Another rich guy telling those not as lucky as him how lucky we are. Oh, and btw, pay your taxes.
He points out regularly injustices such as the fact that his secretary pays a higher tax rate than he does, thanks to the ridiculous capital gains laws in this country. He points out regularly that people like him should have to pay higher taxes, including the estate tax. He lives less lavishly than most people who have .1% of his wealth.
He's already given most of his fortune (the largest single donation ever) to charity and will give the rest when he goes. He's a real-life Robinhood.
Corporate tax rates plus capital gains tax rates exceed normal income tax rates. The only way you can claim that he pays less in taxes on selling stock is if you assume that the company's profits -- the sum of which, discounted to the present, is the value of the stock -- somehow don't affect the value of the stock.
If we cut capital gains taxes to zero and added an equivalent amount to corporate profits (say, a 40% annual tax rate instead of 35%), the government would make an equivalent amount of money from the same economic activity, and Buffett's theoretical tax rate would go down. Similarly, if corporate income taxes were zero and his capital gains were taxed at 40%, he'd pay much more than his secretary, but the government would collect the same amount.
If the strength of his argument is independent of the magnitude of the problem he's arguing against, there is a flaw there.
Buffett is an admirable guy. But the line about his secretary is a rhetorical flourish, nothing more.
Your making the argument that corporate taxes reduce his personal income, and therefore should count as his taxes. Ok. But if corporations did not have to pay taxes, they would pay their employees more, including secretaries. It's impossible to say for sure that a 35% corporate tax rate reduces secretary salaries by 35%, but it is something highly significant.
In a roundabout way the secretary is paying that corporate tax too. Its effect is not as directly measurable on her as it is on Buffet, and might not be 1 for 1, but it's undeniably there and equally applicable to her tax rate.
Also Social Security reduces her pay by 12.4% (half of which is paid by her employer but again would likely go to her if not). Since its capped at $100k income, it rounds to 0% of Buffet's yearly earnings.
*I should point out that I am aware I've grossly oversimplified the effect of the corporate tax on the secretary, I trust but you get the point.
Profits and pay for workers are in competition. So raising the cost of profits actually increases the incentive to pay workers more. This is why many actual nonprofits are poorly managed; they are funneling profits to workers rather than to shareholders.
That is not how it works. When car companies start losing money, they don't give people raises; they fire them. When Goldman has a great quarter, they don't cut people's pay -- they give them bonuses.
Nonprofits are managed because they exist to spend money, not to spend it well.
I'm discussing how a fixed amount of MAE is distributed in response to changes in incentives. Each dollar of MAE can be given either to shareholders, to employees, or can be invested. If you raise the cost of distributing money to shareholders (this is what the corporate tax does), companies will divert money to employees and investments. I.e., no one will pay dividends if there is a 100% dividend tax.
And if he paid less in taxes, he'd buy more goods and services, too. In fact, he probably spends money more intelligently than your average bureaucrat -- certainly, he's able to balance the budget, and that's without even owning a monopoly on first-class mail delivery and taxation of income!
I disagree. Buffett is so wealthy that it simply doesn't matter if his bottom line is reduced by 35%. His net worth is $40 billion. It is simply impossible for him to run out of money at this point.
Think about this for a moment. At $200M each, he could have a personal Boeing 777 on call in every state in the country ($10B) and still have $30B left over. The most expensive house in the United States is a $165M compound in Beverly Hills with 72,000 square feet of living space. Why not build 100 of them around the world for $16B? There's still $14B left for the cheap stuff: Ferraris, Bugattis, servants, chefs, and whatever else you can dream up.
Barring any bad business deals, it's effectively impossible to squander away one billion dollars much less forty. A 35% tax hike or cut won't affect his spending in any way, shape, or form.
Neither of these are equivalent. The "only capital-gains tax" scenario creates incentives for foreign investors in US corporations. The "only corporate tax" scenario creates incentives for US investors in foreign corporations.
The current scenario seems to be a "get some tax revenue from whomever we can" strategy, but it might be worth tinkering with the ratios, especially to determine whether a more capital-gains-heavy, corporate-tax-light regime might increase overall tax revenue, by altering in the US's favor the flow of foreign capital, domestic capital, corporate relocations, and corporate expenditures.
"Real-life Robinhood?" Really? I think its far more likely that he is a damn smart businessman. Consider this fact:
Buffet spoke out about keeping the Estate Tax, because, as he said, rich people need to pay more. In reality, the Estate Tax generates over $ 12 Billions dollars a year for big life insurance companies, which Buffet either owns stock in or controls.
If Buffet was a "real-life Robinhood" he would say repeal the Estate Tax (as it destroys jobs and small businesses) and make ME pay more directly.
Don't agree about the Estate Tax? Watch this video http://www.youtube.com/watch?v=Urvkfi134Ew and tell me how you figure.