Warren Buffet has written an editorial that was published in The New York Times yesterday arguing that the super wealthy should be paying more in taxes. In his essay entitled, "Stop Coddling the Super-Rich", Buffett writes,
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These are important words to be sure, and I admire anyone who believes in parting with more money for a cause, regardless of how much she or he makes.
Let me state at the outset that I agree with Buffett. I can see no good reason why we cannot return to the tax rates of the 1990s. I struggle to understand the logic that is opposed to it. Yes, it is certainly possible to tax too much and stifle economic growth, but this novice who plays at economics is not convinced that returning to the tax rates of the 90s will indeed do that.
At the same time, I am also not sure that raising the tax rates in our current economic context will end up raising a whole lot more revenue. Anyone who has even a basic knowledge of economics knows that the government raises the most revenue when the economy is strong. So, we could go ahead and raise the rates now, but it is not clear to me that it will help a whole lot; and what I am interested in is raising more revenue. It is not clear that either keeping tax rates where they are or raising them will have the desired result. How the government receives revenue is more complex. In other words, A (raising tax rates or cutting them) does not simply lead to B (more money in the government's coffers).
I like Warren Buffett. I admire him. He has been very generous with his money over the years. But when mega-rich folks like Buffett write editorials arguing that the wealthy should pay more in taxes, I am always puzzled by one thing. If he thinks he should pay more why doesn't he just do it? He could, for example, not take those tax breaks that the government allows him to take. There is no law requiring Buffett to do so. Or he can actually make a contribution to the federal government. Instructions on how to do so are right on the website of the Financial Management Service, which is a bureau of the U.S. Department of the Treasury. The instructions are as follows:
Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called "Gifts to the United States." This account was established in 1843 to accept gifts, such as bequests, from individuals wishing to express their patriotism to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government. Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below.
Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782
It's one thing to write an editorial stating what others should do. I would suggest to Mr. Buffett that if he is serious about his words, he will back them up with action. Uncle Sam has his hand out and will not reject his check. I highly doubt that he will even ask Warren for two forms of ID.
When I stand up in front of the folks in church on Sunday morning and I encourage them to tithe (which should be the minimum gift to the church, not the maximum), I better be tithing and more myself. Otherwise my words have no integrity. If I insist that individuals read their Bibles and pray, I better be doing so as well.
My point here is that while we continue to have this debate over taxes and how much everyone should pay, those who believe their fellow mega-rich friends should pay more in taxes can set a good example and do so right now. If Mr. Buffett should decide to donate a couple of billion to the U.S. Treasury perhaps he will inspire other billionnaires to follow suit. They do not have to wait for Washington DC to change the rules of the game. And while I personally prefer to give my donations above my 10% to UMCOR and to the Salvation Army, if someone feels it's important to extend charity to the federal government, there is nothing to stop them from doing so.
It's easy to put one's convictions in print; it's quite another to act on them.
When we do the latter, people take our words much more seriously.
Some will choke on what Buffet said. Maybe a cold Coke would make it go down easier.
One thought... S.S. tax applies to all the wages, tips, salary, etc. until you reach $106,800. After that it does not apply resulting in a effective tax cut. Since SS is one of the major problems for coming budget years... remove the cap. Tax every dollar of income. And... eliminate the cute ways that income is redefined into something else... like capital gains, etc. Apply the S.S. tax to every dollar of income received... from wages, tips, salary, dividends, investments, capital gains, everything. Apply that revenue generated only to S.S. It would eliminate any problems with S.S. Cutting back medicaid and unnecessary defense spending would virtually correct the rest.
Thanks for your comments. While some might quibble with your solution, you have certainly depicted the complexity of the the tax code, which makes discussions limited strictly to tax rates too simplistic.
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