Time to Talk About the Buffett Rule

[Gregg]

Perhaps this is indicative that some sort of radical simplification of the overly-complex tax code is in order...

There is a certain elegance to 15% of all income received by anyone above the poverty line. But that's just me, I love one line answers to essay questions.

[Yossarian]

"Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant" Justice Learned Hand, Comm’r v. Newman, 159 F.2d 848, 850–51 (2d Cir. 1947)

It's worse than that. Hand's quote is usually employed in the context of structuring transactions that take advantage of favorable rules. The pitchfork crowd is really worked up over basic tax policy, but they are ironically ignorant or callously mislead. As you fairly pointed out, some people's tax rate is lower simply because they earn income that is taxed at a lower rate, not that they employ some nefarious tax scheme (note to LC, income earned in a Swiss bank account or a Cayman partnership is taxable in the US the same as if the money was held in a US entity, and no one is defending tax fraud). But there are typically reasons why there is a lower rate. Yes Kerry held a bunch of tax exempt bonds, but there is an additional economic tax implicit in the lower interest rate you get from them. Yes dividends (currently) and capital gains are taxed at a lower rate, but they bear some additional indirect payment through the double tax system that puts the economic tax rate much higher. The tax code is actually full of rules that distort capital allocations AWAY from dividends, even at 15%, because people who have a choice and employ those evil tax planners know that and try to avoid the very income that uninformed get worked up over. Yet some people would prefer to wallow in demagoguery about the nominal headline rate without addressing the substance.

[Lainey]

. As you fairly pointed out, some people's tax rate is lower simply because they earn income that is taxed at a lower rate,.. But there are typically reasons why there is a lower rate. .

They have better lobbyists.

[bunnys]

How does one distill this unfair advantage (as it must be "unfair" if it is "fair" to take away the proceeds) from personal effort and an appropriate level of reward for success?

That's impossible. There is no way an equation could be developed to measure personal effort.

But the comment you quoted was not stated clearly. I should have added to the end, "tied to their level of success."

I am arguing that those who earn more income should pay a higher percentage of their income to taxes in part because a lower percentage of their income is necessary for them to pay for the necessities of life and they have more disposable income. Additionally, I just think it's ethically right for those who benefit from our economic system to contribute to making life a little less difficult for those don't benefit from it. If I didn't feel that way I would say that as a nation we should dismantle ALL social welfare programs and all regulations passed curb the natural tendancies of business that were passed during the Progressive Era.

Would you want to eliminate all Social Security, minimum wage, workplace safety, child labor laws and welfare and just let business go wild doing whatever they wanted unchecked to make money? If not, where would you draw the line? Isn't any line arbitrary?

I am of the Robin Hood camp. And unapologetic about it. But let's be clear here. This is not about communism or socialism or killing the work ethic. No one is proposing anything even close to that. I just want to raise taxes a few percentage points on the wealthiest people in our society. And I don't think that families living below the poverty level should be required to pay any income taxes.

[bunnys]

Bunnys, I know we probably won't agree on this and I appreciate you understanding my logic. Truthfully, I'm trying hard to understand yours. Nothing you have said raised any hackles on me... until the paragraph above. Allow me to make a couple comments regarding that...

1. Please don't tell me what I believe. I will be happy to share that on my own.
I was stating what you believe based on the arguments you presented earlier. Was I wrong to assume that you were arguing your own position? You were offended that I presumed to state what you believe. For that I apologize. Are we going to argue the points of the issue or bristle indignantly because of semantics?

2. The "wherewithal" to succeed includes a lot of things beyond just money. In fact money is well down the list of what it takes to succeed (if it makes the list at all). Sure, in some cases people use family money to get a head start. So? If my family would have had any I would have used it. In far more cases the ones who succeed have a drive and a willingness to keep going.
I didn't say wherewithal meant money. I said it meant will, grit, discipline and much bootstrap pulling-up. Yeah, it's great that some richies can use family money to get a head-start. Too bad those children of crack-addled mothers whose fathers were killed before they were born and who were raised without one good adult role model to keep them from dropping out of high school didn't just have more drive even if they don't have more family money.

Success at all levels is usually the result of more than one star aligning, some you can control, some you can't. Being at the right place at the right time is not something that is handed out to the wealthy and withheld from the poor. What evidence are you basing this claim on? My entire point is that all those things I listed in my earlier post (education, stable childhood, etc.) are exactly what amount to the "right place at the right time." If you don't feel this way, how do you define the "right place at the right time?" If you take the time to talk to people you know who YOU consider successful I bet you will hear a lot more about their ambition and how they stuck it out than you will about privileged backgrounds. I bet a lot of them will tell you they got to the right place and hung on for the right time. I can prove any point I want if I rely on anecdotal evidence to make that point. That doesn't mean my point is true for anyone beyond me and my example.

3. This whole concept of a level playing field is kind of absurd and completely unattainable. No two people are alike. No two people's situation is alike. No two people's parents, schools, neighborhoods, mentors, heroes, opportunities, incomes, expenses, bodies, taste buds, fingerprints, snowflakes, whatever. The playing field will NEVER be even. It makes no difference at all what your goal is, there will ALWAYS be someone who starts off closer to the target, and someone who starts farther away, than you did. There's no use wringing your hands about that because it will always be the case. I am not suggesting we should pretend that we're going to level the playing field so everyone can have an even shake. But I do think we should try. I do believe in Affirmative Action. I do believe in Head Start. I do believe in the Pell Grant. I believe in plenty of those types of programs. The playing field is NOT level. But we can try and even out some of those peaks and valleys. But let's also try to make up for that inherent unfairness by making the people who are richest pay more.

I won't even begin to say I understand the "from the very beginning" aspect of your comments as it relates to taxation, but I would certainly appreciate it if you would clarify that for me. As it reads now it almost sounds like you are proposing a caste system or a sperm tax or ??? I don't think that's really what you meant. No, I mean from their infancy when I say "from the very beginning." They've had advantages their entire lives.

Communism is the largest scale attempt to level the playing field. It doesn't work and it never will. I agree, communism kills the profit motive. I fully believe in limited capitalism. I'm not saying you're a communist bunnys, No, I'm not a communist. But why are you even bringing that up as a possible explanation for my ideas? What I'm suggesting doesn't even come close to communism. I'm saying that trying to get everyone to the same starting line isn't the answer. I've said several times that I don't think this is possible. Why do you still think I think this? What we need to do is find a way to make sure anyone with a desire is not hindered by the government (I think we need to use government to protect workers from exploitive business. I have no worries whatsoever that business isn't going manage to make a profit unless government gets out of the way. But this isn't really part of the original discussion.) and we need to be able to provide a safe, secure, comfortable environment for everyone else. We need to foster an environment that provides opportunity for everyone, but it doesn't always have to be the same opportunity in every single case. Even in Namibia, which makes rural Mississippi look like a Four Seasons, its all about opportunities. We need to provide them, but you (do you mean me personally? Or are you saying "one?")have to remember that you can't control what people do with them. That's what the old saying about leading a horse to water is all about.

Hey Gregg: As I said in the beginning we aren't coming from the same place and there is no way you're going manage to convince me of your position or that I will be able to convince you of mine. Although I do think we both did an admirable job of explaining our positions to each other.

Ulitmately, I think the difference here lies in the fact that you and I come from philosophically seperate camps that look at the world in profoundly different ways. That's ok.

Hope my voice above wasn't too harsh. You said you were a little put off by my earlier comments so I really don't want you to bristle further. However, the nature of this kind of discussion often does lead to that, huh? It's been interesting talking with you about this.

[loosechickens]

I dont think any of those folks NEED to resort to tax fraud. When you are the ones with the campaign money, access and clout, you just see to it that the tax rules that benefit YOU and folks like you become legal and written into the tax regulations. When you can control what legal IS, you have no problems.

[dmc]

I'm one that is also in favor of a flat tax. And do away with all the deductions. No mortgage, kid, charity, ect. If you make a dollar, pay a percentage to run the government. And I mean everyone. Maybe if everyone paid there would be a little more interest in the amount of government spending.

[Yossarian]

I just think it's ethically right for those who benefit from our economic system to contribute to making life a little less difficult for those don't benefit from it.

I can go along with making sure people who can't do well are taken care of, but IMHO your ideas of reallocation based simply on outcomes lacks the morality you think they do. We aren't talking ethics of caring for your neighbor, you are endorsing violence to reallocate the fruits of labor without any justification other than the desire for someone else's stuff.

[Yossarian]

I dont think any of those folks NEED to resort to tax fraud. When you are the ones with the campaign money, access and clout, you just see to it that the tax rules that benefit YOU and folks like you become legal and written into the tax regulations. When you can control what legal IS, you have no problems.

I wish I could create one of those online counters so I could track the number of times you've been asked for specifics on this and you have simply given insubstantial rhetoric. This is a smart crowd here, we can get past some meaningless campaign tripe. So what are these great tax rules that you are referring to? And don't say dividend rates, because there are lots of places in the tax code that push people into dividends- and they have to be pushed because it's a horrible tax result that people with access to planning and choices run from.

I think things like the step up at death might be a fair issue, but that doesn't affect your annual rate which is the topic at hand. From a budget point of view the big issues are really things like the healthcare exclusion, mortgage interest deduction, retirement savings exclusions, but those don't really fit your narrative since they are widely accessed. So please save us the meaningless tin foil had stuff and honor us with some specifics.

[flowerseverywhere]

I dont think any of those folks NEED to resort to tax fraud. When you are the ones with the campaign money, access and clout, you just see to it that the tax rules that benefit YOU and folks like you become legal and written into the tax regulations. When you can control what legal IS, you have no problems.

when I read your quote it brought me back to when I was a child in the 50's. My mother used to tell us "the rich get richer and the poor have children. The only way to get ahead is to have a profession. If you have children without being married to someone who has a decent job you are resigning yourself to a life of poverty. If you have money you can have great influence in how your own life will turn out. Never take on debt except to buy a house"
I only knew one person who was divorced when I was a child and you did not have children unless you were married to their father. Or you married their father. You took care of your family.

Somewhere this message got lost.

The war on poverty has failed. More people are in poverty than in the 60's when these social programs really increased. We need to do something different because all these social programs are not working.

There will always be rich people and always poor people. Unless we put all the money in a pot and divvy it up it's the way it is going to be.