Warren Buffet's advice to Congress (1 Viewer)

[bostonfred]

I think that you're confusing a few terms here. Hard working doesn't really mean a whole lot in my book. Lots of people work very hard doing menial work that brings a small benefit to society and in return receive a small compensation. What's important on a larger scale is the total contribution to humanity that someone makes. I could work 80 hours a week flipping burgers and I'm bringing a small measure of benefit to a lot of people who are hungry in my area, but that's a pretty small contribution to humanity as a whole.

Someone else could work 15 hours a week and stumble upon the cure for cancer. That would benefit humanity tremendously. And that person should be compensated much more than the 80 hour a week burger flipper.

I don't think I'm confusing those terms, but you seem to be reading meaning into them that's not there. I'll restate the paragraph: "Much like Buffett can be assumed to do a better job with his money than the Bill and Melinda Gates foundation, the hard workers people who earn great wealth in a meritocracy can be assumed to do a better job with their money than the inheritors in the aristocracy. So a massive amount of resources are controlled by an inefficient group. And while you might argue that they'd be able to hire someone to invest for them, the hard workers people who earn great wealth in the meritocracy would be more likely, on average, to pick the best person to invest. "

Or, restated again, I think we'd both agree that Buffett will probably be a better investor than his kids. On the aggregate, all of the Buffetts of the world will be better investors than their kids. There may be some exceptions, but at a macro level, it's hard to dispute that the people who earn the money will do better investing than the people who inherit it from them.

I do agree that rich folks who just sit on their money and spend it are not contributing all that much to humanity. Although, even their spending on high end items creates a market for technological growth. 12 years ago you could get a plasma tv for $20,000. Only the rich could afford them. But because the rich bought them, manufacturers could continue to develop those technologies, which drove down the cost for the rest of us. Now you can get a 42" screen for $500.

And if all they do is spend their money, then like we've discussed, their wealth will eventually dissipate and flow to people who are providing more value to humanity.

The argument that the rich will eventually spend their money is not particularly strong, since anybody who has money would have the option to spend it. That does nothing to alleviate my concern that a smaller and smaller group controls a larger percentage of the country's - and world's - resources.

Are there going to be inefficiencies and wastes of resources at times? Sure. Could the resources be better used by someone else? Probably. But the argument for an inheritance tax says that the US government will better and more efficiently use those resources than those chosen by the wealthy. I'm not so sure that's the case. You'd have to make a pretty strong argument to convince me that the government is better at using resources than the heirs of the rich.

It's not that the government is better at using their resources. It's that the estate tax prevents us from taxing people who would be better at using their resources. You seem to be implying that an increase in estate tax receipts would necessarily mean an equal increase in spending by the government. But that's not the case. To cover the same budget, we can either increase the debt, or tax other people more. The estate tax is a more efficient and more correct place to place that tax.

 

[jonessed]

1) Not hammering the Walton's at all. They are absurdly rich and would continue to be so under any imaginable tax structure. I don't begrudge them their money. But I find it amusing that Buffett is being hammered for his delayed philanthropy.

2) You are unequivocally wrong here. If Buffett is earning a higher rate of return with his wealth in his hands than the Gates Foundation would if he donated it now, they will not benefit more. The difference in present value, assuming his investments perform better than the Gates Foundation's, will be higher the longer he delays.

I'm not sure how many times I have to point out that Buffett doesn't have to own any stock for him to still control the company. So no, it is not earning a higher rate of return in his hands than it would in the Gates Foundation. It would earn exactly the same since he would still be on as President and CEO.

You continue to point it out, but I still don't see why it matters? If the Gates Foundation isn't going to sell the stock and is just going to hold it, then who cares whether Buffett keeps it until he dies? Maybe he has a legitimate reason that I'm not aware of, or maybe it's just the hubris of enjoying his wealth. But if the plan is to just leave it untouched and let it continue to appreciate while the company is under his leadership, the person holding it is inconsequential and in no way suggests that Buffett is a hypocrite.If he was a Republican lapdog, you'd be in here praising how wonderful he is. But since he doesn't agree with your world-view, you are pathetically attempting to find fault in how he distributes his wealth.

Oh, the irony.

Really? Good luck finding a backlog of posts that I've written that in any way suggests I am some hardcore Democrat. I'm quite sure I could fairly easily put together a similar one for the Republicans for yourself, Grove, and BB.

You aren't getting it.

 

[Bronco Billy]

The estate tax takes money out of no one's pockets. It removes money from estates, hence the name. And it only effects a small percentage of estates at that.

Imagine if this were done at the corporate level - as soon as a company changes CEOs, the company has to pay 40% of its value to the government. What do you think that would do to private enterprise?

Newsflash, CEOs generally don't own the company, they just work for it. Poor analogy.

That's valid, but I'd hope that you would get the point. Hoping in vain, by the looks of it.

 

[dparker713]

Buffett obviously has little faith that the wealthy will be charitable with their wealth on their own. He seems to firmly believe they will hoard it all. I have to assume he has a lot of faith that government will distribute it to the poor if they confiscate it and not figure out a way to turn it into pork or funnel it into accounts over time. So this is really about what you believe about human nature, and what you have faith in, and not Warren Buffett's economic expertise.

Or he could belive that not only is cutting tax revenues a pretty bad idea right now, but cutting tax revenues from the people who least need the cut is a really bad idea.Let's reign in the spending before we start talking about tax cuts.

Ask any economist and they will tell you the dumbest thing to do is to RAISE taxes in the middle of a recession. Even a liberal Keynesian like Robert Reich will tell you that.

Well, the economy just grew by nearly 6%, unemployment finally fell and any tax hikes wouldnt be effective till the end of the year. Seems like any tax hikes now wont take effect in the middle of a recession.

 

[jonessed]

Buffett obviously has little faith that the wealthy will be charitable with their wealth on their own. He seems to firmly believe they will hoard it all. I have to assume he has a lot of faith that government will distribute it to the poor if they confiscate it and not figure out a way to turn it into pork or funnel it into accounts over time. So this is really about what you believe about human nature, and what you have faith in, and not Warren Buffett's economic expertise.

Or he could belive that not only is cutting tax revenues a pretty bad idea right now, but cutting tax revenues from the people who least need the cut is a really bad idea.Let's reign in the spending before we start talking about tax cuts.

Ask any economist and they will tell you the dumbest thing to do is to RAISE taxes in the middle of a recession. Even a liberal Keynesian like Robert Reich will tell you that.

Well, the economy just grew by nearly 6%, unemployment finally fell and any tax hikes wouldnt be effective till the end of the year. Seems like any tax hikes now wont take effect in the middle of a recession.

 

[fatguyinalittlecoat]

And it's kind of my point that he's holding onto the money strictly because he sees it as a benefit to himself to hold the money. It's not because it actually benefits anyone else that he is holding the stock, it's because it's benefiting HIM. Which is kind of what this whole thing is about.

Isn't the reason for this that if Buffett sold off all his stock at one time it would cause the stock price to crash?

 

[bostonfred]

The estate tax takes money out of no one's pockets. It removes money from estates, hence the name. And it only effects a small percentage of estates at that.

Imagine if this were done at the corporate level - as soon as a company changes CEOs, the company has to pay 40% of its value to the government. What do you think that would do to private enterprise?

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

 

[bostonfred]

Ask any economist and they will tell you the dumbest thing to do is to RAISE taxes in the middle of a recession. Even a liberal Keynesian like Robert Reich will tell you that.

They're not talking about estate taxes. Think about it. Are you suggesting that raising the estate tax will cause people to postpone dying? Or that the inheritors of estates over 3.5 million will spend more enough in the first year to raise tax receipts? Similarly, how do you propose that eliminating the estate tax would help a recessionary economy?

 

[Bronco Billy]

Well, the economy just grew by nearly 6%, unemployment finally fell and any tax hikes wouldnt be effective till the end of the year. Seems like any tax hikes now wont take effect in the middle of a recession.

First off, the economy grew 4.6% last quarter, not 6%. And economists point out that it was likely due to some filling of vastly depleted inventories - which means that growth is not sustainable. Unemployment did fall, which is some sign of life especially when combined with average full time hours worked rising. Production and resale numbers were also up some - which are very good signs. But there are still some serious issues standing that haven't changed significantly - most prominantly the single family foreclosure rate and its effect on construction as well as a looming commercial real estate crisis that would doubly hammer the same sector. Then we have the likely effect of inflation grabbing hold as the government continues to churn out money to pay its debts despite not increasing tax income. It's possible that this will be a relatively stagnant period for the next year and may even start dipping again - but I hope I am wrong.

 

[GroveDiesel]

The argument that the rich will eventually spend their money is not particularly strong, since anybody who has money would have the option to spend it. That does nothing to alleviate my concern that a smaller and smaller group controls a larger percentage of the country's - and world's - resources.

Out of curiousity, is this actually the case? Is the world's wealth actually being concentrated into a smaller and smaller percentage of people? Just going by medieval times, pretty much everyone was extremely poor other than the king and a few nobles. I'd say that's probably been the case generally throughout history. I could possibly be persuaded that taking a portion of the estate to offset taxes would contribute to a greater benefit to humanity. But I don't think that I could be persuaded that with the current size of our government. The overall impact on tax revenue would still be miniscule and do very little to incentivize the more productive capitalists I think though. But I could see that as a legitimate argument.I think we've also been kind of assuming that wealth is a fixed amount and I don't really see it that way. Those that contribute greatly to humanity are generally compensated greatly as well. Their ideas expand the wealth pool as they receive a slice of it. I could see though an argument that dynastic hoarders create an inefficiency by drying up capital that would go towards giving those capitalists an opportunity. But those with great wealth generally have a desire to maintain and perpetuate that wealth. So most of them do actually invest their money and do it fairly well. Sometimes they fail spectacularly as well, but the market needs the extreme risk takers as well, and that's what the super wealthy afford us.

 

[GroveDiesel]

And it's kind of my point that he's holding onto the money strictly because he sees it as a benefit to himself to hold the money. It's not because it actually benefits anyone else that he is holding the stock, it's because it's benefiting HIM. Which is kind of what this whole thing is about.

Isn't the reason for this that if Buffett sold off all his stock at one time it would cause the stock price to crash?

He can donate the stock without anyone selling a penny of it. The Gates Foundation would then have control and could immediately start selling it at a rate that wouldn't affect the stock price.

 

[dparker713]

The estate tax takes money out of no one's pockets. It removes money from estates, hence the name. And it only effects a small percentage of estates at that.

Really? So why does the government deserve another share of that money when it was already taxed when it was earned? Why would the earners of the money not have the ultimate say in the disposing of the post-taxed capital that they earned, regardless of whether they are alive or dead? How does the government justify taking another slice of that already taxed capital other than base greed?Imagine if this were done at the corporate level - as soon as a company changes CEOs, the company has to pay 40% of its value to the government. What do you think that would do to private enterprise?

This just displays a fundamental misunderstanding of the tax code.Earning has ZERO to do with the tax code. Each transaction is taxed. We do not tax capital, we tax transactions. If you have a lump of money sitting in a trust, it could sit there untaxed inperpetuity. Only when the funds are transfered from one owner (the trust) to anyone else does a tax ensue. If I have $100 billion and store it under my mattress, I pay nothing on that capital. There is nothing particularly special about the taxes levied upon a transfer of wealth from an estate, and its a marvel of marketing and branding that people believe otherwise - especially people that are highly unlikely to ever be involved in a transfer large enough to actually be taxed.Also, the owners of corporations - shareholders - are taxed each time they transfer ownership. They pay the cost of transfer, not the corporation, but it is paid regardless. These transfers are generally at a much lower rate than the estate tax, but they do occur much more frequently, effect many more people, and have no minimum threshold.

 

[GroveDiesel]

Are you suggesting that raising the estate tax will cause people to postpone dying?

I just read something recently about a family that asked a doctor to postpone pulling the plug on their mom until January 1st since the estate tax is not in play this year. It may have even been a thread here. Either that, or people are going to pull the plug earlier!

 

[Bronco Billy]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

 

[bostonfred]

Are you suggesting that raising the estate tax will cause people to postpone dying?

I just read something recently about a family that asked a doctor to postpone pulling the plug on their mom until January 1st since the estate tax is not in play this year. It may have even been a thread here. Either that, or people are going to pull the plug earlier!

Pull the plug, doc. I can't bear to see her suffering a moment longer than she has to for me to maximize my inheritance.

 

[Bronco Billy]

Earning has ZERO to do with the tax code. Each transaction is taxed. We do not tax capital, we tax transactions. If you have a lump of money sitting in a trust, it could sit there untaxed inperpetuity.

So that lump of money was created through immaculate conception? It wasn't initially earned, making it subject to income tax? Or acquired through sales, making it subject to sales tax? It just was? And therefore the government has a claim on it?

 

[Homer J Simpson]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

How do you know the money was taxed. If grampa Joe has been sitting on 50,000 shares of GE for the last 60 years, that has never been taxed.

 

[Homer J Simpson]

Earning has ZERO to do with the tax code. Each transaction is taxed. We do not tax capital, we tax transactions. If you have a lump of money sitting in a trust, it could sit there untaxed inperpetuity.

So that lump of money was created through immaculate conception? It wasn't initially earned, making it subject to income tax? Or acquired through sales, making it subject to sales tax? It just was? And therefore the government has a claim on it?

You're gonna have to get past the whole idea that money should only get taxed once.

 

[dparker713]

Well, the economy just grew by nearly 6%, unemployment finally fell and any tax hikes wouldnt be effective till the end of the year. Seems like any tax hikes now wont take effect in the middle of a recession.

First off, the economy grew 4.6% last quarter, not 6%. And economists point out that it was likely due to some filling of vastly depleted inventories - which means that growth is not sustainable. Unemployment did fall, which is some sign of life especially when combined with average full time hours worked rising. Production and resale numbers were also up some - which are very good signs. But there are still some serious issues standing that haven't changed significantly - most prominantly the single family foreclosure rate and its effect on construction as well as a looming commercial real estate crisis that would doubly hammer the same sector. Then we have the likely effect of inflation grabbing hold as the government continues to churn out money to pay its debts despite not increasing tax income. It's possible that this will be a relatively stagnant period for the next year and may even start dipping again - but I hope I am wrong.

Unless there is a revised number in the past 10 days, the number reported was 5.7%Marketwatch

I was not saying the economy is in great shape or even stable, merely that 2 straight quarters of growth along with the other factors generally satisfy the definition for the end of a recession. And the argument that you shouldnt raise taxes during a recession does not apply.

 

[Bronco Billy]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

How do you know the money was taxed. If grampa Joe has been sitting on 50,000 shares of GE for the last 60 years, that has never been taxed.

It wouldn't be money if it were shares of GE, would it?

 

[Twilight]

The argument that the rich will eventually spend their money is not particularly strong, since anybody who has money would have the option to spend it. That does nothing to alleviate my concern that a smaller and smaller group controls a larger percentage of the country's - and world's - resources.

Out of curiousity, is this actually the case? Is the world's wealth actually being concentrated into a smaller and smaller percentage of people? Just going by medieval times, pretty much everyone was extremely poor other than the king and a few nobles. I'd say that's probably been the case generally throughout history.

I'm not searching for a link, but yeah, that is definitely the case. And the trend has had a sharp incline over the past 30 years.

 

[Homer J Simpson]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

How do you know the money was taxed. If grampa Joe has been sitting on 50,000 shares of GE for the last 60 years, that has never been taxed.

It wouldn't be money if it were shares of GE, would it?

Do you think the estate tax only includes cash?

 

[Bronco Billy]

Unless there is a revised number in the past 10 days, the number reported was 5.7%

Marketwatch

I agree with that number. I made the mistake of using an msnbc story from January 29, 2010. You'd think I'd know better...

 

[Bronco Billy]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders. Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

How do you know the money was taxed. If grampa Joe has been sitting on 50,000 shares of GE for the last 60 years, that has never been taxed.

It wouldn't be money if it were shares of GE, would it?

Do you think the estate tax only includes cash?

Thanks for making my point.

 

[bostonfred]

I would think that this is a bad thing, because the company is still trying to earn money for its shareholders.

Are you suggesting that the Paris Hiltons of the world are pursuing ways to earn money for their families as actively as the parents they inherited it from?

Now I see your dilemma. Paris Hilton is your model for extended capital as it passes through a family. Better the Federal government have the already taxed capital than allowing her to blow it, right? Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

I've already addressed that repeatedly throughout the thread. Try to break away from the standard three legged Pony Boy platform: 1) using condescending language (Now I see your dilemma)

2) attacking the low hanging fruit (Paris Hilton is your model for extended capital...),

3) using cliched, surface level arguments that have already been discussed (it's not the government's money)

That's a good description of it from the perspective of the person passing the money on. And that's fair. You should be able to do what you want with your money, and if what you want to do with your money is give it to your kids when you die, then why should you pay more?

Now let's look at it from the perspective of a meritocracy. The Paris Hilton's of the world aren't living in a meritocracy, they're living off daddy's wealth, and they have no reason to put that wealth to productive use. Which, from a Randian perspective, is perfectly acceptable - the world has no right to compel you to work. But from a resource utilization perspective, the inevitable outcome is that the richest families will hoard all of the resources. It's a new breed of aristocrats, where people can earn their way into the aristocracy, and once there, will use their greater resources to maintain their status for themselves and their family.

So we have two ends of a spectrum - the one end where we want to make sure that people are free to do what they want with their money, and the other where we want to avoid the hoarding of resources by the families of the elite. Some kind of compromise is appropriate; the only question is how much.

The major difference is that he's arguing against the hoarding of wealth by the elite families of the world. I don't remember the numbers, but we've all heard them before - the top 1% own some ridiculous percentage of the world's wealth. Well, that compounds. With each generation, some small number of new people may enter that top percent, while some small number may drop out, but the percentage of the world's wealth they control will continue to rise. Is that a policy that's good for America or the world? If so, why?

But more importantly, let's assume that Buffett passed on his entire net worth to his kids, and his kids did nothing with the money but spend it and pass it on to his grandkids, great grandkids, and so on. And assume the same thing happens with every single estate out there. A massive percentage of the world's resources are just sitting there in an eddy pool of the aristocratic rich. And sure, they would eventually spend themselves out of the aristocracy, while others would earn their way in. But over time, more and more of the world's resources would be owned by that aristocracy.

But wait, you say. They wouldn't all just idly sit there with their wealth and do nothing with it. Many of them would invest it. But the problem with that is that a great percentage of the world's wealth would be owned by people who did nothing to earn it. Much like Buffett can be assumed to do a better job with his money than the Bill and Melinda Gates foundation, the hard workers in a meritocracy can be assumed to do a better job with their money than the inheritors in the aristocracy. So a massive amount of resources are controlled by an inefficient group. And while you might argue that they'd be able to hire someone to invest for them, the hard workers in the meritocracy would be more likely, on average, to pick the best person to invest.

Now on the far opposite end of the spectrum, just because the end result of eliminating the estate tax is bad for the country, doesn't mean that we should just take all the money away from people when they die. Because people absolutely should have a right to do with their money what they please, and if that means that they don't spend their money so their kids can have it, then they should be allowed to use their money in that way. So there's a necessary compromise - because neither a 0%, nor a 100%, estate tax would be correct.

 

[Homer J Simpson]

Do you think the estate tax only includes cash?

Thanks for making my point.

Taxes = Socialism?

 

[Bronco Billy]

I've already addressed that repeatedly throughout the thread. Try to break away from the standard three legged Pony Boy platform:

You are aware that a 3 point support system is considered the most stable, correct? It why we engineers use triangles regularly to design things...

 

[bostonfred]

The argument that the rich will eventually spend their money is not particularly strong, since anybody who has money would have the option to spend it. That does nothing to alleviate my concern that a smaller and smaller group controls a larger percentage of the country's - and world's - resources.

Out of curiousity, is this actually the case? Is the world's wealth actually being concentrated into a smaller and smaller percentage of people? Just going by medieval times, pretty much everyone was extremely poor other than the king and a few nobles. I'd say that's probably been the case generally throughout history.

One of the benefits of capitalism is that it breaks us away from that model. America is supposed to be a meritocracy, not an aristocracy. Yes, there's a long standing history of people in power finding ways to preserve their power and pass it to their heirs.

No, that doesn't mean we should help them by building that ability in to the American legal system and tax codes.

 

[dparker713]

Earning has ZERO to do with the tax code. Each transaction is taxed. We do not tax capital, we tax transactions. If you have a lump of money sitting in a trust, it could sit there untaxed inperpetuity.

So that lump of money was created through immaculate conception? It wasn't initially earned, making it subject to income tax? Or acquired through sales, making it subject to sales tax? It just was? And therefore the government has a claim on it?

The government isnt making any claim on any money whatsoever. Have all the money you want, they wont touch a dime. HOWEVER, involve yourself with any transaction involving money, and they will tax you. Its like you're arguing for a system where a dollar can only be taxed once after issuance and then its free and clear. Every dollar is taxed multiple times before it reaches your pocket, and it will be taxed multiple times after it leaves your pocket. Maybe you're confusing you pocket with your assigns, but unless its a joint tenancy situation there is a definite change in ownership of the wealth, and therefore a taxable transaction.

 

[LHUCKS]

There is nothing wrong with death/estate taxes as they are...so I agree with Mr. Buffet.

 

[bostonfred]

I've already addressed that repeatedly throughout the thread. Try to break away from the standard three legged Pony Boy platform:

You are aware that a 3 point support system is considered the most stable, correct? It why we engineers use triangles regularly to design things...

I don't know if I should compare your argument to a three legged chair, or a stool.

 

[Bronco Billy]

I've already addressed that repeatedly throughout the thread. Try to break away from the standard three legged Pony Boy platform: 1) using condescending language (Now I see your dilemma)2) attacking the low hanging fruit (Paris Hilton is your model for extended capital...), 3) using cliched, surface level arguments that have already been discussed (it's not the government's money)

Addressing these 3 points:1) using condescending language (Now I see your dilemma)I'm apologize. I did not realize that you were so sensitive, especially seeing the way you treat others. I sincerely hope that you recover from my assault on you.2) attacking the low hanging fruit (Paris Hilton is your model for extended capital...),I admit that I should have been mature enough to not use the example you provided in rebutting your argument. 3) using cliched, surface level arguments that have already been discussed (it's not the government's money)I may be wrong. Can you show me where Paris Hilton's money is in fact not her money but the government's money? Where do you possibly come up with the concept that every amount of money is the government's other than that which they allow us to keep? I think that is your underlying assumption and hence the fatal flaw in most of your arguments.

 

[dparker713]

Can you show me where Paris Hilton's money is in fact not her money but the government's money? Where do you possibly come up with the concept that every amount of money is the government's other than that which they allow us to keep? I think that is your underlying assumption and hence the fatal flaw in most of your arguments.

Well, they print the money. They back the money. They could discontinue to back the money at anytime.But on a more relevant note, why do you believe that ownership of money precludes any further taxes on money? I have a bank account with some money in it. Therefore I own that money. Why can't I freely give that money to a plumber without him paying income tax on that money and me paying sales tax on the total bill? Why should all estates be different?

 

[CBusAlex]

especially people that are highly unlikely to ever be involved in a transfer large enough to actually be taxed.

This really shouldn't matter.

 

[The Commish]

So you think he pays a higher rate than his secretary and he's just blowing smoke? I do everything in my power to lower my tax rate and do a decent job. It's simple to do if you take the time to read the code and structure your portfolio accordingly. I assume these uber rich do an even better job than me and know the system even better than I do.

No, he pays a lower rate because of his position in the company and his ability to remove capital in a manner that precludes high tax rates (capital gains). It's also why he pays himself a salary so relatively low considering his position - it falls just under a threshold for higher taxation on wages. His secretary does not have that option, and is forced to pay on her wages solely.Pretty simple, like I said. And disingenuous of him to make the comparison knowing full well that he is using the tax code to his advantage given his position while his secretary has no such option.

I don't understand why you think she can't do this. She's allowed. She can negotiate the method she's paid. I've done it. I've taken jobs before where part of my salary comes in capital rather than wages. I am no millionaire, but this is a pretty common practice I would think. Even in her position there are plenty of things she can do to reduce her gross income and get into a lower tax bracket. We can all use the tax code to our advantage it's just that most people are too lazy to do the leg work.

She's not allowed - it's not her company. Let's make this perfectly clear: Buffet does not allow for her to be compensated in that manner, even though it would reduce her tax liability, because HE chooses not to compensate her that way. But he does it for himself in the most advantageous manner. Then he chooses to use that to make some kind of tortured point of comparison between the two.Now are you beginning to see more of his hypocrisy?

How do you know WHY she isn't compensated that way? Do we have documentation somewhere that says she tried to get compensated that way and he refused? It's more likely that what I said before holds true. She simply doesn't know any better. It would be hypocritical of him if he insisted on being compensated one way and then refused the same type of compensation for one of his employees if they asked for it. Otherwise, this is just an unfounded rant and I'm not really sure what you're getting out of it.

 

[bostonfred]

I may be wrong. Can you show me where Paris Hilton's money is in fact not her money but the government's money? Where do you possibly come up with the concept that every amount of money is the government's other than that which they allow us to keep? I think that is your underlying assumption and hence the fatal flaw in most of your arguments.

I don't mind the condescension. I'm just saying it doesn't pass for substance. Same thing with attacking the low hanging fruit and using cliched, surface level arguments that have already been discussed. And yet, here you do all three, again, even though I went back and neatly summarized my response to your point. There are a whole bunch of posts up there for you to reply to, and I even bolded parts that agree with your point. I agree that it's not the government's money. I agree that people should have the right to do with their money as they see fit, including passing money on to their heirs. That's a great argument for why the tax rate should not be 100%, and a reasonable argument for keeping it low. There are also arguments for why the tax rate should not be 0%. You haven't addressed any of them.

 

[CBusAlex]

Except of course for that tricky part about the capital already being taxed once before it was passed on and that really tricky part about it not being the government's money...

When I send in my 1040 this year, I'm going to request a full refund of all my income tax. After all, that capital was already taxed once before it was paid to me, and it's not the government's money anyway.

 

[dparker713]

especially people that are highly unlikely to ever be involved in a transfer large enough to actually be taxed.

This really shouldn't matter.

Self interest seems to inform pretty much every political debate in this country, except it seems to get thrown out the door by alot of people concerning marginal rates and the estate tax. Seems rather odd to me.

 

[Mark Wimer]

The system is set up to take advantage of the average working man/woman and to benefit those who promulgate/interpret/implement the laws (lawyers, accountants and legislators).Both major political parties in the US are shameless in the ways in which they abuse the tax code in order to benefit their particular party bases.My .

Well, seeing as how over 50% of Americans don't pay any income taxes, I'll disagree somewhat with your assertion that both parties are trying to figure out how to tax the lower and middle classes. In fact, I'd argue just the opposite. I'd say that the Republicans are generally trying to not tax anyone very much and the Democrats are trying just to tax the rich a WHOLE lot.

A very interesting assertion. Link? Source? I've never seen someone say that half of the population of the United States doesn't pay income tax to the federal government before.Oh, and I wasn't just referring to the income tax code, my friend. The whole set of links I posted included the following:

# ubtitle A—Income Taxes# Subtitle B—Estate and Gift Taxes# Subtitle C—Employment Taxes# Subtitle D—Miscellaneous Excise Taxes# Subtitle E—Alcohol, Tobacco, and Certain Other Excise Taxes# Subtitle F—Procedure and Administration# Subtitle G—The Joint Committee on Taxation# Subtitle H—Financing of Presidential Election Campaigns# Subtitle I—Trust Fund Code# Subtitle J—Coal Industry Health Benefits# Subtitle K—Group Health Plan Requirements

I'm pretty darn sure (99.99999%) that given the above list of taxes and tax regulations, every man, woman, and child in the United States of America who buy or sell anything (from a lolly-pop to a block of Berkshire-Hathaway shares) pays taxes to the local, state, and federal governments in one form or another. Perhaps you could find a few hundred homeless persons with $0 annual income who never purchase anything in the retail marketplace and who live by dumpster diving and nothing else, but outside those unfortunate folks almost everyone in the U.S.A. pays an extortionate amount of taxes to the government (whether explicit taxes, like the income tax, or so-called 'hidden' taxes like Medicare/Medicaid/Social Security and FICA taxes, etc.).

 

[SeveredHorseHeads]

Yes, GroveDiesel's argument is actually quite brilliant. Brilliant in the fact that it is so mind-numbingly idiotic that I can't think of a way to logically counter it.

Aw yes, the feeble minded attempt at a slam. Feel free to continue contributing your stunning insight and escalating the discourse here. This is the type of post that makes the FFA so much fun.

You say "Why doesn't Buffet give his all of his money to charity if he believes this?" People respond, "He has given tens of billions of dollars to charity and is one of the largest philanthropists in the history of mankind." You respond "Not good enough."Just admit you were wrong in the initial post and move on. This guy walks the walk to an extent that is unquestionable and yet, since his view violates some BS tax creed you worship like a god, you trash him and call him a hypocrite. If would be hilarious if it wasn't so damn pathetic.

 

[Michael Fox Fan]

Also, if he wants to make it seem like he's making an honest argument, then maybe he should get rid of his insurance arm at Berkshire Hathaway that sells insurance products specially designed to help people avoid the hits of the inheritance tax.

Is this even true? I'm only aware of Berkshire Hathaway (through its GenRe subsidiary) selling reinsurance to property-casualty insurance companies. That wouldn't involve anything related to insurance produts that avoid inheritance tax. Just curious where you've read this - can you share a link?

 

[Michael Fox Fan]

Lastly, what if Buffett's son was the 2nd most capable investor in the world. Wouldn't it actually be a BETTER move to transfer that control over to his son rather than giving it to the inefficient government to use?

Buffett's son isn't the 2nd most capable investor in the world.

 

[Michael Fox Fan]

First of all, not all investments "help the world". For example, if they bought real estate low and sold it high, they haven't increased the amount of real estate. They haven't improved the world in any meaningful way. If they're speculating on oil, and driving up the prices, they're not helping American interests. So it's not necessarily true that all investments that make money are good for the world or good for America. But more importantly, let's assume that Buffett passed on his entire net worth to his kids, and his kids did nothing with the money but spend it and pass it on to his grandkids, great grandkids, and so on. And assume the same thing happens with every single estate out there. A massive percentage of the world's resources are just sitting there in an eddy pool of the aristocratic rich. And sure, they would eventually spend themselves out of the aristocracy, while others would earn their way in. But over time, more and more of the world's resources would be owned by that aristocracy. But wait, you say. They wouldn't all just idly sit there with their wealth and do nothing with it. Many of them would invest it. But the problem with that is that a great percentage of the world's wealth would be owned by people who did nothing to earn it. Much like Buffett can be assumed to do a better job with his money than the Bill and Melinda Gates foundation, the hard workers in a meritocracy can be assumed to do a better job with their money than the inheritors in the aristocracy. So a massive amount of resources are controlled by an inefficient group. And while you might argue that they'd be able to hire someone to invest for them, the hard workers in the meritocracy would be more likely, on average, to pick the best person to invest. Now on the far opposite end of the spectrum, just because the end result of eliminating the estate tax is bad for the country, doesn't mean that we should just take all the money away from people when they die. Because people absolutely should have a right to do with their money what they please, and if that means that they don't spend their money so their kids can have it, then they should be allowed to use their money in that way. So there's a necessary compromise - because neither a 0%, nor a 100%, estate tax would be correct.

 

[Bottomfeeder Sports]

Ask any economist and they will tell you the dumbest thing to do is to RAISE taxes in the middle of a recession. Even a liberal Keynesian like Robert Reich will tell you that.

19821990to a lesser degree 1993

 

[Bottomfeeder Sports]

I don't think the Buffet defenders get it. Those detractors of Buffet are calling him out for his hypocrisy - trying to force other people to give the government more of their money when he refuses to do the same of his own free will and instead reaches into the tax code to reduce what he has to pay.The monster is bloated enough. Instead of finding more and different ways to feed it, why not try to wean it off some of its gorging?

Umm, we need to both raise taxes and cut spending to get the budget under control. We're not going to be able to just cut our way out of these problems.

I'd disagree. Reducing expendible capital in the private sector isn't going to stimulate production, enhance sales, or promote job growth. Why would you think that it would?

How is removing capital from the private sector via taxation all that much worst than removing it by borrowing?

 

[Maurile Tremblay]

In principle, estate taxes should be eliminated. They effectively tax future labor more heavily than current labor (or, equivalently, they tax future consumption more heavily than current consumption), which is inefficient.

It seems that Buffett wants to use the estate tax to make the tax system overall more progressive. In principle, there are much better ways to do that -- e.g., by incorporating a more progressive system of graduated marginal rates on income taxes.

In practice, the "much better ways" may be politically infeasible, so an estate tax may be a good realistic alternative (assuming a more progressive tax system is desirable).

(How progressive or regressive the tax system is wouldn't matter so much if tax revenues [along with government spending] were limited to less than 5% of GDP; but that's another issue. And cutting spending is itself politically infeasible in a representative democracy, so my parenthetical point here is irrelevant anyway.)

I do wonder about this, though:

Warren Buffett has a few lessons for Congress on tax priorities for the coming years. He supports making the tax system more progressive. To underscore the unfairness of the tax system, he recently offered a $1 million reward to any member of the Forbes 400 who could prove that they pay a higher tax rate than their personal assistants and secretaries. So far, he has had no takers.

Is there a link to the exact rules? If we consider all taxes comprehensively (e.g., acknowledging that corporate taxes are effectively paid by shareholders), it would be trivial, I suspect, to show that super rich people generally pay a higher tax rate than their secretaries.

 

[Bottomfeeder Sports]

e.g., acknowledging that corporate taxes are effectively paid by shareholders

Why not "corporate taxes are paid by the employees?"If cost goes up what is the most likely to happen - dividends cut? prices raised? do without a few employees?In this argument "corporate taxes are effectively paid by shareholders".In other arguments "corporate taxes are past on to customers".

 

[Maurile Tremblay]

First of all, not all investments "help the world". ... If they're speculating on oil, and driving up the prices, they're not helping American interests.

If they're driving up prices, they are signaling that oil will become scarce -- which induces others to conserve gas by carpooling, or to conduct research on alternative energy sources. That helps American interests.

Much like Buffett can be assumed to do a better job with his money than the Bill and Melinda Gates foundation . . .

Maybe I missed the context (I haven't read the thread; I just saw your post quoted by Michael Fox), but what does that mean? The fact that Buffett has donated so much of his money to the Bill and Melinda Gates foundation seems to indicate that Buffett himself would disagree with your statement.

 

[bostonfred]

e.g., acknowledging that corporate taxes are effectively paid by shareholders

Why not "corporate taxes are paid by the employees?"If cost goes up what is the most likely to happen - dividends cut? prices raised? do without a few employees?In this argument "corporate taxes are effectively paid by shareholders".In other arguments "corporate taxes are past on to customers".

Whenever "the company" pays for something, it's paid for by the shareholders. Every asset the company owns, and every liability, belongs to the shareholders. When the company hires people, it's because the leadership team, which reports to the shareholders, feels that it will increase shareholder wealth. When the company decides how much to charge for their goods and services, the management team put in place by the shareholders determines the amount that will maximize shareholder wealth. That's pretty much the defintion of what for-profit companies do. For the same reason, the argument that companies pass anything on to their customers is wrongheaded. For example, when we discussed taxing banks, there were a lot of conservatives arguing that if we taxed the banks, they'd just pass the price increase on to their customers. If the company could increase prices without losing customers, they would have done so already. They may determine that, because the cost of providing their goods and services has gone up, it would be more profitable to charge more and have fewer customers. Or they may determine that their competitors will also increase prices, and the implicit price collusion will lead them to all "pass the cost along to their consumers". But that's just spin. The people who pay for costs to the company are the shareholders. Part of management's job is to minimize the impact of those costs by constantly seeking to increase shareholder wealth.

 

[bostonfred]

Much like Buffett can be assumed to do a better job with his money than the Bill and Melinda Gates foundation . . .

Maybe I missed the context (I haven't read the thread; I just saw your post quoted by Michael Fox), but what does that mean? The fact that Buffett has donated so much of his money to the Bill and Melinda Gates foundation seems to indicate that Buffett himself would disagree with your statement.

And to those criticizing Buffett for not giving away his money fast enough, here are two very clear reasons for Buffett to space it out:1) Buffett's fortune is in Berkshire Hathaway stock. In order for those receiving his wealth to make use of it, they need to sell the stock. In essence, if Buffett gave away all of his stock tomorrow and those foundations then tried to sell it, the price would bottom out, destroying much of the value in the stock. And if those organizations don't intend on selling it right away, then…2) If the stock is not to be immediately sold, why not leave it in the hands of the man who has shown the ability to increase it's value more than anyone else? Per Buffett himself:"And someone who was compounding money at a high rate, I thought, was the better party to be taking care of the philanthropy that was to be done 20 years out, while the people compounding at a lower rate should logically take care of the current philanthropy."