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Depends. The entire quip plays on peoples assumption they're both employees taking a standard wage and are "equal" besides the amounts. Unless I'm mistaken, War

Depends. The entire quip plays on peoples assumption they're both employees taking a standard wage and are "equal" besides the amounts. Unless I'm mistaken, Warren Buffet makes money from the ownership he holds, not as a salary, so the assumption people make ("of course he pays more", "what, he doesn't?!") is because they assume he's an employee and equal in everything but the amount, which isn't the case. He makes his money (a variable amount) from ownership, not work. If you prefaced the statement with an explanation of how he pays capital gains and not income tax because of the different types of money nobody would be confused / surprised.

revelation 15y ago
I know you just want to make the case for a more differentiated view here, but what you are in fact doing is defending a higher tax rate on work than for capital gains through mere ownership.
- jshen 15y ago
  Precisely. I inherited tens of millions, then invested it, should I pay a lower rate than a person that works for a living?
  - simplefish 15y ago
    I have no idea if you should, but in the US, you probably will. Depending on what year you inherited the money, you'll have paid up to 55%.
    - jshen 15y ago
      That seems reasonable. My problem is with the party that wants to abolish the estate tax and cut capital gains taxes.
  - analyst74 15y ago
    In that case, the more "fair" solution is high inheritance tax (maybe it's already in place?). Discouraging long-term investment through high capital gain is not a good solution.
- newbusox 15y ago
  Well, there are lots of reasons as to why capital gains are taxed at a lower rate than ordinary income. I'm not advocating that any of them are correct (and, obviously, many countries tax capital gains and ordinary income at the same rate, or possibly capital gains at a higher rate), but you could argue that a lower tax rate on capital gains offsets the impact of double taxation (corporation is taxed on the income, then you are taxed on your income), or offsets inflation, or, probably most prominently, encourages investment which in turn can encourage innovation, and so on. There presumably are other ways to reach these same results, but that's the policy choice we have made. I don't see it as much as valuing "mere" ownership over labor, just that we've made certain policy choices as to what incentives we want in our economy.
mikeash 15y ago
Plenty of people know that he gets his money in a different way and still don't understand why that makes it OK for his tax rate to be so low.
aaronblohowiak 15y ago
>different types of money That's where you're wrong. Different ways of getting it, but it is still USD.

revelation 15y ago

I know you just want to make the case for a more differentiated view here, but what you are in fact doing is defending a higher tax rate on work than for capital gains through mere ownership.

jshen 15y ago
Precisely. I inherited tens of millions, then invested it, should I pay a lower rate than a person that works for a living?
- simplefish 15y ago
  I have no idea if you should, but in the US, you probably will. Depending on what year you inherited the money, you'll have paid up to 55%.
  - jshen 15y ago
    That seems reasonable. My problem is with the party that wants to abolish the estate tax and cut capital gains taxes.
- analyst74 15y ago
  In that case, the more "fair" solution is high inheritance tax (maybe it's already in place?). Discouraging long-term investment through high capital gain is not a good solution.
newbusox 15y ago
Well, there are lots of reasons as to why capital gains are taxed at a lower rate than ordinary income. I'm not advocating that any of them are correct (and, obviously, many countries tax capital gains and ordinary income at the same rate, or possibly capital gains at a higher rate), but you could argue that a lower tax rate on capital gains offsets the impact of double taxation (corporation is taxed on the income, then you are taxed on your income), or offsets inflation, or, probably most prominently, encourages investment which in turn can encourage innovation, and so on. There presumably are other ways to reach these same results, but that's the policy choice we have made. I don't see it as much as valuing "mere" ownership over labor, just that we've made certain policy choices as to what incentives we want in our economy.

mikeash 15y ago

Plenty of people know that he gets his money in a different way and still don't understand why that makes it OK for his tax rate to be so low.

aaronblohowiak 15y ago

>different types of money That's where you're wrong. Different ways of getting it, but it is still USD.