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May 20, 2003 PAYING BACK....In the Warren Buffet op-ed I mentioned below, he also says this about the fact that both he and his receptionist pay about the same tax rate even though he's a zillion times richer than her:
This is such an important point, because wealthy conservatives are forever crying that it's our money, dammit, and we earned it via hard work. Why should we have to pay a higher tax rate than anyone else? Yes, rich people are often rich because of their innate talents and hard work. But as Buffett points out, they are also rich because the culture they live in helped them along. If Bill Gates had grown up in Pakistan, he might be worth a few million dollars, but growing up in Seattle he ended up worth $50 billion. So of that $50 billion, how much is due to his innate talent and hard work and how much is due to the fact that he grew up in America? The answer is obvious. America was responsible for a big chunk of Bill Gates' fortune, which is why it makes sense that he should be asked to pay more to keep the country going. But instead the ultra-rich fight tooth and nail these days to pay as little as they possibly can. Why are they so begrudging about paying back a country that has given them so much? Posted by Kevin Drum at May 20, 2003 05:12 PM | TrackBackComments
I'm sure she ain't complaining to your face, Warren. She knows her ass would be out on the street if she did. But I'm sure her ballot tells quite a different story. Posted by: Prince Roy at May 20, 2003 05:40 PM | PERMALINKSurfer: no blurring going on here at all. This is a straightforward appeal for a more progressive tax system. After all, the first sentence of the post was a complaint that Buffett and his receptionist pay the same *tax rate.* They shouldn't. Buffett should pay a higher rate. Posted by: Kevin Drum at May 20, 2003 05:48 PM | PERMALINKWe are getting close to a topic of great interest to me: If you are lucky in life, do you deserve all that flows from that? Conservatives tend to think that luck is the property of each person. Either that, or it's bestowed by a Higher Power. Therefore, it's "deserved" and the good fortune should not be redistributed. They almost certainly don't believe in what might be called "scientific randomness," which is a close cousin of evolutionary theory. The same thinking that denies evolution and instead posits a deity guiding the universe also makes various fortunes and misfortunes part of a grand scheme. This is even more striking in Luther's theology, which elevates predestination to new heights. Those at the top of the wealth pyramid probably know better, but for those lower down it's useful to proclaim that the tricks of fate are to be stoically endured - or celebrated - depending on how the cookie crumbles. Actually, it's a rather interesting - and easy to state issue: Should people with good fortune be obligated to share that with those who experience bad fortune? Of course, determining what is Luck and what is Hard Work can become difficult. But there are many cases which are unambiguously not the result of one's character. Consider the poor person hit by a car. That's clearly bad luck. Or that millionaire who won the $300 million lottery last year. Not only was he clearly lucky, but this additional luck was bestowed on a very rich man. Posted by: Quiddity at May 20, 2003 06:13 PM | PERMALINKIt's worth noting that Bill Gates is giving an extraordinary amount of money away. In fact, he's set up a foundation to do it. As far as I know, however, he's not a Democrat (unlike his dad). I believe he gives money to Repub politicians. Here's a basic issue with the rich, Calpundit: unless they just inherit their money, they get rich by being obsessed with performance and efficiency. They want measurable results for the money they spend. They want ROI. Fairly or not, they view the gov't as a vast, inefficient bureaucracy. In their view, gov't spends lots and lots of money, for incommensurate results. I mean, seriously: if you were Bill Gates, and you wanted to do the most good with your discretionary altruism dollar, would you send it to congress? This is just to tie it back to a hobby-horse of mine, an issue on which, one would think, the right and the left could agree: efficiency in gov't. Make the money we spend count. Don't tell me you can't do it with a large organization--Gates did. Posted by: Realish at May 20, 2003 06:23 PM | PERMALINKI'll wager Warren is paying a whole lot more in taxes than his receptionist. Is it accurate to say that they are begrudging "paying back a country that has given them so much" when they are, in fact, paying a whole lot more than the rest of the country? Posted by: Scott at May 20, 2003 06:46 PM | PERMALINKI agree with your point Realish about efficiency in government. I would love to see taxpayer money be used in a more efficient manner. However, as we all know, there are 435 member of the House of Representatives who aren't rewarded for making the government more efficient. They are rewarded for bringing industry, money, and jobs to their districts. And some of those jobs are just a waste of money that provide nothing to the vast majority of Americans. Based on our system of government, some inefficiencies are going to be the price of democracy. Posted by: Double B at May 20, 2003 06:50 PM | PERMALINKBill Gates gives a ton of money to libraries. Public Libraries, the kind run by (gasp!) the government! He's also giving money to HIV-related causes. Bill Gates isn't stupid. :) He knows that public institutions like libraries, and public health initiatives, like AIDS prevention, are long-term investments which will only make him richer in the long run. Tying this in to Quiddity's post above: Wasn't Gates incredibly fortunate to sell MS-DOS to IBM in the first place? I'll try to find the back story, but I seem to recall some sort of serendipity in the transaction. Posted by: edub at May 20, 2003 07:18 PM | PERMALINKBTW, Buffet's example is almost assuredly tendentious. Supposedly he lives fairly frugally, so he actually might not take much more income from his company than his receptionist. But more likely they wouldn't be paying an equal average tax rate without counting the payroll tax, which stops at something like $85,000. So half of the 30% the receptionist pays is payroll tax (remember, he, correctly, counting the employer's contribution against the receptionists tax burden), while it is significantly less than that for him. Thus, the issue isn't so much the progressive nature of the income tax, but the old argument over whether the payroll tax should be capped, which is something not un-related to, but still different from, tax rate progressivity. Posted by: Scott at May 20, 2003 07:30 PM | PERMALINKScott, Buffet makes it very clear in the article that he's not referring to the income tax. And why should he anyway? It's not like our government is treating the payroll or income tax revenues any differently. The payroll tax is an essential part of any fair discussion about tax rate progressivity (as opposed to something unfair, like Buckley's absurd restaurant metaphor). Buffet was making a good point about the influence of America on his wealth, and I'm glad Kevin emphasized it. Still, I was surprised to see that Buffet, who otherwise is pretty good about keeping his perspective while being wealthy, fell in the trap of crediting his wealth strictly to deterministic causes. I guess he's entitled to a little self-delusion, but it was disappointing, since he could have made an even more important (and more accurate) point about the nature of wealth. Posted by: Ben Vollmayr-Lee at May 20, 2003 07:46 PM | PERMALINKFirst of all, the more money one makes usually means that they get a
higher standard of living. They also have to potential to enjoy more
things out of life, etc. Paying by proportion means that you pay for the privileges that come with increased wealth. (Gates and DOS) Gates becoming a billionaire in the 90's was the confluence of preparation, good business sense, being in the right place at the right time, and being a take-no-prisoners right bastard. IBM was looking for an OS for its off-the-shelf project (the 5150, to be marketed as the IBM PC). When Gates learned about this, he offered them Seattle Computer Product's Q&D DOS, a somewhat sketchy rip-off of the industry standard CP/M, rebranded as MS-DOS. Gates' mother was on a charity board with one of the IBM execs in this; whether or not this was the cause of IBM's extreme prejudice against CP/M proper is unknown, but the end result was that MS-DOS became the standard OS for IBM, marketed by IBM as PC-DOS. Gates, in his wisdom, was open to license his MS-DOS to IBM clone manufacturers that were springing up and needed IBM PC compatibility. This was his 2nd necessary break to becoming a billionaire. Microsoft, being an application development house at the time, also had business dealings with Apple, who sent them early Macintosh prototypes. Seeing the future, Gates immediately directed his minions to begin copying the Mac GUI for inclusion in a future MS desktop environment. His 3rd step... Having licensed MS-Basic to the millions of Apple II's that had shipped, when this license was coming up for renewal, Gates had incredible leverage over Apple in 1985 to obtain a license to the Mac GUI for Windows 1.0 and "following versions". His 5th step was ensuring the success of Windows 3 in the marketplace. This was done by (illegally) tying Windows to MS-DOS -- OEM PC vendors wishing to ship MS-DOS were "encouraged" to purchase Windows 3 along with it (at pain of paying more for MS-DOS alone). The MS application bundle also helped ensure Windows became a success. The final step was Windows95, the culmination of all the above processes into total market domination. Posted by: Troy at May 20, 2003 08:33 PM | PERMALINKMy experience with successful Americans who vote for Republican party tells me Kevin's argument is not effective. Those people believe they are successful not because of American government policies, but in spite of American government. Do they lack comparative perspective? Yes. But they will never admit government programs are good, even if they vote for them. And they never think about how they benefit from government in ways that poor people don't. For example, rule of law and order disproportinately benefits the rich. Why do I care if thieves aren't punished if I own nothing? But if I drive a $50 thousand car I care very much. And of course everyone benefits from law & order, but the rich benefit most and should be taxed at higher rate to pay for these services. Posted by: boban at May 20, 2003 08:56 PM | PERMALINKThere's no question that there's a fair amount of inefficiency in government spending. I think it comes with the territory. On the other hand, I'm sure everyone on this thread who, like me, has worked in the private sector for the past 25 years, will agree that there is plenty of inefficiency there too. We should certainly try to make government spending as efficient as possible. But the larger question is determining what things government is better able to do than the private sector and vice versa. The free market is a wonderful thing, but it's the not the universal answer for everything. As for Gates and Buffett, of course there's some luck involved in their fortunes, but I'm not suggesting that they don't deserve their fortune on those grounds (or any other, for that matter). Rather, I'm just arguing that since they got so much out of America, they and their fellow super-rich should be less resentful about giving some of it back. Posted by: Kevin Drum at May 20, 2003 08:59 PM | PERMALINKI'm sorry. I didn't mean to imply that I thought I was catching Buffet hiding something. It wouldn't have occurred to me that he was including the payroll tax had he not said it. But the point is still that the discussion over the payroll tax cap has some features that discussions of tax rate progressivity don't, most obviously that the payroll tax looks a lot like (or can be though as) a forced purchase of a specific product rather than a contribution to the general good. If Buffet doesn't think that it should be considered that way he needs to argue why it shouldn't be considered that way. Once we accept that then we will all agree that the current way of raising revenue for SS is bad. But he has to get over that hurdle first. Posted by: Scott at May 20, 2003 09:01 PM | PERMALINKOne of the great myths that lies behind the Republican rhetoric on the rich is the notion that the amount of money people make is how much they "deserve". The thing is, it's demonstrably false that market forces automatically reward people according to their real contributions. The argument here is simple. In, say, the 50s and 60s and 70s, the average Fortune 500 CEO made (roughly) 50 times as much as the average worker. Today, the average Fortune 500 CEO makes well over 500 times as much as the average worker (I don't remember the exact number here, but the underlying point is certainly true). On no rational accounting can the contributions of today's Fortune 500 CEO be said to be more valuable to their companies than those of their counterparts a number of decades back. How explain the relative differences in pay, which are over an order of magnitude in size? For the sake of our current argument, it's mostly irrelevant. The one thing you CAN'T say is that both the CEOs in the fifties AND the CEOs today are getting what they have earned. Today's game in corporate America is just far more rewarding for the CEO than in decades past, and it's only fair that American society take back a goodly portion of the money that gets played in that game. If, as seems immensely plausible, the CEOs of today are being paid far far beyond their deserts, why should they not be taxed at a far higher rate? Indeed, why in general assume that rich people have truly "earned" all their money? Why not assume instead that they are in large measure beneficiaries of a society and a game they did not set up, and which they should pay a good premium to play in when they win big? Posted by: frankly0 at May 20, 2003 09:27 PM | PERMALINKColour me Canadian, but I grew up believing in a mixed economy. Some things are too important to trust to the private sector. Government is inherently inefficient. It isn't supposed to be efficient. Justice can't be efficient. The adjective just doesn't fit. Making sure every child is fed, has medical care, and an opportunity for an education can't be efficient. The adjective doesn't fit. Making sure there is a Canadian media voice on a continent dominated by the American - and corporate - culture isn't efficient. Why isn't it okay for a society to collectively decide to assure these things, efficient or not? There is nothing inherently wrong with income redistribution through a progressive tax system either. If that results in a system that is less efficient in terms of incentives, so be it. About the only thing economic policy can do, it seems to me, is make tradeoffs between efficiency and equity, between efficiency and fairness, between efficiency and justice, between efficiency and environment. A little inefficiency in the American economy might marginally reduce the collective output and wealth, but so what? it is a small price to pay for a little fairness, equity and justice. What's so great about efficiency? Posted by: Tom Benjamin at May 20, 2003 09:29 PM | PERMALINKKeep in mind that the vast majority of rich folks are rich because of inherited money. Some are go-getters like Donald Trump; more are drifters like Georgie Bush. Most rich folks that I've known aren't opposed to paying their fair share of taxes. Most of them, like Buffet, know how the system works and, more importantly, can do simple arithemetic. Inherited wealth breeds a strong tendency toward social Darwinism -- "I have more money than you because I'm better than you. Proof: I have more money than you." These are the people who are pushing the Bush tax cuts. Since they're the Superior Race, they should get a free ride. Posted by: lightning at May 20, 2003 09:40 PM | PERMALINK"Still, I was surprised to see that Buffet, who otherwise is pretty good about keeping his perspective while being wealthy, fell in the trap of crediting his wealth strictly to deterministic causes." No, he didn't do that. He didn't say that America caused his wealth, he said America allowed his wealth. In other words, America was necessary but not sufficient. He's not talking about social programs being involved either (the quoted poster did not suggest this, others did). He's talking purely about the basic economic system. Which, as Kevin mentioned in an earlier post, is regulated capitalism. Posted by: taktile at May 20, 2003 10:43 PM | PERMALINK
The resentment comes from a government which feels it doesn't need to keep taxation consistent (down or up) from one year to the next. In the late 1970s, California constructed a 5-year Cap Gains holiday (that is, no state cap gains if you kept invested for five years) -- but then, as a lot of people started cashing out from those investments in the mid-1980s, California changed the rules. I think taxes ought to be low, low, low. But what makes it impossible for me to structure long-term economic decisions is that I haven't the slightest clue what the government is going to do to tax rates and policy in a year or two or ten. So, yeah, I resent the government tax policy, because I can't make decisions that take into account my largest expense. Gee, that shouldn't cause me any resentment at all, should it Kevin? Posted by: Anonymized Regular at May 20, 2003 11:21 PM | PERMALINKSee, now that just bugs the crap out of me. Inefficiency is inherent in gov't spending? Inefficiency is somehow emblematic of justice and caring and compassion? Why? Take health care--if we demanded better health care results (and by this I don't mean less spending or more profit, but healthier people) for each dollar the public spends, we could get it. There's no built-in reason we can't. There are many health care systems out there that are more efficient than ours that we could learn from. We could upgrade and connect the many disparate and ancient computer systems used by healthcare agencies at the local, state, and national level. We are data rich and information poor, and outmoded information systems are one of the reasons. We could do more targeted studies on the relative outcome of various preventative vs. ameliorative treatments. We could use (both market and gov't) incentives to reward healthier behavior. Yes, there are many barriers in the way of rational, non-ideologically-driven reforms, but the point is, if we spent the same amount of dollars more efficiently, we would have more aggregate health. And who, I ask you, could oppose that? "Efficiency" is just smart steps towards the goal. It's not a goal. If our goal is caring for the poor, or protecting the environment, or simplifying the tax code, or stimulating the economy... whatever... all these things can be done in more or less efficient ways. Everybody wants to bitch and agitate for their favored programs, but nobody follows up and demands performance. That's why the conservatives own the "gov't is ineffective" trope. Posted by: Realish at May 20, 2003 11:28 PM | PERMALINKSo, Boban and the poor don't care about law and order nearly as much as the next guy? Sounds like a good slogan for the Democratic party...''we're criminals and coming after you rich guys...see if we care!!''....I think Al Sharpton should be your front man...GO AL win the nomination....instead of blow jobs we'll get nationally televised reality rapes!! Posted by: DickD at May 20, 2003 11:33 PM | PERMALINKTis post provides a fascinating glimpse into the liberal mind. A person is only giving back if they pay taxes to the Government? What about charitable contributions, or the jobs their firms create? Only the state counts? Posted by: Tom Maguire at May 21, 2003 03:18 AM | PERMALINKI agree with Tom Maguire about giving back. Taxes aren't the only way to do so. And using Gates and Buffett as examples of "the rich" is somewhat disingenuous. Obviously these two can afford pretty much whatever tax rate they have to. The problem is that what the government considers "rich" isn't really rich at all. Posted by: greg at May 21, 2003 05:22 AM | PERMALINKIt is, of course, an absurd, and I also think a dangerous, description of Buffet's success to say he was "hard-wired" for capital allocation. Genes can't do that, and the offhand way in which everybody debating his point without noting that hard wired bit spooks me. On the substance, of course, Buffet is obviously right. The rich make out like bandits, and they should pay a much higher percentage of their income both because that helps level out the luck and because they get far more of the benefits the U.S. government provides. Posted by: david at May 21, 2003 07:08 AM | PERMALINKMe: "Still, I was surprised to see that Buffet, who otherwise is pretty good about keeping his perspective while being wealthy, fell in the trap of crediting his wealth strictly to deterministic causes." taktile: "No, he didn't do that. He didn't say that America caused his wealth, he said America allowed his wealth. In other words, America was necessary but not sufficient." Yes, he did do that. Buffet: "But I was luckier in that I came wired at birth with a talent for capital allocation -- a valuable ability to have had in this country during the past half-century. Credit America for most of this value, not me." He should have written: But I was luckier in that I came wired at birth with a talent for capital allocation, and I was extremely luckier still to have had many breaks go my way in a system where this can only happen to a certain number of people. Posted by: Ben Vollmayr-Lee at May 21, 2003 11:14 AM | PERMALINKOne reason (not the only one) for favoring a progressive tax system
is equality of pain. This, I think, is Buffet's point, and I'm in full
agreement. A tax rate of 10% is likely to be much more painful to
someone making $10,000/yr than a rate of 50% is to someone making
$10,000,000/yr. We should share our suffering equally. Adultvideos Free - Female Porns - Wilds Pic - Free Ifriends - reality sexo - casino 3k - Freak View Posted by: Free porn thumbs at June 21, 2004 04:28 PM | PERMALINK
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