoy the fruits of your progress in your quest for whatever you want to define success as over there.
- Konstantin
August 17, 2011 at 11:35am
vox - just how strong a disincentive is a 4.6% increase in the marginal rate applied to income *over* the $250-$500k, and how does it qualify as "the government will get most of it"? If the opportunity to expand (and make more money, albeit 4.6% less than you would today) is there, who are these mythical people who would rather just sit where they are instead of ramping up to meet demand?
- Nari224
August 17, 2011 at 11:37am
Thank you Nari for taking down vox's pathetic attempt to be clever by his inane imitation of Chait.
- MikeB.
August 17, 2011 at 11:44am
I love the insight that the right has tried to cover its bases. The poor and middle class can not argue for higher taxes for the rich because that is "class warfare" and "envy." However, the rich themselves can not argue for higher taxes on the rich because, "they can just write themselves a check." So it is almost immoral for anyone anywhere to argue for higher taxes on the rich.
- MikeB.
August 17, 2011 at 11:54am
So I am assuming that Vox and Bachmann are in favor of more tax brackets like Buffet is for higher incomes so it doesn't affect those job creators he mentioned. What they are not? I am shocked.
- MikeB.
August 17, 2011 at 11:55am
Nice reasoning again, Mr Chait, especially the last paragraph. The rest is rather obvious, not to take anything from you. One could also advise Bachmann to keep not being gay herself, and stop bothering others with her advise. In any case, I am not sure how any argument goes against threats of lynching or secession bragging about guns, and questioning peoples patriotism.
- harasan
August 17, 2011 at 12:06pm
Dear Michele Bachmann: The next time you want a federal subsidy for the farm that you lie about and say you don't have a stake in but that you do, go begging for a private handout and get off us taxpayers' backs, you Minnesota harlot.
- liberalref
August 17, 2011 at 12:08pm
Buffett proposed higher taxes on those earning more than $1 million, not $250,000. Obama uses the $250,000 threshold. We are talking about taxable (net) income, not gross income, after the home mortgage deduction, etc. Here's my problem with this debate. The US tax system is progressive as between those at the low end and those at the high end, but hardly progressive at all between the upper middle and high end. It's the upper middle that's getting shafted. There are two reasons. First, for someone in the middle, payroll taxes (at a flat 15% of gross wages up to about $110,000) make up a large part, if not the largest part of taxes; for the wealthy, payroll taxes make up only a very small part of their taxes. Second, the maximum marginal income tax rate is hit at a taxable income of $250,000, so someone in the upper middle is paying the same income tax rate as the wealthiest taxpayer; indeed, because so much of the income of the taxpayer in the middle is subject to both payroll taxes (15%) and the maximum income tax rate (39.6% under the Obama proposal), the middle pays a higher effective rate than the wealthiest taxpayers. I won't suggest any changes to the payroll tax (since it gets into issues related to social security), but I will suggest more tax brackets than the five current brackets. Where's the equity if those in the middle pay taxes at a rate as high if not higher than the wealthiest taxpayers? Contrary to one of the comments above, that's a proposal that would help the hard-working middle class that TNR supports. Alas, all the tax reform proposals being given serious attention would do just the opposite; it's considered a necessary condition for getting support from the wealthy, which has become the sine qua non of every important legislation, especially tax legislation.
- rayward
August 17, 2011 at 12:35pm
And again the MSM treats the republican response to Buffett as if it had substance. The LA Times headline reads "Republicans Call Out Buffett on Tax Talk." The lede: "Republicans blasted back at Warren Buffett ..." But four grafs down is the actual story: "Republicans responded with a series of tweets questioning Buffett’s sincerity."
- koppgeo
August 17, 2011 at 1:47pm
Commonly heard in business meetings, I'm sure: Entrepreneur 1: "I have a great idea that will make us a fortune." Entrepreneur 2: "No way, Smith. We'll just have to pay taxes on that." Entrepreneur 3: "I agree. On that topic, I'd like to take a pay cut in order to move down to a lower tax bracket." All: (Noises of agreement.) Entrepreneur 1: "I hadn't thought of that. Okay, why don't we stop producing and selling things entirely?" CEO: "Good thinking, Smith! You've saved the company."
- frippo
August 17, 2011 at 6:24pm
@koppgeo: The media's coverage of most Republican pronouncements would be much improved if the headlines included more words like "whine," "bluster," "gibberish," and "lie."
- Dausuul
August 30, 2011 at 5:26pm