Have a look at what a flawed assumption looks like?
Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.
I haven’t read or seen anything else about Mr. Buffet’s comments, so I’m going on the assumption that this version of events is fairly reported. Whatever the cause of the error, it would be just as easy to lament that the poor don’t pay taxes at the lower rate paid by rich people. Note, of course, that Mr. Buffet’s 17.7% tax rate and his secretary’s 30% rate are anecdotal. Is he incorrectly assuming that his tax situation fairly represents all “rich” Americans and that his secretary’s tax situation fairly represents all “poor” Americans? The tax code is far too complex for me to assume that is the case.
Buffett said that he and other privileged Americans must do more to help the less fortunate.
…Clinton finished by asking Buffett, “Why are you a Democrat?”
Buffett said he thought Democrats would do a better job in evening out the field for those who had drawn the unlucky tickets in life.
Spare me the populist babble, please. “Privileged”? Being smarter and/or more productive does not make a person “privileged”. Yes, there is luck in life, but assuming that it is a key factor is hopelessly naive and dangerous. Such benevolence from on high is condescending.
Get the government out of people’s way and set up minimal safety nets where necessary. That will be more effective than simply spouting the incorrect notion the “privileged” aren’t doing enough, generally in the form of paying taxes. I thought Mr. Buffet was smarter than that.
Greg Mankiw has detailed analysis of Mr. Buffet’s likely tax scenario. Kip adds his thoughts.
From a mini-editorial within the article:
The event comes as public frustration has grown over executive compensation and disparity in pay. It also comes as Congress debates changes to the tax code that would decrease take-home pay for managers of private-equity firms and hedge funds, pools of money for wealthy families and institutional investors. The rich can take advantage of tax loopholes, including one that allows those managers to pay the capital gains tax rate of 15 percent instead of the ordinary top income tax rate of 35 percent.
To put it bluntly, “the public” can go take a flying leap. Populist complaints that some people earn “too much money” deserve no consideration other than the time it takes to tell “the public” to mind its own business. If it wants to do something about this, boycott the companies that pay “excessive” compensation. Purchase stock in the company and propose resolutions to the board. Both are better than begging Congress to “fix” inequality by limiting the most successful. Even if the most successful don’t earn it, according to the self-serving criteria of an outside party.
Notice, too, how the reporter uses the unspoken assumption that income from a private-equity and hedge pool is not an investment and should be taxed ordinary income. Maybe I need to revisit my analysis of the article’s opening paragraph.