Why Doesn’t Warren Buffet Just Pay More Taxes?

Warren Buffet is at it again. The super-rich investor thinks the super-rich should pay higher taxes. Liberals find this delightful because for some reason they usually can’t get the super-rich to agree to their plans to make them pay higher taxes. Here’s a kind rich man who’s not just another greedy good-for-nothing! He sees the truth! Conservatives find this annoying because the super-rich are supposed to hate paying taxes. They’re supposed to want to keep all their money so they can create jobs with it because they’re supposed to be better at spending it than the government. Buffet’s pro-tax-stance is almost as annoying to conservatives as Hermann Cain being a conservative black man is to liberals.

Now conservatives have found an easy way of coping with Buffet’s very strange statements. They say, Warren Buffet, be my guest! If he thinks he should pay more taxes, then no one is stopping him from volunteering to pay more taxes. “Set an example and send a check for $5 billion to the federal government,” Pat Buchanan says. “Mr Buffet, write a big check today!” Michele Bachmann crows. Buffet’s apparent unwillingness to do this lets conservatives dismiss him as another cranky liberal “do as i say, not as i do” hypocrite, right along with “cut your carbon while I fly around in a jet and live in mansions” Al Gore, and “paint your roofs white to cool the earth except I haven’t painted mine” Bill Clinton. Ha, maybe he doesn’t really want higher taxes after all, and he just wants to earn some liberal cred or something.

But conservatives are largely missing the point as they rattle off their zingers. This is a discussion about solving the federal government budget crisis, and Buffet thinks that all the super-rich should pay higher taxes. Buffet writing voluntary checks to the Treasury does nothing to solve our long-term problems. It’s well-known that Buffet pays a lower tax rate than his secretary – he has been “complaining” about this for years. The basic federal income tax rules mean Buffet should be paying a much higher rate, but thanks to all the complications and deductions, he pays less. And of course the point is that he’s not the only one. Even if conservatives reject the notion of progressive taxes that penalize the rich for being successful or whatever, surely they at least don’t support an effectually regressive system? What if we looked for a way to simplify the tax code and make everyone happy? (In fact, the conservatives that support some sort of flat tax where everybody pays the same fair share are essentially recommending for a tax increase on the super-rich if the super-rich truly pay less than the middle-class. Kinda puts a spin on things, doesn’t it?)

But liberals are largely missing the point here too. I’m probably a bad libertarian because I don’t think it’s unreasonable to include some proportion of tax increases along with hefty spending cuts, but blanket calls to TAX THE RICH are not as simple as they seem. The super-rich don’t make $100 million a year because they’re earning wages of $50,000 an hour doing constant work. They make that much because they invest money in the stock market along with various other complicated and volatile things that are taxed at different rates. As Megan McArdle has pointed out (I think – can’t find the link right now), that means the income of the super-rich is much less dependable than mine or yours – when the stock market crashed in 2008, so did the income of the super-rich. A lot of them even lost money. So the more you count on super-rich income to fund your government, the more you’re going to be hurting when super-rich income completely disappears for a year. I haven’t ever heard a response to this line of thinking, in addition to the usual diatribes about increasing incentives for tax avoidance and decreasing incentives to work and the like. And not to burst the liberal Buffet bubble completely, but there’s also a chance that the kind man actually thinks that higher tax rates will make him richer (not totally sure I follow, but hey, taxes are complicated).

So maybe we can find a way to simplify the tax code to make Warren Buffet and his other super-rich friends at least pay the same effective rates as their secretaries without completely dismantling all the important incentives for a functioning economy. But soaking the rich in ever higher taxes is not going to solve all of our problems, either. We still need those mega momma spending cuts.

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