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Warren Buffett has me Confused

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Re: Warren Buffett has me Confused

#11

Post by justinph »

thematt wrote: post #7
voxmatt wrote: post #4

The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last…

Buffett pays a lower percentage of income by choice . Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high. Rather than punishing the rich for making smart decision…

What?

Tell me how people should choose to not to get born into poverty or a family that can't afford college.

You seem to think people should make their money from investment rather than production, which has little value for a society. We should encourage people to make money from actual productive work, rather than shuffling paper around. Having higher taxes on wages (actual work) rather than capital (shuffling paper) doesn't do it.

Re: Warren Buffett has me Confused

#12

Post by lionhearted »

earl wrote: post #6

Let's start with the first argument: "His message seems to be 'I'm rich, and I want the super-rich like me to pay more in taxes.' That's great. Write a check." But him writing a check isn't the point. If Warren writes a check, we get that check's worth of new government income. If taxes are raised, for Warren's contribution of the same check, we get much larger pool of spending. Put more simply: plan (a) warren donat…

You picked the least interesting point of Markham's to disagree with.

These two were more interesting:

> Ok, I'm calling bullshit. What does "sensible investment" mean? Does it mean the amount invested, the risk, and the amount expected in return? Because last I checked, you'd take the amount you're getting in return and decrease it by your tax rate.

He then goes on to note tax-deferred and tax-advantaged investments will see capital move to them if tax rates are changed.

Which is a good point. And yes, every serious investor calculates their after-tax return and makes it one of their decisionmaking criteria. That's a crucial point that's obvious when written out, but many people miss it.

> The rest of the blog is well characterized as Dunning Kruger in action.

This should be Godwin's Law II: Whoever accuses someone else of Dunning Kruger loses the argument. There were interesting points in there. You apparently disagree, but that's not a good reason to be flippant. Just address the points you disagree with. Changing tax laws changes the suitability of investments and changes the allocation of investments made and legal structures used. Those are good points and seem correct on a glance.

Re: Warren Buffett has me Confused

#13

Post by [deleted] »

thematt wrote: post #7
voxmatt wrote: post #4

The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last…

Buffett pays a lower percentage of income by choice . Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high. Rather than punishing the rich for making smart decision…

[deleted]

Re: Warren Buffett has me Confused

#14

Post by Locke1689 »

Astrohacker wrote: post #10

Force is unethical. The government's fundamental tool--which distinguishes it from most other organizations--is that it forces people to do stuff under the threat of violence (and it often actually employs violence to demonstrate that it is serious). The government is therefore unethical. Taxes shouldn't exist at all, because it just a protection racket from a scaled up version of the mafia. The answer is not to scal…

This is not initiation of force. It is enforcement of contract, in this case an explicit social contract. Many libertarians make a big deal of "men with guns" enforcing laws, yet try to overlook the fact that "men with guns" are the basis of enforcement of any complete social system. Even if libertarians reduced all law to "don't commit fraud or initiate force", they would still enforce with guns.

Re: Warren Buffett has me Confused

#15

Post by tghw »

thematt wrote: post #7
voxmatt wrote: post #4

The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last…

Buffett pays a lower percentage of income by choice . Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high. Rather than punishing the rich for making smart decision…

I think you're missing the point of Buffett's argument. He's not paid a huge salary, he's making the vast majority of his money off of investments, and because he invests for the long-term, it means that when he does take profits, they'll be taxed at the long term capital gains rate, which is 15%, instead of the income rate of >35%. To "choose" otherwise, he would have to go out of his way to create short-term capital gains while maintaining a long view, which doesn't make any sense.

Re: Warren Buffett has me Confused

#16

Post by byoung2 »

thematt wrote: post #7
voxmatt wrote: post #4

The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last…

Buffett pays a lower percentage of income by choice . Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high. Rather than punishing the rich for making smart decision…

he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high

The average citizen making $50k a year doesn't have the cash to buy that house and car (or even the other lifestyle purchases). They have a mortgage, a car payment, and a few thousand dollars in credit card debt. You couldn't use the money used to fund those purchases to invest in something that would allow you to draw income taxed at the capital gains rate. You'd need a lot more cash for the amount of investment that would net you enough to replace a salary.

Re: Warren Buffett has me Confused

#17

Post by pyoung »

thematt wrote: post #7
voxmatt wrote: post #4

The primary point of Buffett's article isn't even addressed here: most people pay a much higher percent of their income to the federal government than do the "mega-rich" (I do have to say that don't really like Buffett's term there) and, furthermore, that the economy didn't suffer one drop when the rates were more reasonable (and in fact, did much better than under the historically low capital gains rates of the last…

Buffett pays a lower percentage of income by choice . Meaning, he derives his income from investments that get taxed at the capital gains rate. Everyone else is free to make the same decision, but they don't. They "invest" in houses, cars and other lifestyle purchases and then rely on their daily job to provide their income...hence their tax rate being so high. Rather than punishing the rich for making smart decision…

You conveniently ignore the huge wealth discrepancies that allow the mega-rich the ability to derive the majority of their income from investments, rather than payroll. If you read Buffett's op-ed, his co-workers, who presumably make a good salary and are probably very savvy investors, pay effective tax rates nearly twice as high as Buffet. The only reason that Buffet and the mega-rich have a "choice" to pay lower effective tax rates is because they are mega-rich to begin with.

No one is 'punishing' the mega-rich. We are asking them to pay their fair share. They derive much greater benefit from the social stability provided by a strong government than does the average person. As such, they should be required to contribute accordingly.

Re: Warren Buffett has me Confused

#18

Post by mikeash »

joe_the_user wrote: post #3

Wow, I think my group should pay its fair share (paraphrasing) OK, lets do little example. Suppose a large group of your friends a pizza and half the people just hadn't paid. Would you say "hey, I'll pay for all these people" or "hey, we all need to pay our fair share". How hard is that to understand?

If I'm out with my friends, you're damn right I'd want to pay for the ones struggling with a minimum-wage job and consider that to be my fair share.

Re: Warren Buffett has me Confused

#19

Post by cjy »

lionhearted wrote: post #12
earl wrote: post #6

Let's start with the first argument: "His message seems to be 'I'm rich, and I want the super-rich like me to pay more in taxes.' That's great. Write a check." But him writing a check isn't the point. If Warren writes a check, we get that check's worth of new government income. If taxes are raised, for Warren's contribution of the same check, we get much larger pool of spending. Put more simply: plan (a) warren donat…

You picked the least interesting point of Markham's to disagree with. These two were more interesting: > Ok, I'm calling bullshit. What does "sensible investment" mean? Does it mean the amount invested, the risk, and the amount expected in return? Because last I checked, you'd take the amount you're getting in return and decrease it by your tax rate. He then goes on to note tax-deferred and tax-advantaged investments…

Well said. The guy also makes a good point that Buffett isn't clear what he is advocating. Does he want to raise the capital gains tax only on the mega rich or raise capital gains taxes for everyone which would have a disproportionate impact on the mega rich who get most of their income from capital gains? The former wouldn't raise that much revenue. The latter would encourage people to consume instead of investing their money.

Re: Warren Buffett has me Confused

#20

Post by geebee »

I think this post may understate the economic impact of low taxes on high incomes. While I agree that in the short term, the deficit actually isn't the biggest threat to the US economy, I do think we need to close it long term, and the main options are 1) spending less and 2) raising revenues. If you can get the second through growth, that's much better, but you have to be realistic about how much growth you're going to get.

If you agree that some revenues are an inevitable part of good governance, then taxes become inevitable. So while I'd agree that taxes (usually) deter desirable behavior such as work, investing, saving, spending, and so forth, it doesn't really make sense to talk about how taxes are innately bad. You need to think about what level of taxation you can get away with, and where taxation will do the least damage.

This is where I tend to part ways with most fiscal conservatives (though I like to think of myself as one).

My take on it is: estate tax? No, I don't like it. I'd much rather allow a person who has created great wealth to decide who to give it to.

Payroll taxes? No, don't like them. I'd much rather not deter work and put an immediate regressive tax burden on people who get off their asses and work poorly paid jobs.

So which is worse. A 10% tax on estates above $5 million, or a 13% tax on the lowest income workers in America?

Which tax cut provides more benefit to the economy? A decrease in capital gains from 15% to 10%, or a decrease in marginal tax rates for the middle class? Which one would lead to more spending if you need to jump start the economy?

You can tell which way I lean, I'm sure, but I consider these good questions for reasonable debate. But I do think that a higher tax rate on very wealthy individuals that enables a lower tax rate on low income individuals (through, say, a reduction in the payroll tax) could bring a lot of tax relief where it is needed most, and might be a better jump start to the economy than "trickle down" economics.

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