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Say "wealth tax" near Buffet and Gates and watch them have quite a different reaction. Income tax rates have little effect on the already-wealthy because most o

Say "wealth tax" near Buffet and Gates and watch them have quite a different reaction. Income tax rates have little effect on the already-wealthy because most of their money is not distributed in the form of a wage or salary; rather, it is stored in various types of financial vehicles that are already tax privileged. To the extent that this wealth is not held in stock, accountants set up other types of tax-privileged holdings. Whenever a prominent wealthy person is talking, be aware of the PR necessity to not appear as if they are hoarding their wealth, or as if they are uninterested in sharing. Buffet and Gates are no doubt keenly aware of this necessity. From the perspective of a Buffet or Gates, it is wise to publicly advocate for a tax increase that has little or no effect on your personal wealth, potentially targets up-and-comers who are currently making good money through their small-to-medium business ventures and may some day pose a threat to your interests (weakening them by confiscating more money from them), and keeps the public on your good side because they can point at you and say "There is $FAMOUS_RICH_GUY, and he knows that being greedy is bad."

edanm 9y ago
Just out of curiosity, is there anything Gates/Buffet could do that you wouldn't approach cynically, i.e. that you would assume they're really doing it for other peoples' benefits rather than their own?
- roenxi 9y ago
  Cynicism comes into its own when that sort of money is involved. Practically it isn't possible to become build that sort of wealth without being super-aware of the financial outcomes of your decisions. It isn't safe to take someone at face value once they can buy a PR firm without blinking.
  - edanm 9y ago
    "It isn't safe to take someone at face value once they can buy a PR firm without blinking." Well I agree with that. But it seems like you're saying that there's literally no evidence in the world that can convince you that your cynical view of them is wrong, which is a pretty hard position to hold IMO.
- cookiecaper 9y ago
  I think it's always valuable to analyze the cynical angle and potential game. As a sibling commenter stated, you don't get to Gates or Buffet level without good awareness of the game. In most cases, you can hardly get up more than one or two rungs on the corporate ladder without it. I don't necessarily impute any of these motives upon Gates or Buffet per se. I just think it's important to be aware of how such actions align with their interests. The subjective judgment of each man's true motives is left to the reader. I will say that if Gates and Buffet truly believed that 40% of the wealth they accrue each year could be put to better use by the USG than themselves, they could put their money where their mouth is and donate that portion of their assets to the U.S. Treasury. [0] Instead, they seem to keep that wealth within vehicles that they can control. [0] https://www.fiscal.treasury.gov/fsfaq/faq_gifts_to_govt.htm https://www.fiscal.treasury.gov/fsfaq/faq_gifts_to_govt.htm
  - dahoraTSUNAMI 9y ago
    Just to clarify, Buffet and Gates didn't climb a corporate ladder. You are right, though, that the thinking is different and theirs is most likely atypically well-refined.
  - ethbro 9y ago
    How do you square your comments with Buffett being on the record (repeatedly) in griping about his effective tax rates vs those who earn less? One example: http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/ http://money.cnn.com/2013/03/04/news/economy/buffett-secreta... I don't have any quotes in memory from Gates, but your position of "Buffett is just trying to get good PR by advocating tax changes that wouldn't effect him" doesn't mesh with his quotes to the effect of "It's unfair I pay less effective tax than my secretary." What exactly do you seem him advocating that has an ulterior motive?
    - cookiecaper 9y ago
      I think it's a calculated illustration. Power is all about making calculated gambles like that. If everyone was bare with their intentions all the time, it'd be easy for their enemies to bring them down. The fact of the matter is that any type of change to the tax status of a significant asset is going to have far-reaching implications and plenty of people sticking their hands in the pot to try to make the outcome favorable to themselves. A puff piece that features one of the most-conspicuous richest men in the world suggesting a tax hike against himself is just throwing a bone to the dogs; it's fodder that keeps Berkshire Hathaway and Buffett in the news and it makes the Buffett/BH brand more recognizable, likable, and personable, which are very important qualities. It also gives him an anchor to point to if he ever needs to negate bad press. He can say "Look, I have a track record of advocating for selfless causes. What kind of greedy billionaire would get on TV and ask for a tax hike? You wouldn't see Donald Trump do that! The things that are causing my bad publicity are not actually bad, they're just misunderstood." When people hear "tax hike" they think about it in relation to themselves, i.e., a hike on wage taxes. Beyond PR interest, the ulterior motives would be a) increasing the tax rate on people who are having good years in their small businesses, so that the growth of their nascent empire is stymied, lest it someday pose a challenge to BH's interests; and b) many of BH's major holdings are closely linked to government activity, things like railroads and utility companies. More money to the government = more money to BH, and this good PR makes government employees more favorable to Buffett/BH since he is not demonizing the thing that pays their salaries (taxes). It's convenient to assume that people are honest and straightforward as long as one remains naive enough to believe that. But with something as complex and interconnected as BH and Buffett, nothing occurs in a vacuum. Buffett's private thoughts remain private. He knows when he is on the public stage and he certainly knows to calculate the consequences of his actions there. To deny that this is significant is to deny the purpose and value of Public Relations completely.
- astrodev 9y ago
  Not naming their foundations after themselves would be a good start.
  - croon 9y ago
    I would argue the opposite. They're not hiding behind other names, and you could instead argue that they're doing it for legacy, not for capital gain.
ChuckMcM 9y ago
I appreciate the point of view, but in this conversation specifically, and the Economist article specifically, the discussion is around evaded taxes of the wealthiest individuals. By definition an 'evaded' tax is one that is legally owed, but has been not paid illegally[1]. So without a tax increase, simply increasing compliance, you increase the actual tax revenue collected. [1] Not to be confused with 'sheltered' where the tax was not paid but through a legal loophole.
rsync 9y ago
"Income tax rates have little effect on the already-wealthy because most of their money is not distributed in the form of a wage or salary; rather, it is stored in various types of financial vehicles that are already tax privileged." The problem with this line of thought in it's current implemenation is that the top marginal income tax rates are very, very, very low in comparison to the "truly wealthy" people that you are referring to. You only have to make (roughly) $400k[1] in the US to hit the very top federal bracket of 39%. That's hardly scrooge mcduck swimming in his bank vault. It's more like middle sized contractors, and (lower echelon) doctors and dentists. So if you are a proponent of substituting income taxes with wealth taxes I would hope you are also a proponent of drastically raising the income brackets for very, very high tax rates to avoid hitting people that aren't "actually wealthy" (your definition). [1] https://taxfoundation.org/2017-tax-brackets/ https://taxfoundation.org/2017-tax-brackets/
- raarts 9y ago
  Does a dentist really make $400k in the US? Wow, just wow..
  - cmurf 9y ago
    Quick google search: The median annual Dentist salary is $146,434, as of April 27, 2017, with a range usually between $130,761-$171,212... If the dentist owns a particularly successful office of dentists, they're not just a dentist, but a small business owner, so they could be making more money (paid by dividends rather than salary).
    - lern_too_spel 9y ago
      An established single dentist practice will take in over a million dollars per year. After paying secretary and dental hygienist salaries, rent, and other business costs, that comes to more than $400k net. http://www.dentaleconomics.com/articles/print/volume-102/issue-5/finances/i-paid-too-much-for-my-dental-practice.html http://www.dentaleconomics.com/articles/print/volume-102/iss... https://forums.studentdoctor.net/threads/how-much-can-a-private-dentist-make.566230/ https://forums.studentdoctor.net/threads/how-much-can-a-priv...
refurb 9y ago
Another thing to keep in mind is that the top 1% in the US (>$428 AGI) earn 19% of all AGI and pay 38% of all income taxes. The top 1% pay more in taxes than the bottom 90%.[1] [1]https://taxfoundation.org/summary-latest-federal-income-tax-data-2015-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
- vkou 9y ago
  The top 1% also own more then the bottom 90%. 35% of all the wealth, compared to 28%. (Going by reported numbers - the reality may be worse.) Their wealth also tends to stay with them. Bill Gates isn't planning on taking out a reverse mortgage for his house anytime soon. In our debt-based society, wealth flows up. The average person spends most of their life paying interest to someone, in exchange for the ability to work, a place to live, and a vehicle for getting them from where they live to where they work. People who don't need to go into debt for those three expenses get to grow their wealth, and pass it on to their children. People who do have to go into debt to do so tend to die, and pass on little to nothing.
  - refurb 9y ago
    The top 1% also own more then the bottom 90%. 35% of all the wealth, compared to 28% Hmmm... so it sounds like the rich are paying their fair share then?
    - deleted 9y ago
      [deleted]
  - skookumchuck 9y ago
    > 35% of all the wealth This neglects to account for all the wealth owned by the government.
- ethbro 9y ago
  Yes. That's the definition and social contract of a progressive tax code. E.g. "You probably screwed over a lot of people to get where you are, or at least leveraged their work while reaping most of the gains. As well as being able to afford to pay more (given that basic necessity costs don't scale with income). So you should pay a larger share."
cmurf 9y ago
>Income tax rates have little effect on the already-wealthy because most of their money is not distributed in the form of a wage or salary No, the fact is we differentiate between salaried "earned" income and tax it much, much higher, than investment "unearned" income. It's a very explicitly designed system that encourages stuffing the left overs into real estate, stocks, bonds rather than take the risk of starting or growing a business. This is not a John Rawl's country, where we believe in "the veil of ignorance" thought game. If it were, there would be no such thing as tax free gifts, and low or non-existence inheritance tax.
- skookumchuck 9y ago
  Stocks & bonds are investing in growing a business.
  - cmurf 9y ago
    Only IPOs transfers cash directly to a growing business, all other stock trades are shareholder trades, the company sees none of that money. Corporate bonds do help grow businesses, but these are dwarfed by government bonds, which are just another way of transferring money from the vast majority of living and future generations, to a tiny number of current living people.
    - 1123581321 9y ago
      The part about trading not mattering to companies isn't true. One, companies issue additional shares after IPO. Two, the fluidity and likely future viability of the market affects IPO feasibility and price. Three, stock price affects employee compensation. Four, companies that own shares in other companies benefit from liquid markets just like retail investors. Corporate bonds also trade on the secondary market and that has similar consequences.
      - skookumchuck 9y ago
        Also, if trading didn't matter, corporations wouldn't be so concerned about the stock price.
soundwave106 9y ago
Actually, Bill Gates has directly called for a capital gains tax increase (http://www.cnbc.com/2016/05/02/bill-gates-calls-for-higher-capital-gains-taxes.html http://www.cnbc.com/2016/05/02/bill-gates-calls-for-higher-c...) -- I assume capital gains would be most of his current taxable income at this point. Capital gains taxes are of far more concern to mega-rich people and big businesses, compared to small and medium businesses (which can take advantage of some capital gains exemptions specifically designed for them). So in his case at least I don't think this is reflecting some nefarious hidden agenda.

edanm 9y ago

Just out of curiosity, is there anything Gates/Buffet could do that you wouldn't approach cynically, i.e. that you would assume they're really doing it for other peoples' benefits rather than their own?

roenxi 9y ago
Cynicism comes into its own when that sort of money is involved. Practically it isn't possible to become build that sort of wealth without being super-aware of the financial outcomes of your decisions. It isn't safe to take someone at face value once they can buy a PR firm without blinking.
- edanm 9y ago
  "It isn't safe to take someone at face value once they can buy a PR firm without blinking." Well I agree with that. But it seems like you're saying that there's literally no evidence in the world that can convince you that your cynical view of them is wrong, which is a pretty hard position to hold IMO.
cookiecaper 9y ago
I think it's always valuable to analyze the cynical angle and potential game. As a sibling commenter stated, you don't get to Gates or Buffet level without good awareness of the game. In most cases, you can hardly get up more than one or two rungs on the corporate ladder without it. I don't necessarily impute any of these motives upon Gates or Buffet per se. I just think it's important to be aware of how such actions align with their interests. The subjective judgment of each man's true motives is left to the reader. I will say that if Gates and Buffet truly believed that 40% of the wealth they accrue each year could be put to better use by the USG than themselves, they could put their money where their mouth is and donate that portion of their assets to the U.S. Treasury. [0] Instead, they seem to keep that wealth within vehicles that they can control. [0] https://www.fiscal.treasury.gov/fsfaq/faq_gifts_to_govt.htm https://www.fiscal.treasury.gov/fsfaq/faq_gifts_to_govt.htm
- dahoraTSUNAMI 9y ago
  Just to clarify, Buffet and Gates didn't climb a corporate ladder. You are right, though, that the thinking is different and theirs is most likely atypically well-refined.
- ethbro 9y ago
  How do you square your comments with Buffett being on the record (repeatedly) in griping about his effective tax rates vs those who earn less? One example: http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/ http://money.cnn.com/2013/03/04/news/economy/buffett-secreta... I don't have any quotes in memory from Gates, but your position of "Buffett is just trying to get good PR by advocating tax changes that wouldn't effect him" doesn't mesh with his quotes to the effect of "It's unfair I pay less effective tax than my secretary." What exactly do you seem him advocating that has an ulterior motive?
  - cookiecaper 9y ago
    I think it's a calculated illustration. Power is all about making calculated gambles like that. If everyone was bare with their intentions all the time, it'd be easy for their enemies to bring them down. The fact of the matter is that any type of change to the tax status of a significant asset is going to have far-reaching implications and plenty of people sticking their hands in the pot to try to make the outcome favorable to themselves. A puff piece that features one of the most-conspicuous richest men in the world suggesting a tax hike against himself is just throwing a bone to the dogs; it's fodder that keeps Berkshire Hathaway and Buffett in the news and it makes the Buffett/BH brand more recognizable, likable, and personable, which are very important qualities. It also gives him an anchor to point to if he ever needs to negate bad press. He can say "Look, I have a track record of advocating for selfless causes. What kind of greedy billionaire would get on TV and ask for a tax hike? You wouldn't see Donald Trump do that! The things that are causing my bad publicity are not actually bad, they're just misunderstood." When people hear "tax hike" they think about it in relation to themselves, i.e., a hike on wage taxes. Beyond PR interest, the ulterior motives would be a) increasing the tax rate on people who are having good years in their small businesses, so that the growth of their nascent empire is stymied, lest it someday pose a challenge to BH's interests; and b) many of BH's major holdings are closely linked to government activity, things like railroads and utility companies. More money to the government = more money to BH, and this good PR makes government employees more favorable to Buffett/BH since he is not demonizing the thing that pays their salaries (taxes). It's convenient to assume that people are honest and straightforward as long as one remains naive enough to believe that. But with something as complex and interconnected as BH and Buffett, nothing occurs in a vacuum. Buffett's private thoughts remain private. He knows when he is on the public stage and he certainly knows to calculate the consequences of his actions there. To deny that this is significant is to deny the purpose and value of Public Relations completely.
astrodev 9y ago
Not naming their foundations after themselves would be a good start.
- croon 9y ago
  I would argue the opposite. They're not hiding behind other names, and you could instead argue that they're doing it for legacy, not for capital gain.

ChuckMcM 9y ago

I appreciate the point of view, but in this conversation specifically, and the Economist article specifically, the discussion is around evaded taxes of the wealthiest individuals. By definition an 'evaded' tax is one that is legally owed, but has been not paid illegally[1]. So without a tax increase, simply increasing compliance, you increase the actual tax revenue collected. [1] Not to be confused with 'sheltered' where the tax was not paid but through a legal loophole.

rsync 9y ago

"Income tax rates have little effect on the already-wealthy because most of their money is not distributed in the form of a wage or salary; rather, it is stored in various types of financial vehicles that are already tax privileged." The problem with this line of thought in it's current implemenation is that the top marginal income tax rates are very, very, very low in comparison to the "truly wealthy" people that you are referring to. You only have to make (roughly) $400k[1] in the US to hit the very top federal bracket of 39%. That's hardly scrooge mcduck swimming in his bank vault. It's more like middle sized contractors, and (lower echelon) doctors and dentists. So if you are a proponent of substituting income taxes with wealth taxes I would hope you are also a proponent of drastically raising the income brackets for very, very high tax rates to avoid hitting people that aren't "actually wealthy" (your definition). [1] https://taxfoundation.org/2017-tax-brackets/ https://taxfoundation.org/2017-tax-brackets/

raarts 9y ago
Does a dentist really make $400k in the US? Wow, just wow..
- cmurf 9y ago
  Quick google search: The median annual Dentist salary is $146,434, as of April 27, 2017, with a range usually between $130,761-$171,212... If the dentist owns a particularly successful office of dentists, they're not just a dentist, but a small business owner, so they could be making more money (paid by dividends rather than salary).
  - lern_too_spel 9y ago
    An established single dentist practice will take in over a million dollars per year. After paying secretary and dental hygienist salaries, rent, and other business costs, that comes to more than $400k net. http://www.dentaleconomics.com/articles/print/volume-102/issue-5/finances/i-paid-too-much-for-my-dental-practice.html http://www.dentaleconomics.com/articles/print/volume-102/iss... https://forums.studentdoctor.net/threads/how-much-can-a-private-dentist-make.566230/ https://forums.studentdoctor.net/threads/how-much-can-a-priv...

refurb 9y ago

Another thing to keep in mind is that the top 1% in the US (>$428 AGI) earn 19% of all AGI and pay 38% of all income taxes. The top 1% pay more in taxes than the bottom 90%.[1] [1]https://taxfoundation.org/summary-latest-federal-income-tax-data-2015-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...

vkou 9y ago
The top 1% also own more then the bottom 90%. 35% of all the wealth, compared to 28%. (Going by reported numbers - the reality may be worse.) Their wealth also tends to stay with them. Bill Gates isn't planning on taking out a reverse mortgage for his house anytime soon. In our debt-based society, wealth flows up. The average person spends most of their life paying interest to someone, in exchange for the ability to work, a place to live, and a vehicle for getting them from where they live to where they work. People who don't need to go into debt for those three expenses get to grow their wealth, and pass it on to their children. People who do have to go into debt to do so tend to die, and pass on little to nothing.
- refurb 9y ago
  The top 1% also own more then the bottom 90%. 35% of all the wealth, compared to 28% Hmmm... so it sounds like the rich are paying their fair share then?
  - deleted 9y ago
    [deleted]
- skookumchuck 9y ago
  > 35% of all the wealth This neglects to account for all the wealth owned by the government.
ethbro 9y ago
Yes. That's the definition and social contract of a progressive tax code. E.g. "You probably screwed over a lot of people to get where you are, or at least leveraged their work while reaping most of the gains. As well as being able to afford to pay more (given that basic necessity costs don't scale with income). So you should pay a larger share."

cmurf 9y ago

>Income tax rates have little effect on the already-wealthy because most of their money is not distributed in the form of a wage or salary No, the fact is we differentiate between salaried "earned" income and tax it much, much higher, than investment "unearned" income. It's a very explicitly designed system that encourages stuffing the left overs into real estate, stocks, bonds rather than take the risk of starting or growing a business. This is not a John Rawl's country, where we believe in "the veil of ignorance" thought game. If it were, there would be no such thing as tax free gifts, and low or non-existence inheritance tax.

skookumchuck 9y ago
Stocks & bonds are investing in growing a business.
- cmurf 9y ago
  Only IPOs transfers cash directly to a growing business, all other stock trades are shareholder trades, the company sees none of that money. Corporate bonds do help grow businesses, but these are dwarfed by government bonds, which are just another way of transferring money from the vast majority of living and future generations, to a tiny number of current living people.
  - 1123581321 9y ago
    The part about trading not mattering to companies isn't true. One, companies issue additional shares after IPO. Two, the fluidity and likely future viability of the market affects IPO feasibility and price. Three, stock price affects employee compensation. Four, companies that own shares in other companies benefit from liquid markets just like retail investors. Corporate bonds also trade on the secondary market and that has similar consequences.
    - skookumchuck 9y ago
      Also, if trading didn't matter, corporations wouldn't be so concerned about the stock price.

soundwave106 9y ago

Actually, Bill Gates has directly called for a capital gains tax increase (http://www.cnbc.com/2016/05/02/bill-gates-calls-for-higher-capital-gains-taxes.html http://www.cnbc.com/2016/05/02/bill-gates-calls-for-higher-c...) -- I assume capital gains would be most of his current taxable income at this point. Capital gains taxes are of far more concern to mega-rich people and big businesses, compared to small and medium businesses (which can take advantage of some capital gains exemptions specifically designed for them). So in his case at least I don't think this is reflecting some nefarious hidden agenda.