freedom of choice politics

Warren Buffet and taxes

An editorial that Warren Buffet wrote has been making the rounds recently. I can’t link to it since it’s at the NYT behind a paywall, but the essence is this; Warren Buffet doesn’t think that he pays enough in taxes, he doesn’t think the “super rich” pay enough in taxes, he doesn’t think it will adversely affect either the rich or business, so why not raise the tax rate and stop “coddling” the rich?

He does also say that a lot of the super rich people he knows donate a significant amount of money to charitable causes as well. He said his tax bill last year was over 6 million, but he thinks it should be higher. He claims that over 250,000 people make over a million dollars a year. Let’s bump that to 300,000 and then assume that, on average, they paid 12 million a year in taxes. That would give us 360 billion dollars. Quite a chunk of change, it’s enough that it could take care of around of a third of the debt incurred annually by the US government.

Here’s a thought experiment. Imagine that Warren Buffet convinced all those people to put up that money, but instead of giving it to the IRS, they gave it to charitable causes instead. Would that be better or worse?


360 billion dollars. You could give the poorest 20 million people in the US $18,000 in direct aid. Or maybe buy 3.6 million houses worth $100,000. Or maybe take that $360 billion and create business with them and provide who knows how many jobs and income opportunities. Now compare that to cutting the deficit by a third for a single year. Which one of these things would have the most impact?

“But those people won’t do that.” That’s the typical response. The alternative that Buffet offers is that the IRS just take the money instead. Because they do not willingly give up that money, people feel justified in taking it from them. Taking money simply because they have it doesn’t exactly give you the moral high ground. I shouldn’t have to say this, but I always do; the ends do not justify the means. Even if that money were used for the best things in the world, it does not justify forcibly taking it. I think this is made even more clear when we realize that that money would be taken so that a relative handful of people can spend it in politically expedient ways. Is there any reason to believe that money will be spent more wisely than before?

Some people will say I’m “defending the rich,” or some such silliness. I am trying to point out that volunteering other people’s money doesn’t take much imagination or courage. In the end, it won’t actually solve much either. 360 billion sounds like a lot, but when you give it to an origination that has wracked up 14 trillion in debt, it doesn’t go very far. It goes about 2.5% into the debt payment. If you injected it into the economy directly, much more would happen.

Warren Buffet is free to send the IRS any amount over his tax bill that he wants. If some of his friends feel the same way, they can do the same. He really shouldn’t assume that the money would be used well or given freely though.

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