Why Are We Bashing Buffett?

What is altruism? Warren Buffett recently proposed a surtax on the very wealthiest Americans, including himself to help reduce the federal deficit.  (This is a mild version of Obama’s perfectly reasonable proposal to tax family incomes above $250,000, i.e., fewer than 2% of families.) Buffett is being altruistic—the tax will reduce his net income. I always thought altruism was desirable, yet I’ve seen Buffett lampooned in the press.

I suppose one can argue that he’s really doing this to preserve the value of Berkshire Hathaway stock.  (The same argument might apply when I donate blood—perhaps I do it because it makes me feel good, not to help others.) But: it’s a pretty sorry state of the world when someone offers to reduce his circumstances in order to help his country and is mocked.

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  1. HeavyD says:

    A large and complicated topic which I would boil down by saying:
    a) WB’s mid 80s and already got his taken care off a few billion times over
    b) he proposes taxing income, not wealth – where was he the past 50 years while earning?
    c) taxing the richest 500 Americans sounds good but won’t move the meter on our real problem (spending 40% too much)
    d) find me lots of people making $200k-$500k who tell you they want to pay more. You won’t because those are the upward “aspiring” rich who aren’t set for life yet – but hope to be one day.
    e) this is a clear cut case of limo-liberal attitude – I won the lottery and feel badly that so many others don’t have it so easy. See Hollywood Actors for more details.

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    • DJS says:

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    • nobody.really says:

      “this is a clear cut case of limo-liberal attitude – I won the lottery and feel badly that so many others don’t have it so easy. See Hollywood Actors for more details.”

      This is very well said. Indeed, it illustrates the very point Hamermesh was making: Why, exactly, do we condemn “limo liberals”? What about compassion makes us so uncomfortable?

      In many instances, I sense the answer is envy. It’s bad enough that we must acknowledge that some people are richer than we are. When those rich people acknowledge the status difference between us and them, it’s just unbearable.

      Behavioral economics indicates that people don’t merely care about their absolute standard of living; they care about how their standard of living compares to their neighbor’s standard of living. The Ultimatum Game demonstrates that people are willing to sacrifice money in order to punish those whom they believe had treated them inequitably.

      Not to go all David Brooks on you, but culture matters. In “The Social Animal,” Brooks cites research showing that if you bump into a man living in the South, his stress hormones jump, whereas men in the northern states don’t exhibit this same response. The research adds to the theory that people in the South are more status-conscious – and specifically, are more sensitive to being looked down on.

      This creates a problem for public policy, because the South is also where we find the highest rates of all kinds of problems (poverty, unemployment, drop-out rates, violent crime, divorce, obesity, etc.). The people who may be most in need of assistance are also the people who may most resist being identified as being in need of assistance. This leads to the paradox that the states where we find the most generous social safety nets are where those nets are least needed, and vice versa.

      So this may be part of the reaction to Buffet: he’s too candid. To make public policy palatable to a certain segment of society, we need to conceal the policy’s mechanism. I sense that many people will embrace progressive policies provided they never have to see the man behind the curtain.

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      • Clifton Griffin says:

        I don’t see any evidence that compassion is making anyone uncomfortable. This seems like a straw man designed to make the critics feel like they are caught in a Freudian slip, opposing altruism.

        We are questioning whether the true motivation is compassion. Is it compassionate to offer up the tax revenues of the slightly rich when your personal income is but an infinitesimal fraction of your net worth?

        Is it compassionate to call for coerced altruism while not practicing personal altruism (in the form of voluntarily paying more taxes)?

        Buffet has a political agenda. He frames that agenda in terms of helping the greater good, but we are wise (or at least justified) in being partially suspicious of the methods and motivation of this agenda.

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      • nobody.really says:

        Speaking of straw men….

        As noted below, Buffet has given neary $8 million to the Bill & Malinda Gates Foundation and has committed to give 99% of his wealth away via The Giving Pledge. I eagerly await an explanation of Buffet’s clever political ploy that reveals his many faux acts of altruism for the cynical, self-serving devices they are.

        Alternatively, I could return to the hypothesis that some people seem deeply uncomfortable with compassion – so uncomfortable that they prefer to imagine fantastical sinister schemes in order to shield themselves from having to acknowledge actual, human compassion in action.

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      • JimT says:

        WB donations to the Gates foundation and The Giving Pledge actually represent altruism. He should be applauded for his choice. By doing this he also gets a say in how his dollars are used to improve the lot of those less fortunate.

        Suggesting that others be forcibly required to surrender a portion of their wealth, and the ability to direct how it is used is not altruistic at all.

        Compulsion does not in any way, shape, or form equal altruism.

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      • Dave says:

        I do not condemn limo liberals because of their compassion. Compassion does not make me uncomfortable–it is a laudable thing. But I wish they would express their compassion by giving away their own money, if they feel they have too much, not mine, for I don’t have too much.

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      • pawnman says:

        Because this doesn’t actually affect them. If I had $1 billion, it would not materially affect me if the government took $100 million of it. It would affect me even less if they moved from taking $10 million a year to $110 million a year. However, I don’t make that kind of money, and taking $25,000 out of a family income of $250,000, while the same percent, creates a much steeper drop in purchasing power.

        I think Buffett is getting so much negative press for this one because he’s not being altruistic…he’s trying to use the government to coerce people into giving up their incomes. If he were being altruistic, he’d give his money away (which he has on previous occasions).

        The problem with limo liberals is that they don’t have a solid understanding of the circumstances of people who don’t have that kind of cash. It’s very easy to be generous with someone else’s money (which is what taxes are, by the way…someone else’s money).

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    • Mike B says:

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      • Boros says:

        If you’re making $200k/yr but also paying off student loans, paying taxes on the 200k, and maybe buying food, housing, and God forbid daycare for your kids, it’s extremely unlikely that you have more than $100k left over after covering those.

        If you want to be “set for life” at a $60k/yr pre-tax income, say, you need about $1.2 million in investable assets. That’s 12 years of saving every penny you make except for necessities.

        Maybe that’s quick in your book. I don’t know….

        As for sheltering income… pray tell me how one does that with earned (as opposed to business) income? For earned income you can typically put (as of this year) $16.5k/year into a 401(k), $5k/year into a flex account, $6150/year into an HSA…. and that’s it. If you want to shelter more than about $27k/year, you have to incorporate and so forth.

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      • Mike B says:

        Attending an overly expensive school and having kids too early in life are not decisions that should allow one to shirk one’s responsibility to the community. If one wants to be set for life that’s fine, but being set for life and spending hundreds of thousands of dollars on children and education at a profit center school just might be mutually exclusive acts. Anyway the real point is that few people actually go out and work until they set themselves up for life then stop. A person’s drive to work is about more than reaching a point where they can relax in idleness all day and if it wasn’t it would be good government policy to stop such a thing. People just want more and excuse me if I am unsympathetic when high income earners complain that because they don’t have whatever fancy toy their neighbor has they aren’t really rich. Not “feeling” rich and not actually being rich are two completely different things and our tax policy shouldn’t be based on the former.

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      • Chris BeHanna says:

        One’s only responsibility to the community is “do no harm.” There is no other responsibility to shirk.

        Penn Jillette had it right:

        “It’s amazing to me how many people think that voting to have the government give poor people money is compassion. Helping poor and suffering people is compassion. Voting for our government to use guns to give money to help poor and suffering people is immoral self-righteous bullying laziness.

        “People need to be fed, medicated, educated, clothed, and sheltered, and if we’re compassionate we’ll help them, but you get no moral credit for forcing other people to do what you think is right. There is great joy in helping people, but no joy in doing it at gunpoint.”

        (Penn Jillette, “I don’t know, so I’m an atheist libertarian”, CNN Opinion piece, 16 Aug 2011)

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    • John says:

      I’ll go one step farther, I’ll bet I can find a whole slew of people who don’t want to pay any taxes at all, myself included! But, yet, I want roads, I don’t want people going hungry or lacking healthcare, I want the military to be strong (even though I think we wasted a bunch of money in Iraq and Afganistan), I want the government to support far-out research that business can’t or wont’.

      I’m much prefer someone else to pay for it. And, so, I find it silly when someone says we should be spending 40% less without telling me what programs they would end to get there. While they’re at it, they should clearly put the other option on the table (raising taxes) and tell me why that’s not the better options. For instance, it’s hard to see how raising taxes on rich folks 2% is worse than cutting Medicare spending (or ending the payroll tax, for that matter).

      Until the spending cut folks are willing to address the real argument — the choice between two undesirables — they’re doing nothing to change my mind. Folks wanting to raise taxes a bit at least have an argument — spending cuts will hurt, raising taxes on people who can afford it doesn’t hurt society as much.

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      • James says:

        “And, so, I find it silly when someone says we should be spending 40% less without telling me what programs they would end to get there.”

        But a lot of us ARE willing to tell you exactly that. Not room for a full list here, but you could start with the DEA and all the other money spent on the War on Drugs, subsidies to oil companies, most of Homeland Security, the billions in foreign aid (especially military aid) to Pakistan & similar places…

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      • Joshua says:

        I gotta get in on this.

        Ever penny spent keeping troops anywhere in the western hemisphere that isn’t the USA.
        Department of Education.
        Subsidies to anybody – oil, corn, etc.
        Change SocSec to a pension at the poverty borderline like it’s going to end up anyway.

        I could go on, but I have to get to work.

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      • Gordon B says:

        You could probably pick the programs to cut at random and most people wouldn’t notice. Military adventures would be a good start, farm subsidies next, means test SS, raise retirement age a year or two.

        In terms of overall economy, you’d probably get the most benefit out of fixing the broken tax code… lower income tax rates and get rid of idiotic market-distorting tax breaks.

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    • twobeef says:

      “c) taxing the richest 500 Americans sounds good but won’t move the meter on our real problem (spending 40% too much)”

      A Quinnipiac poll in March 2010 asked the following question: 49. Do you think – raising income taxes on households making more than $250,000 should or should not be a main part of any government approach to the deficit?

      Responses by income: Make less than $50k, 64%-33% in favor. $50k-$100k, 61%-38% in favor. $100k-$250k, 51%-49% in favor. $250k and up, 64%-36% in favor. A strong majority of responses in the upper bracket supported raising taxes on the top bracket, and the next bracket was split about equal on the issue. ( Link: http://www.quinnipiac.edu/x1295.xml?ReleaseID=1438 )

      This would seem to support the idea that you have plenty of people in that bracket who think they should pay more.

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      • Clifton Griffin says:

        The consent of the governed isn’t the only criteria worthy of consideration.

        Capitalism is primarily based on the idea that, free from intervention, capital tends to flow to its most valuable use.

        Taking money out of the private sector breaches this concept. And, for those of us interested in private sector growth and economic recovery, taking more privately held money for federal purposes is just a horrible idea in a recession, no matter who suggests it or who approves it.

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      • twobeef says:

        “Capitalism is primarily based on the idea that, free from intervention, capital tends to flow to its most valuable use.”

        Define valuable. Capital has been flowing more and more toward the financial sector in recent decades, and it’s not clear that intervention had anything to do with that.

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      • Clifton Griffin says:

        I’m not sure how provable that statement is. But, at any rate, we barely can call our market free. We live in a mixed economy at best, with interventionist policies encircling every sector of our economy.

        The most valuable use of capital is the most efficient one. Companies that maintain artificially high profit margins lose to companies who don’t. Companies who hire crappy workers lose to those who hire good ones. Companies who adapt and innovate beat companies who rest on their laurels.

        Disclaimer: The statement I made, which you quoted, is loosely quoted from an essay by Alan Greenspan in 1962. I have looked around online for it, but can’t find it.

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      • pawnman says:

        Even the smartest economists debate the best way to solve the debt problem…I’m to believe that the general public, many of whom can’t even balance their personal budgets, have a better solution?

        I’m not saying that increasing taxes should be off the table. We probably will have to raise taxes, though I’m sick of the class warfare and would love to see a rise in taxes across the board if that’s what we’re going to do. However, there is almost no level you can raise taxes to that will materially affect the level of debt we currently have. Any true solution will include both tax hikes and spending cuts.

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  2. William says:

    Family incomes above $250,000 are already being taxed. Don’t you mean raising the tax rate? And why is it perfectly reasonable? I am not going to get into the issue of who actually pays the income tax, as that has been adequately documented elsewhere. Also, Warren is not offering to reduce just his circumstances, but is offering to reduce other’s as well. How nice of Warren to offer to reduce the disposable income of others. As others have commented, if he wants to pay more in taxes, nothing is stopping him from sending the IRS a check. I don’t agree that it is a pretty sorry state of the world when people do not appreciate Warren deciding that they should have more of the income seized by the government. Would this “help his country”? Not if, as I believe, the problem is a spending one and not a revenue one.

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    • Mike B says:

      Imagine if you were very wealthy (which probably isn’t very hard) and you belonged to an organization whose facilities were getting rundown and shabby. You go around to the other wealthy people of the club and suggest that they all pay more in dues so the facilities can get fixed up, however they refuse and respond that if you want things fixed so badly why don’t you write a check on your own. How would that make you feel? Would you do it? No, that would make you a sucker and only cause a free rider situation.

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      • G Butler says:

        That’s nice, but Buffett said outright that he wasn’t being taxed enough. That he doesn’t send the IRS a check for the difference is a legitimate point. A more important point is that Berkshire Hathaway is still fighting with the IRS over taxes due from over a decade ago. Despite his bluster, he still minimizes taxes (like everyone else with functional neurons) because he knows he can spend his dollars more effectively than the government.

        Anyone arguing for more taxes on themself must think the government can spend their money more efficiently than they can themselves. This should be prima facia evidence of insanity.

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      • Michael B says:

        “because he knows he can spend his dollars more effectively than the government.”
        He minimizes taxes because it is to his personal benefit, not because he can spend it more effectively on providing social security, training American soldiers etc. Everyone minimizes their personal taxes for this reason.

        The reason for government intervention is market failure, it is all well and good to suggest that no one wants to pay for this intervention, but where do those who are unable to work or unable to afford housing go?

        If the US wants to change its tax structure and reduce any freeloading, unfair tax breaks etc, then they can change to a consumption tax and reduce the income tax brackets, this will capture more income from the rich if they choose to spend more and will result in a more stable long term outlook, as the number of producers in the economy contracts, their will be a wider tax base.

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      • Chris BeHanna says:

        Michael B wrote, “The reason for government intervention is market failure.”

        Er, no. Government intervention CAUSES market failure. Without government intervention, there would not have been massive sub-prime lending–no lender who wanted to stay in business would have given mortgages to people who couldn’t prove they could pay them, and without the government forcing lenders to make these loans under the rubric of the Community Reinvestment Act on the one hand, and backstopping these loans with taxpayer money (Fannie and Freddie) on the other, there would have been no subprime meltdown–the spark that lit the economic fire in late ’08. Without subprime loans, there couldn’t have been securitized derivative products based upon subprime loans, and so on and so forth.

        Then there’s that little matter of Helicopter Ben and Turbo Tax Timmy blatantly trying to hyperinflate our way out of this. Currency devaluation is a regressive hidden tax that all pay. Buffett has protected himself by largely getting out of the dollar–he has large positions in other currencies, as well as in commodities, which Ben and Tim can’t inflate.

        To quote a great man, “The best thing that government can do is get out of the way.”

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      • Hoss says:

        “No, that would make you a sucker and only cause a free rider situation.”

        Which is exactly the problem we have in America. Many expect the diminishing number of true taxpayers (those not getting more back than they put in) to “refurbish” or maintain the free-rider’s lifestyle choices and wants. And the taxpayer is the one getting constantly played as the sucker. Your argument counters the point you’re trying to make.

        We have a spending problem, not a taxing problem. Giving the federal government more money is about as responsible as giving teenage boys whiskey, beer, and the car keys. And let’s face it, you could never tax the “rich” enough to suit the American left. If taxes were increased the spending would continue at it’s current unsustainable rate, and the next time it dawned on someone that we owe trillions and trillions of dollars that we can’t possibly service, it would be time to come back to the productive for just another pound of flesh. Guaranteed.

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      • Llama Face says:

        This is a false argument, because I am voluntarily associated with the organization. If the facility were rundown and shabby, and the other members of the organization refuse to chip in to fix it up, I can quit the organization. I would FEEL like the other guys were jerks, and I didn’t want to be part of their club anyway. When the government compels me through taxation, I don’t have that option.

        I am free to volunteer my own money, but not to volunteer other people’s money for them.

        What Buffett suggests is not altruism, it’s compulsion, and it’s just as bad as letting babies and kittens starve to death while big fat rich people feast on caviar and champagne all day.

        No matter how envious you are of them, Mike, rich people are free to be stingy with their money. They are also free to be altruistic WITH THEIR OWN MONEY, not with other people’s money.

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  3. Dave Roland says:

    I don’t know about others, but I question Mr. Buffett’s sincerity. After all, if he (or any other extraordinarily wealthy person) truly believes that putting more of their money in the government’s hands will help solve the nation’s problems, they have always been free to write as large a check as they’d like. That they have not chosen to do so speaks volumes about their “altruism.”

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    • L says:

      That they have not chosen to do so speaks volumes about their “altruism.”

      You do know that Buffett has committed to giving away the vast majority of his wealth right? To question his “altruism” because he didn’t write a check to the government is just stupid.

      One person voluntarily writing a check to the gov’t is not the same as having a whole class of people write a check to the gov’t. He is looking for a greater impact.

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      • Ryan says:

        It is exactly the fact that he has chosen to give away the majority of his wealth to exclusively NGOs that makes it seem disingenuous to require that others be forced to give up their money to the US gov’t. If he felt that the US gov’t was the best medium for advancing humanity’s quality of life, why did he choose to give to the Gates Foundation and not to Uncle Sam?

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    • robu says:

      Question his sincerity? This is the guy who has already given close to 8 billion dollars to the Bill and Melinda Gates Foundation (I believe he has pledged to give that foundation a total of at least 30 Billion) and is actively going around trying to get people to sign onto The Giving Pledge. If anything, I suspect that some of the people who refused to pledge probably drove part of his public calls to tax them instead…

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      • Clifton Griffin says:

        I have long questioned the giving pledge.

        I would rather billionaires invest in new, self-sustaining profitable enterprises that will employ thousands for many years than give their money away for more limited, temporary purposes.

        Giving someone a full time job is at least as generous as other forms of donations.

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    • nobody.really says:

      What is the purpose of altruism? Different people have different theories.

      For some people, the purpose of giving is focused on the giver. Altruism exists for the giver to demonstrate his virtue (to God, if not to his neighbors). These people find Buffet’s remarks baffling. If Buffet wishes to make a display of his virtue, why not simply write a check?

      For other people, the purpose of giving is focused on the receiver, or on the cause. Buffet believes that the government needs more revenues, and needs a larger supply of these revenues. Even if he gave all of his funds to the feds, he would not be able to match the long-term consequences of raising taxes on the affluent. To these people, Buffet’s remarks are eminently sensible — whether or not you agree with them.

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    • Quentin says:

      Sure, Warren can mail a check, but even his substantial wealth is not enough to cause any significant change in the nation’s revenue situation. On the other hand, the combined income of the top earners, taxed at a modestly higher rate (the tax rates we had during the Reagan administration, for example), would make a significant difference. And yes, I understand it’s still not nearly enough to fix our long term budget problems.

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      • Clifton Griffin says:

        Even if you taxed everyone making 250k or more at 100%, you would only put a 900 billion dent into our 1.6 trillion dollar annual deficit.

        The problem is spending.

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      • Rich McVey says:

        If returning to pre-Bush tax rates on those making $250K and more would increase tax revenue by $700 billion how is it remotely possible that taking 100% of their incomes would raise tax revenue only $900 billion?

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      • Clifton Griffin says:

        Very simple actually. Returning to pre-Bush tax rates raises 70 billion a year, 700 billion over 10 years .

        Raising taxes to 100% raises 900 billion a year, 9 trillion over 10 years. We are currently spending ~1.5 trillion a year over revenue, or 15 trillion over 10 years. Even under the most absurd revenue raising scheme, we would still have a 6 trillion deficit over the next 10 years.

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      • Matthew Finn says:

        Ohhh it would only put a 900 billion dollar dent in. We wouldn’t want to take half of the debt away when we can still debate how to eliminate it completely!

        You sir are and ass.

        Spending isn’t the problem. Spending WAS the problem. When we had a baboon of a president bringing us into two different wars on a hunch of weapons and an inkling of oil.

        Spending is inevitable, it has to be done in order to keep the country going strong. What needs to change is the tax rates on capital gains. The rich don’t need to get taxed on income when they make most of their money on capital gains.

        And to say the rich shouldn’t be taxed while SocSec and education spending is being cut is absolutely asinine. How can you possibly believe that we shouldn’t tax the rich and let the rest of the country go to waste.

        Our students don’t get the books or supplies they truly need to compete with Asian countries who make sure their education systems are superior in quality and quantity. They go to school all year and pay their teachers the entire year. We go for 8 months and can barely pay our teachers.

        This is why our country is losing the number of intellectuals. This is why we have economists who aspire to be Gordon Gecko. The country needs to wake the fcuk (I meant the spelling mistake.) up and realize that everyone needs to pitch in a proportional sum of their money.

        It’s a civic duty.

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  4. Horatio says:

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    • Joshua Northey says:

      We have too much spending and too few taxes. Taxes are at an all time low, and the services we demand from government are at an all time high. That doesn’t seem incongruous to you?

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      • Mike B says:

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      • Hoss says:

        Who is demanding all these services…just some random straw-man, right.

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    • bob says:

      How do you conclude that we “don’t have to few taxes we have too much spending”?

      I know that our tax rate is lower than most of the developed world. Is this just a talking point that people can’t avoid hitting?

      When Roosevelt cut spending during the late 30s, the “Roosevelt Recession” occurred. Why would you conclude that we need less spending as we slowly dig out of this recession?

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      • Horatio says:

        Every year tax revenue goes up (even in down economic times like we are in currently) and spending goes up at an even greater amount. Spending is rising as a % of GDP as well as in real terms more than revenue or inflation. That is how I can say we don’t have a tax problem or to low/few taxes we have too much spending. We could easily get out of our deficit problem by spending less than the increase in revenue each year without cutting a single service.

        The challenge we face with the government is that they can take whatever they want unlike a company that if it abuses the people it serves by poor service or prices that are to high it simply goes out of business. No matter how bad the services are from the government, no matter how ineffective the service, they can continue to charge us more. In fact more often than not they use the failure of their delivery as a justification to raise taxes and spending as the previous level was the ‘reason’ for failure.

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    • Sam says:

      That’s like saying that people in favor of military intervention are “free to parachute in anytime they’d like.”

      It’s a cheap shot argument that makes no logical sense. Buffet’s entire fortune would make a tiny dent in our current deficit; an increase of 2-3% on all earnings over $250k would be far more substantial and isn’t reliant on the whims of billionaires.

      You can’t honestly believe that your argument makes sense, can you?

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      • DaveyNC says:

        Buffett’s point is a philosophical one. Philosophically, he should stroke a check for whatever amount he thinks it will take for him to make adequate payment.

        Realistically, it won’t make a damn bit of difference.

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    • twobeef says:

      “Daniel, Mr. Buffett is free to ‘give’ more of his money to the government now. Nothing is stopping him from doing it on his own yet he has not done so, which brings into question any altruistic motivation on his part. Why hasn’t he just set the example and written the check? ”

      If you believe that we are spending too much on health care, you are free to return any Medicare spending that is given to you.

      If you believe that Social Security is a ponzi scheme, you are free to return your SS checks when you get older.

      If you believe that we do not spend enough money on the military, you are free to make a donation to the armed forces.

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      • Horatio says:

        True, I could do all of those things. If I advocated for a ‘mandate’ of such things and then didn’t do so myself it would be a more apt comparison of what Mr. Buffett is doing. Your argument doesn’t even address the point at hand. How can he advocate using the force of government for something he believes in but doesn’t take the step himself? It is like Al Gore demanding the government make all of us live in the dark and cold while he creates enough green house gas in his mansion to warm the Earth all on his own.

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  5. BL1Y says:

    Perhaps it would rock the national psyche too much to believe that the very wealthy are not the enemy. People want to find someone to blame for their problems, and politicians and the news media are willing to quickly name anyone but themselves.

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  6. Colin says:

    Altruism is desirable, but how is Buffett being altruistic? He has done nothing except pen an editorial. Furthermore, why is giving money to the government altruistic? Buffett keeping the money and investing it would do a lot more good then handing it over to a bunch of politicians to spend on their own various pet projects.

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    • Mike B says:

      Why are investments that benefit private individuals beneficial to everyone when investments undertaken by the public sector a waste? Are non-profit organizations a waste as well because they seek to enact their founders “pet vision”? Investment is investment and there is no difference between skimming off the top for profit and skimming off the top for corruption. Because business investments have the expectation of profit built into them one stands a better public return from public investment where such skimming is illegal.

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      • Colin says:

        This is nonsensical. Profit is earned by providing a valuable good or service. Apple makes big profits because it provides goods that people want, as do evil, greedy oil firms. Failure to provide useful goods and services will result in the company going out of business, which tends to concentrate the mind. Government, on the other hand, can waste money willy-nilly without any such concern. Time and time again the private sector has demonstrated that it is much more effective than the public sector in allocating resources to productive ends.

        I wish Buffett would allocate more money than the government, as he is much more likely to put it to a productive use.

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      • Mike B says:

        How can it waste money willy-nilly? Government has to answer to the voters for its expenditures like any other mutual organization. Are credit unions or anything else with a voting membership therefore bad and inefficient? Moreover companies ARE constantly going out of business, which means they were in fact inefficient and the threat of going out of business didn’t make them any more prone to being efficient or competently managed.

        The only difference between public and the private, for-profit sector is that in the public sector everybody has their skin in the game so they can’t sit back and laugh when an investment crashes and burns in flames. Sure you don’t want the government running supermarkets and Popsicle stands, but just remember the private sector isn’t there to help you, its there to extract every last ounce of consumer surplus it can. Where it can be managed and where market conditions make sense, an organization owned by the public will provide more value for money than one attempting to return a profit to an external group of owners.

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      • agingcynic says:

        “Where it can be managed and where market conditions make sense, an organization owned by the public will provide more value for money than one attempting to return a profit to an external group of owners.”
        And if my aunt had a whatzis she would be my uncle. When has a government entity EVER been more efficient than private enterprise? If we could legislate human nature you would be hypothetically correct. We can’t.

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      • J says:

        “Because business investments have the expectation of profit built into them one stands a better public return from public investment where such skimming is illegal”

        Because business investments have the expectation of profit built into them, they are considerably more efficient that public investment, which has a number of considerations built in that make efficiency at best a tertiary concern. Skimming is perfectly legal in the public sector; it just takes on the form of spending on unnecessary functions and/or bizarre priorities focused on giving money to the right people. And that may be desirable in some cases, but it’s still skimming.

        I question Mr. Buffett’s call for higher taxes because I have difficulty believing someone with his investing skill couldn’t create or grow businesses that generated far more tax revenue than any surtax on rich people would. I also have no confidence in the government spending that revenue on deficit reduction, and have difficulty believing he does. I’m not going to try to decontruct why he’s proposing higher taxes, just wonder why.

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      • Chris BeHanna says:

        You say skimming in public “investment” is illegal? What the heck do you call Davis-Bacon?

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    • Thomas says:

      If we accept that altruism is unselfish concern for the welfare of others, Buffet is being perfectly altruistic. He advances a concept that won’t give him any individual advantage, but which would be a substantial benefit to the nation as a whole.

      Public schools are where tomorrow’s work force starts acquiring the means to be a part of tomorrow’s economy (capable producers, savvy consumers). Hopefully a discussion of the value of our transportation infrastructure isn’t necessary, and the same for sanitary systems. Advanced societies also need laws and the mechanisms to administer and enforce them, objectively and without corrupt influences. All these things (and more) created, and create, the environment in which Buffett’s investments make money.

      Buffett simply says that those individuals (himself specifically included) who have profited the most from the things government provides and the environment thus made possible, can afford to support the infrastucture to a slightly larger extent than those who have not profited as much. In doing so, their standard of living will remain unchanged, but the vast majority of society will better off because government will be able to fully fund the essential services that only government can provide. Seems like unselfish concern for the welfare of others to me.

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      • Colin says:

        I didn’t realize altruism was simply concern, I thought it actually involved doing something. Public schools, meanwhile, are a national embarrassment and are regularly outperformed by their private counterparts — evidence that education is not one of those “essential services that only government can provide.”

        Government, meanwhile, already has enough money to perform its essential tasks such as the military, police, etc. If government can’t fund everything it should be doing with $3 trillion then something is seriously awry, and indicative of gross mismanagement.

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      • Thomas says:

        My definition of altruism came from the American Heritage Dictionary. An act could clearly be motivated by altruism, but I infer that the attitude is a necessary pre-condition. If you argue that “actions speak louder than words”, we are agreed that a “practicing” altruist has a better claim to the title than one who merely talks the talk. A true altruist, however, wouldn’t be interested in the title, but only in the good done for others.

        We do disagree on the matter of public education, particularly the proposition that public schools “are regularly outperformed by their private counterparts.” Any number of articles accessed via the Freakonomics website indicate that privatization is no panacea for education.

        But, I’ll give the private-versus-public sector source issue to you: many municipalities contract out essential services like trash collection, proving that not every service performed for the overall public good needs to be done by a public employee. That said, are you suggesting that government has no legitimate role in education? That there is no collective (local, state, national) benefit to having a literate and numerate population? That it’s perfectly ok for children whose parents can’t afford private schools to be left behind? The model you are offering is currently in use in the third world; the first world (and the second world) gave up that model a long time ago for a publicly supported system calculated to produce citizens capable of sustaining and advancing their society’s standard of living.

        If there is any truth to your proposition that private schools are more effective than public schools, consider that private schools don’t have to take every applicant. They can select for the most promising and gifted students. At the very least, most families who have the resources to pay for private school probably also have the resources to reliably feed and house their children. The problem with public education isn’t as much the education itself as the non-academic issues that the public schools are forced to deal with on a daily basis. Don’t take the “easy route” of simply labelling schools a “national embarassment”, when the schools aren’t in control of the variables that impact the outcome. Unemployment is a greater national embarassment. Poverty is a greater national embarassment. The frinancial crises that have undercut the tax base are a national embarassment. Lack of access to adequate health care for a substantial segment of the population is a greater national embarassment. An over-abundance of calories and a lack of actual nutrition in the national diet is a national embarassment. Exporting our manufacturing capacity, and pretending that unskilled, service sector employment will make up for those losses is a greater national embarassment.

        As for gross mismanagement, the previous administration was extraordinarily proud of having cut taxes, AND of having committed the US to two wars. Fiscally, these are mutually exclusive. Add to that the failure of the same administration to enforce regulations that could have prevented or at least diminished various disasters. I’ll reserve comment on the effectiveness of the current administration in dealing with the issues it has inherited, but it is an absolute model of prudence compared to its predecessor.

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      • Chris BeHanna says:

        Thomas wrote, “That said, are you suggesting that government has no legitimate role in education? That there is no collective (local, state, national) benefit to having a literate and numerate population? That it’s perfectly ok for children whose parents can’t afford private schools to be left behind?”

        Yes, I suggest exactly that. Here’s a radical idea: they’re YOUR kids, and it’s YOUR responsibility to educate them. It is neither fair nor just to stick a gun against your neighbor’s head and force him to pay to educate YOUR children.

        Newsflash: we HAVE an illiterate and innumerate population. Public education has utterly failed to improve that over the days before it existed. Have a look at inner city Detroit, for example. Without the public education monopoly, there would be a large enough market for private education that one could choose from the Toyota Corolla version (affordable and quite serviceable) to the Rolls-Royce version, depending upon one’s means and priorities.

        Take responsibility for your own choices, INCLUDING the choice to have children.

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      • Thomas says:

        My definition of altruism came from the American Heritage Dictionary. Philosphically, I think that altruism mindset must precede an act that is altruistic.

        And, if you’ll accept Wikipedia as a source for the sake of discussion, 88% of US students attend public schools (9% parochial, 1% private, 2% home schooled). I question your assertion that private schools outperform public schools; any number of articles accessed from Freakonomics indicate that on balance, the for profit (“charter”) schools are no better than their public counterparts. In addition, truly private schols have the advantage of being able to select (and reject) their students, which would likely tilt their test scores to the better, so it’s not necessarily a fair comparison.

        Theoretically, you are right: education is not an essential service, and government need not have any role in providing it. Practically, however, the US (and the rest of the industrialized world and not a few aspiring countries) came to the conclusion long ago that universal elementary education is a tide which lifts all boats. It’s far more efficient to do collectively than individually, and the overwhelming majority of Americans participates in the collective endeavor by means of local school boards. Elsewhere, it is often more nationally-administered.

        Bottom line, I think it’s clear that government has a legitimate role to play in education. If you are embarrassed by the results, figure out when it stopped working in the way you expected, and identify the objective reasonss for the breakdown. Odds are, the reasons have little or nothing to do with the edducation in and of itself, but are from outside the school systems (joblessness/unemployment, lack of adequate health care, lack of supervision at home for children, etc). BUT, don’t blame Warren Buffet for opining that those who have profited most from the system could stand to give a little more back to it.

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  7. coloradojim says:

    2 points –

    1) You betray your bias when you use the opinion-laden phrase “perfectly reasonable”. You should have just said “….Obama’s proposal to tax….” and dropped the phrase altogether.

    2) I believe the main point people are making with respect to Buffet is that if he truly believes he is paying too little in taxes, then there are two questions – a) Why doesn’t he just write a bigger check and voluntarily pay more, and b) Why does he still aggressively try to reduce his own taxes by reporting his income as capital gains rather than regular income?

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    • Clifton Griffin says:

      I left that phrase alone in my response, but you are absolutely right.

      Hamermesh hardly positioned himself as an unbiased moderator in this discussion.

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    • Mike B says:

      If you take such actions unilaterally then you are just a sucker that the community can leach off of. Buffet may be altruistic, but he’s not a sucker and he’s not going to pay more unless everyone in his peer group shares in the sacrifice.

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      • Tanner says:

        While I largely agree, I must say: unless the large-sum check you write to the government is sensationalized to the point that other high-income earners follow suit. Warren Buffet is getting all kinds of press just mentioning his view on taxation–what if he actually donated? And what might a high income-earner who idolizes him do if WB actually donated billions of dollars?

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      • Clifton Griffin says:

        How would be he be a sucker?

        Either the federal government is a worthy recipient of his money or not.

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    • Sam B. says:

      But those are terrible points. Regarding 2) – the government’s year-to-year fiscal solvency shouldn’t be dependant on whether a billionaire wants to donate money or not. I can’t believe so many people think Buffet’s ability to “write a bigger check” makes fiscal sense.

      It’s really just a weak ad hominem against the man – don’t bother arguing why a higher tax on the $250k crowd is unreasonable; just attack him as somehow hypocritical and then smugly sit back as if your point makes any sense.

      Same is true for his capital gains. If he pays more, it does nothing. If we close loopholes and all claiming CG pay more, it does a lot.

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      • Jimbo says:

        I don’t think you understand the point. It’s not that the government should depend on donations from the ultra-rich, it’s that people like Mr. Buffett have the ability to easily make a visible commitment to what he claims to believe – to literally “put his money where his mouth is,” yet when he chooses to donate money, he doesn’t donate it to the government, but instead to charity. One can only assume that he believes that his money will be better spent by the Gates Foundation than it will by the US federal government, which is an assumption which is supported by a great deal of evidence. Perhaps then even Mr. Buffett tacitly acknowledges that government is bloated, inefficient, and ineffective at accomplishing the many jobs it has taken on for itself. Perhaps if one wants to lift generations out of poverty, one should remove the barriers to the creation of wealth, like progressive taxes. If one wishes to ensure the elderly are able to have enough money for a comfortable retirement, reduce the taxes that make it harder for individuals to save. If one wishes to make funding available to ensure that virtually everyone has access to effective health care, make the costs more transparent, allow greater competition among insurance providers, and encourage individual ownership of health insurance rather than employer-sponsorship. Certainly some will be missed in these systems, but charity similar to what Mr. Buffett does will cover many, and the government can pick up the remainder of those who aren’t. Our government, which is admittedly smaller in many metrics than the governments of most other developed countries, is too big.

        I guess it all boils down to whether one believes that government should be as small as possible and exist only to ensure freedom, or if government is the only agency that can correct for the inequalities of life. Mr. Buffett makes statements consistent with the later policy, but lives his life in a manner more consistent with the first.

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      • Clifton Griffin says:

        We don’t have to assume he believes private organizations will better spend the money. He has said so explicitly:

        “I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government.”

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      • Phil says:

        “yet when he chooses to donate money, he doesn’t donate it to the government, but instead to charity”

        I don’t see how this argument makes any sense. This was stated before but bears repeating: Buffet’s entire fortune would barely make a dent in a single year’s deficit, while the tax proposal will make a significant impact to the government’s financial outlook. The Gates Foundation is involved in solving large issues that the US government may not have any involvement in, like malaria in Africa, so it’s not a 1:1 comparison.

        “…one should remove the barriers to the creation of wealth, like progressive taxes.”

        This is a myth. I would agree with you if the proposal for the upper income tax rate was higher (e.g. 50%) and/or if income inequality was reduced. Neither is the case.

        I think most people agree that the government spends too much. But it’s a well-established fact that our tax rates are the lowest it’s been in decades, and if we want to have a fighting chance at balancing the budget, tax increases are necessary.

        “I guess it all boils down to whether one believes that government should be as small as possible and exist only to ensure freedom, or if government is the only agency that can correct for the inequalities of life.”

        False. Most who claim that they want government as small as possible haven’t shown that they mean it; they don’t define how small or where. How about the defense budget? That’s been off limits, even if we could do it without sacrificing freedom. What about building roads, funding the police and firefighters? Not every problem can be solved by government, and not every problem can be privatized. This black-and-white strawman argument ends up being just a waste of time.

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      • Uthor says:

        “I guess it all boils down to whether one believes that government should be as small as possible and exist only to ensure freedom, or if government is the only agency that can correct for the inequalities of life.”

        The problem I have with current public discourse is that you have to have one extreme or the other. What about believing that SOME government is beneficial and that amount is more than the bare minimum, but less than being the only game in town?

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      • Ash Crill says:

        Because those who understand the need for SOME government above the bare minimum are in a political ‘fight’ against those against those who feel that government power should be used to correct the inequalities of life.

        This is why we have a constitution that defines the proper role of government. There needs to be some sort of hard limit on government powers so that when the extremists push for government solutions the rest of us can say “sorry, that is outside the scope of our government, you will have to rely on yourselves to solve that problem”.

        I believe that very few people truly believe in the bare minimum of government. Many who fall in between the extremes are unfairly labeled as belonging to the ‘bare minimum’ camp.

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    • Enter your name says:

      Buffet is required to report his income in the categories that the tax code gives him. If the money is actually “capital gains”, as defined by the tax code, then he is not permitted to arbitrarily re-classify it to a different type of income, even if that would result in paying higher taxes. This is just as illegal as you arbitrarily re-classifying your “wage” income as “capital gains” to pay lower taxes. Both actions would be equally illegal; the only difference is in the size of the fine.

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      • Jimbo says:

        You are absolutely correct that Mr. Buffett must report his income as the government defines it. But others have proposed that Mr. Buffett could choose to donate income that he feels is in excess of what he should retain. That is a rather straightforward procedure, and one which would remove any legitimacy from charges of hypocrisy. Mr. Buffett would certainly agree that he has more than enough personal income, why then not use it to make a strong statement about what he believes in? He has used his wealth to clearly make the statement that he believes in the unquestionably laudable work of the Gates Foundation.

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      • James says:

        But he could easily rearrange his personal finances so that more of his income came as salary (I believe he takes only a token $100K salary), and less as capital gains.

        Which is why his claim of a lower tax rate is essentially a lie. He pays the same rate on his capital gains as I do on mine (though of course he pays a lot more dollars), and pays the same (if not a higher) rate on his salary as I do. It’s just that he’s chosen (and is in a position) to take more of his income in the form of capital gains, a position I imagine he shares with a lot of retired folks who supplement their social security with income from investments. So why not call this a retirement tax?

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      • Gary L. says:

        He doesn’t need to report all his deductions though. If he sees fit, he’s free to make his tax deductible contributions without deducting them on his personal tax return.

        I don’t buy the arguments that BH is fighting a tax position. Buffett may be the largest shareholder, but the board has a fiduciary duty to reasonably avoid taxation, where doing so is efficient from a business perspective.

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  8. Alex says:

    Although we have a tax code that requires you to pay a certain amount of taxes, no one is stopping you from paying more taxes on your own. You can easily file a return and leave out deductions, thus increasing the taxes you pay. Saying I am willing to pay more taxes only if everyone pays them as well, is not altruistic at all.

    Having said that, the tax code as currently structured is vastly unfair, however it is mostly due to the regressive nature of local and state taxes, not federal taxes (although there is room for improvement here). http://www.itepnet.org/whopays3.pdf

    I applaud Mr. Buffet for speaking out, however he makes billions in his sleep. (Didn’t he just invest Billions in BOA because the stock price was so low, and just because he bought the stock the price increased significantly!). I am thankful that he is as giving as he is, and everything i read about makes me admire him more, but lets not make him a saint just yet, and no one should be immune from criticism.

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