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A Minimum Tax for the Wealthy

79 points by swohns 14y ago

mtgx 14y ago
> Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P Makes sense, but only after you've paid off all or the vast majority of your debt, which means for a decade or two you'll need to have the income be significantly higher than spending, and pay off the debt with the difference.
- r00fus 14y ago
  Yeah, back before Bush's looting of the US treasury for his rich pals, we had budget surpluses. In fact, it might have been possible that we would now have paid off the debt if Bush never took office.
nugget 14y ago
Government is the least efficient allocator of resources. For every dollar put to use, many more dollars are wasted due to incompetence or fraud. California's Proposition 30 was a wake-up call for me; despite all the political advertisements to the contrary, the many billions raised for "education" went entirely to shore up the teacher's bloated pensions and benefits fund. Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. This concept is so rare as to practically not exist in the public sector. I'm not opposed to higher taxes. I am opposed to throwing money, mine or anyone else's, into a black hole. Convince me that the extra tax dollars will be spent wisely and that society will see a net positive return at some point in the future, and you have my support.
- ballstothewalls 14y ago
  Government is the least efficient allocator of resources? Says who? How many wealthy individuals are sitting on piles of money right now because they are unsure of the economic climate and therefore are not going to invest? Who better than the government to take it away from them and then invest it into public infrastructure and consequently stimulate the economy?
  - nhangen 14y ago
    What gives the government the right to 'take it away from them?'
    - mitchty 14y ago
      They have the guns normally. Force tends to be its own right. That said, Californians complaining about government isn't surprising, they have the worst possible state government of the union. Their bias is understandable, but entirely their own doing.
      - nhangen 14y ago
        "Potentially, a government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims."
        forensic 14y ago
        Like everything Ayn Rand, that's completely upside down, since government is also the only entity that has ever succeeded in guaranteeing people's rights. So government is the best friend of man's rights, while libertarianism is the biggest enemy. Libertarianism = corporate feudalism.
      - charonn0 14y ago
        they have the worst possible state government of the union Must be all the rich people that live here; they ruin everything!
        mitchty 14y ago
        I was referring more to their referendum system.
        charonn0 14y ago
        Which diminishes my point not a bit.
- silvestrov 14y ago
  That has nothing to do with the article. No matter how inefficient the government is, they still need money. And the article is about who pays how big part of that money.
- Retric 14y ago
  'Entrepreneurs' are terrible at allocating capital. Just compare the ROI from venture capital funds vs the S&P 500 over the last 20 years to get some idea. And no the vast majority of CEO's of a fortune 500 company are not Entrepreneurs for any reasonable definition of the term. PS: It's important to include failures and opportunity costs when you talk about Entrepreneurs or your basically saying lottery winners are great at allocating capital.
- nhangen 14y ago
  I'm with you. Until the federal gov can prove it is willing to even attempt a balanced budget, is willing to stop giving handouts (to both the wealthy and the lazy), and proves it will actually invest in something other than bad cars and banks, then there's no reason they should get anything more than they already do. If you keep feeding a monster, all you get is a bigger monster.
  - ghouse 14y ago
    Your argument assumes that people making spending decisions care about the debt. 30 years of government run by both sides of the aisle demonstrate that revenue and expenditures are entirely decoupled. Whether you feed or don't feed the monster doesn't impact the monster's size. If you stop funding government, all you get is a larger debt.
- brianchu 14y ago
  Where did you get the idea that "the many billions raised for 'education' went entirely to shore up the teacher's bloated pensions and benefits fund?" (emphasis added) As far as I'm aware, the majority of the money went to prevent spending cuts in education budgets, and the rest went into the general budget (http://voterguide.sos.ca.gov/propositions/30/analysis.htm http://voterguide.sos.ca.gov/propositions/30/analysis.htm). Hyperbole is not necessary to make your point.
  - gwright 14y ago
    It is a mistake to try to analyze spending in this way. Dollars are fungible. Dollars directed to one particular budget item (education budgets in your example) simply frees up other dollars to be used elsewhere (pensions and benefits in the parent comment).
- tsotha 14y ago
  >For every dollar put to use, many more dollars are wasted due to incompetence or fraud. California's Proposition 30 was a wake-up call for me... You needed a wake-up call after the shenanigans we've seen in Sacramento over the last decade? They won't even spend the extra money. They'll use it as leverage to issue bonds. Tax increases in California have become mere guarantees taxes will be raised yet further at some future date.
- alwaysdoit 14y ago
  >Government is the least efficient allocator of resources. This is baseless dogma. Government may not always be the most efficient allocator, but it's not always the least efficient either. In cases of positive and negative externalities, the market does not allocate ideally. We need to move past this dogma of "All government is bad government" so that we can separate the good from the bad. Good rules are helpful. Bad rules are harmful. When we have low expectations of our government, we will unsurprisingly have low outcomes.
  - ruby_on_rails 14y ago
    I think what nugget is getting at, is there are many government programs that are mismanaged (welfare, social security, education to some extent, and others). Who legitimately feels good that they pay taxes only to see other Americans living off of Welfare, generations unemployed, living off of welfare (which btw, I consider to be fraud). People that live on welfare (no, not people who use the program as it was intended, as temporary help), don't pay taxes and the benefit from those of us that do pay taxes. When confronted with situations like the one described above, any rational person would wonder why we want higher taxes, when we should really be focusing on reforming our broken social programs. Only then, when we take legitimate steps to reform our broken social programs, should we be considering higher taxes.
    - rayiner 14y ago
      Broken by what measure? Relative to what? Is the government mismanaged compared to say Google? The federal agency I worked for was a much tighter-run ship than the startup I worked for, or the medium-sized tech company I worked for. I'd wager the federal government, or at least most of it, is better-run than most small and medium sized businesses in the US. The caliber of people in most of the agencies is just extremely high compared to what you usually see at all but the top private sector companies.
      - rdl 14y ago
        Many areas of the federal government are actually pretty good by commercial standards (at least for caliber of employee), but most state governments are by comparison pretty horrible (particularly California). However, they're much more concerned with fairness and being abused by third parties, since they aren't as constrained to succeed or die. It is better for an employee of a government entity to follow process 100% correctly and ultimately fail than to take a calculated risk outside of normal process and fail, even if the expected return on the riskier path is far higher, or odds of failure lower. Startups are exactly the opposite, since they die by default. Big businesses are somewhere in between -- a new product failing usually won't kill the business if it fails cleanly, but could if enough corners are cut. The ultimate difference between private firms and government is that a private firm which is seriously screwed up will go out of business. A government agency can continue being dysfunctional for a long time (e.g. the Office of Thrift Supervision). The other big difference is that when a government entity is incompetent, it tends to hurt others a lot more than when a single commercial firm is incompetent.
- forensic 14y ago
  Entrepreneurs only work for human beings with money. Who works for those without? It doesn't matter how inefficient government is. Government is the only entity that works for the disadvantaged. Government is also the only entity capable of addressing collective problems.
  - prostoalex 14y ago
    > Government is the only entity that works for the interest of the disadvantaged. oh rly? http://www.nps.gov/partnerships/fundraising_individuals_statistics.htm http://www.nps.gov/partnerships/fundraising_individuals_stat...
    - forensic 14y ago
      If you think private charity works for the disadvantaged, you are confusing the customer with the product.
      - prostoalex 14y ago
        Mmm, can you elaborate? Like Red Cross or local church's soup kitchen, how does their activity not benefit the disadvantaged?
        forensic 14y ago
        Maybe some private charities do benefit the disadvantaged. But that doesn't mean those private charities work for the disadvantaged. Who is the customer of a private charity? Who is the product of a private charity?
  - gyardley 14y ago
    You can't possibly actually believe this. When I'm doing volunteer work, I'm working for the interest of the disadvantaged. My synagogue collectively works for the interest of the disadvantaged through their social action programs. My town's interfaith food bank is run very well and addresses a collective problem without taking a dime of government support. Government plays a role in helping the disadvantaged but it doesn't play the only role, it's not necessarily the most effective role, and since it involves taking money from people involuntarily, we should make damn sure the help's truly necessary and there's not a better, voluntary way to do it first.
- ianb 14y ago
  This response has become the standard (non sequitur) response to proposals for progressive taxation, but it doesn't engage at all with the argument being made. The degree to which taxes are progressive doesn't determine the total tax collected, or the amount the government expends, it determines how that burden is applied to people. What we should really be comparing is: does an individual allocate their first $100,000 of income with any different efficiency than their second, third, or fifteenth $100k of income? If you give $1000 to a person who makes $50,000 a year, and $1000 to someone who makes $1,000,000 a year, who will allocate that money better? I think most of us would feel intuitively that the person making $50,000 would use it "better", but there's fair arguments to the contrary as well (including figuring out what "better" means). But only when you ask that question are you asking about progressive taxation, not just tax burden as a whole.
  - gwright 14y ago
    Why are you framing the argument as if incomes are something that are owned by the government instead of the person who earned the money? The notion that taxation should be predicated on whether the government or the person can 'better use' the person's money is damn scary.
    - cdash 14y ago
      Its not really scary at all because that is what governments have always done, unless you are an advocate for no government at all in which case you are damn scary.
      - gwright 14y ago
        That is a false dichotomy. You want me to choose between anarchy or <insert your form of government here> where you've asserted that it doesn't matter what form of government I choose because they are all the same.
    - ianb 14y ago
      The whole point of my post is that progressive taxation is a question of which individuals pay what, not whether money stays with individuals or goes to the government. You appear to be caught up in the framing of political rhetoric.
- mcantelon 14y ago
  >Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. Not if they're burning through someone else's money. Then it's as big a shitshow as government.
- chasing 14y ago
  "Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. This concept is so rare as to practically not exist in the public sector." What a shitty, smug attitude to have towards the many very bright and motivated people who work in the public sector. They're not all perfect, but neither are all entrepreneurs. Not by a long shot.
  - nugget 14y ago
    I didn't say that folks in the public sector are lazy or stupid, I said that there is rarely a direct connection between their performance on the job and their financial upside. Public sector workers are much more concerned about downside protection (i.e. avoid controversial decisions, cover your ass). In many cases, and I've seen this first hand, inaction is safer than action, whereas the opposite is usually true in business and especially in startups.
    - chasing 14y ago
      You're right -- I've never seen anyone in the private sector avoid controversial decisions or cover their ass. We should hand over all our nation's money to Bill Nguyen.
- deleted 14y ago
  [deleted]
tsotha 14y ago
Hey Warren, instead of an income tax, don't you think a wealth tax would be better? Oh, I thought not.
- ianterrell 14y ago
  At taxable income nearing $40 MM in recent years, I'd say he's a decent candidate for speaking on income tax. http://www.huffingtonpost.com/2011/10/12/warren-buffetts-income_n_1007516.html http://www.huffingtonpost.com/2011/10/12/warren-buffetts-inc...
  - tsotha 14y ago
    Yes, well, with 1000x that in assets I'd say he's an even better candidate for a wealth tax.
- damian2000 14y ago
  It would be against the US constitution anyway. http://en.wikipedia.org/wiki/Wealth_tax http://en.wikipedia.org/wiki/Wealth_tax
  - tsotha 14y ago
    Did you read that link? It would only be unconstitutional at the federal level, and even a federal wealth tax would be constitutional if the revenue were "apportioned among the states".
jaggederest 14y ago
Hmm, if only such a thing already existed... http://en.wikipedia.org/wiki/Alternative_Minimum_Tax http://en.wikipedia.org/wiki/Alternative_Minimum_Tax Although when anyone in my lowly tax bracket has to worry about it, it's pretty sad.
- jcampbell1 14y ago
  AMT + Deduction Cap would be the same thing effectively, assuming the deduction cap applied to everything. Right now the reason people make millions and pay no taxes is because they give generously to charities, and their investments are tax-free muni bonds. AMT still allows too many deductions to force all the top earners into paying taxes.
  - rdl 14y ago
    The big deal is that AMT doesn't apply to capital gains (at least not directly; it can cause you to blow the exemption cap though)
  - jaggederest 14y ago
    I suppose my point is that we have a feature in the tax code which is ostensibly designed to achieve his very goals, but it's become useless over time because a) it's not indexed to inflation, and b) it allows some deductions and generally adds complexity, rather than being a true flat minimum.
nhebb 14y ago
> I support President Obama’s proposal to eliminate the Bush tax cuts for high-income taxpayers. However, I prefer a cutoff point somewhat above $250,000 — maybe $500,000 or so. Personally, I don't care if the wealthy pay higher taxes. In the recent election, 8/10 of the wealthiest counties in the US voted for President Obama, and his stance on tax rates was clear. If those voters are willing to pay higher taxes, I'm fine with that. But what I really hate is the class warfare and populist messages driving fiscal policy. With the threshold at $250k, the tax hikes would still only bring in enough added revenue to cover 8 days of federal spending. And "fair share"? The top 5% pay 40% of the federal income taxes collected. In order to generate the kind of revenues that would make a significant impact on the deficit, taxes would have to go up across the board, which in turn would lead to an economic slow down.
- sami36 14y ago
  Or you could pursue a balanced approach. Raise taxes on the wealthy, a little bit & cut intelligently across all programs. The defense budget is bloated, SS could be means tested, Medicare must be both means-tested & some of the benefits curtailed.
- r00fus 14y ago
  > With the threshold at $250k, the tax hikes would still only bring in enough added revenue to cover 8 days of federal spending. Does that include the restoration of pre-Bush capital gains tax? Because I'm sure that would add up to a lot. In fact, I think that's the biggest thing that the ultra-rich have become addicted to in the past decade.
  - cynicalkane 14y ago
    Talk about the "ultra-rich" becoming "addicted" to money is loaded nonsense, but never mind. The idea of taxing investment income leads to a lot of terrible, perverse outcomes. It steers wealth towards being locked up in big companies and funds, since this is how you compound investment fashion without that money being repeatedly taxed. It also makes sure the incentive to invest on one's own accord belongs primarily to capitalists, since the tax naturally compounds when you buy and sell on your own account. Non-capitalists must allocate their money in one of a handful of government-approved fashions, or be eaten by repeated capital gains taxes for things as simple as rebalancing. Capital gains taxes seem motivated by a broad desire to soak the rich, but you will find very few economists on the left (or the right) supporting this idea over alternatives like a progressive consumption tax. Capital gains taxes are one more example of a clueless "progressive" idea leading to outcomes that are poor to both progressive and non-progressive perspectives.
sunsu 14y ago
“Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist. The problem is not that the wealthy won't invest if they are taxed at higher rates. Its that they will have LESS to reinvest with after gains are taxed. Its strictly a matter of who you believe distributes resources more efficiently: the government or the people.
- hackinthebochs 14y ago
  Of course "efficiently" depends completely on what property you're trying to optimize for. Individuals work for themselves, government (theoretically) works for the people. It is not a given that "the people" will be more efficient for all such properties.
  - w3pm 14y ago
    You misunderstand the context of efficiency. We're talking about efficiently allocating limited capital resources. This is done by 'prices.' The government by definition cannot efficiently allocate capital because there exists no market signal from capital consumers as to how the scarce resources should be best utilized. The government can only guess and spend.
    - hackinthebochs 14y ago
      I don't think I misunderstand the context. The definition that people generally use when discussing this is making some fundamental assumptions that simply do not hold up. Efficiency for efficiency's sake is meaningless--its always in the pursuit of some greater goal. For the private citizen, that goal is different than for a government. It is a flawed argument to assume that the government does, or should, have the same goal as a private citizen.
      - w3pm 14y ago
        There's a fixed amount of labor capital in the US. Who decides how it should be allocated? Let's pretend you believe we need to hire more teachers. Are you right? If you were the government, you'd wave your hands and make it so. But are you wasting labor on teachers we don't fully utilize? Perhaps we could have really benefited from additional plumbers. How can we know? The only known way to answer those questions is by asking the capital markets. We all share the goal of best utilizing every citizen to raise our collective standard of living. More broadly, it is in everyone's best interest to efficiently use every type of scare capital resource we are afforded. Waste helps no one. Now, the fact that the capital markets are distorted and borderline useless today is another discussion. Higher taxes won't solve that problem either.
ghouse 14y ago
If small government advocates really wanted a broad base of support, they'd insist that tax rates always cover government expenditures. Then people would be upset about big government. However, the current attack against raising taxes (from their current historically low rates) only raises the debt and weakens our fiscal foundation.
anigbrowl 14y ago
This thread is a sad example of why articles on politics are discouraged on HN. None of the comments engage substantively with the article and most consist of unsupported assertions, as well as failing at staatistics.
- tinco 14y ago
  Haha is this comment meant to be self referential?
bravura 14y ago
Is it possible for non-investors (i.e. small business owners) to avoid taxes using strategies like a "Cayman Islands mail drop"? If so, I propose this HACK to solve the tax issue: Create a site that disseminates information on how small businesses can avoid (not evade) taxes using these approaches that are typically only known to advanced acolytes. Evolve processes that significantly reduces the cost for avoiding taxes effectively. (I imagine that that these complicated loopholes aren't actually that complicated, just that the knowledge is rarified.) If many people, including a large portion of the upper-middle class, reduced their tax liability, this would significantly increase the amount of attention paid to this issue.
- prostoalex 14y ago
  Small business owners are least affected by capital gains increase, since the capital gains tax event is triggered only during sale. The proposed terms of sale (taxation included) don't make sense for you as the business owner? Then either ask for a higher price or don't sell.
neilkelty 14y ago
If Mr. Buffet is so concerned about the amount of taxes paid by the wealthy he should use this simple form (https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454 https://www.pay.gov/paygov/forms/formInstance.html?agencyFor...) to set an example.
- arn 14y ago
  This is an absurd (yet common) response. And if you are for a war, why don't you buy a gun and go fight?
  - deleted 14y ago
    [deleted]
  - neilkelty 14y ago
    Not quite sure why it's an absurd response?
    - w3pm 14y ago
      Agreed. Mr. Buffet is free to donate as much of his 'tail wind' wealth as he chooses. But please, hands off of my wallet.
      - owyn 14y ago
        He donated all of it. Whatever you got isn't that interesting. You know, I've never had a problem with the income taxes that I pay. They're taken out of my check and I work with what's left. I never think "oh man, they're taking my money" any more than I think "oh man, I totally deserve to win the lottery". I do think there's something about earning money through investments that makes paying taxes "feel" more like your money is being taken away from you. It's not automatically deducted. It's not there every week. Sometimes you lose money. You have to pay it all at once. Taxes are not part of the mental calculation of how much you made on that sweet stock investment. I think that's WHY the rates are lower. People just feel like the rates SHOULD be lower. But it's a psychological effect. When I look at the economic effects of the current tax scheme on a large scale, it seems to me that this kind of benefit is just a giant tax dodge. Let's say that the tax rate is structured in a way that the cost of doing productive "work" with your capital is 30%, but the tax rate for just shuffling the money around through a bunch of investment vehicles is %15. Well, you've suddenly got a free %15 to play around with. And if you only need to return %10 to be considered a pretty good investment, then it seems like you really can't fail as long as you've already got enough money to play a different game than the rest of us. But those guys are already orbital, and the rest of us can never achieve escape velocity. I'd prefer to not live in a cyberpunk future where the rich get their own orbital gardens and the rest of us have to live in the ruins they left behind.
001sky 14y ago
A major problem is income != wealth. -- And it took a constitutional amendment to tax income.
AnthonyMouse 14y ago
>But what I really hate is the class warfare and populist messages driving fiscal policy. This. The thing that really gets me are the people who should know better, like Warren Buffet. You read the article and he's making straw man arguments about billionaires stuffing their cash in mattresses because their taxes are too high -- nobody is arguing that. The real problem is that taxation is economically distortionary and the higher you raise the rates, the greater the distortion. Because taxes are only due when assets are sold (and in the meantime the owner is collecting asset appreciation on the portion of the value that would have been due in taxes), capital gains tax encourages investors to hold their existing assets rather than seeking out more economically efficient ones. It encourages them to invest in more stable assets that can be held for a long period of time to defer taxes, rather than taking a risk on a startup that could cause tax to be due sooner when there is an IPO etc. Or the tired numbers about how the rich are a lot richer now than they used to be and their taxes are lower, without providing evidence of causation rather than correlation. I mean sure, the richest might have 4.5X as much as they did twenty years ago instead of 5X, but is that really the big problem? Or is the real problem the regulatory capture and Wall St. shenanigans that allow the rich to double their money every five or ten years while Main St. loses their retirement fund to the same stock market? At the same time, everybody just assumes that if you want to collect more tax money from the rich, raising the capital gains tax is the way to do it. Or the same with corporations and corporate income tax. But both of them are way, way too easy to avoid and for the same reason -- they depend on measuring profit, and it's gotten to be trivial to make an entity look unprofitable on paper. Raising the rates won't help that, it'll just push more people into tax shelters. If you want to tax the rich and corporate entities then you have to tax the stuff they don't have a choice about doing. Sales tax, but the tax is paid by the seller not the customer. Income tax, but the tax is paid by the employer, not the employee. If you want to do business you need employees and customers, so they can't avoid paying taxes with shelters and loopholes. That's how you tax the rich. Capital gains tax is just a shell game that encourages accounting tricks and offshore banking.
- ianb 14y ago
  I'd kind of dismissed the idea of a consumption/sales tax as terribly regressive, but it doesn't have to be, and lately I've been wondering what the distribution might look like. To make a sales tax more progressive, you might in effect say that the first $20,000 you spend is tax-free. If you have a 10% tax, then you just give every individual $2,000 cash (and ignore that some people spend less than $20,000 – that's the sort of loophole that can never grow very large). Given a system like that I'd be curious what the numbers might really look like. How high a tax would we need? What would the actual tax burden look like for different amounts of cash-back? Could we replicate something similar to the progressivity we have now? But there's still distortions. Consider high Shipping & Handling fees – these are often done because S&H is considered a service, and so sales tax is not levied on that portion of the cost. But a $0.01 book with $7 S&H is clearly bullshit. But who is there to call the seller on that bullshit? Why are goods taxed but not services? I've never been clear on that.

79 points by swohns 14y ago

mtgx 14y ago

> Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P Makes sense, but only after you've paid off all or the vast majority of your debt, which means for a decade or two you'll need to have the income be significantly higher than spending, and pay off the debt with the difference.

r00fus 14y ago
Yeah, back before Bush's looting of the US treasury for his rich pals, we had budget surpluses. In fact, it might have been possible that we would now have paid off the debt if Bush never took office.

nugget 14y ago

Government is the least efficient allocator of resources. For every dollar put to use, many more dollars are wasted due to incompetence or fraud. California's Proposition 30 was a wake-up call for me; despite all the political advertisements to the contrary, the many billions raised for "education" went entirely to shore up the teacher's bloated pensions and benefits fund. Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. This concept is so rare as to practically not exist in the public sector. I'm not opposed to higher taxes. I am opposed to throwing money, mine or anyone else's, into a black hole. Convince me that the extra tax dollars will be spent wisely and that society will see a net positive return at some point in the future, and you have my support.

ballstothewalls 14y ago
Government is the least efficient allocator of resources? Says who? How many wealthy individuals are sitting on piles of money right now because they are unsure of the economic climate and therefore are not going to invest? Who better than the government to take it away from them and then invest it into public infrastructure and consequently stimulate the economy?
- nhangen 14y ago
  What gives the government the right to 'take it away from them?'
  - mitchty 14y ago
    They have the guns normally. Force tends to be its own right. That said, Californians complaining about government isn't surprising, they have the worst possible state government of the union. Their bias is understandable, but entirely their own doing.
    - nhangen 14y ago
      "Potentially, a government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims."
      - forensic 14y ago
        Like everything Ayn Rand, that's completely upside down, since government is also the only entity that has ever succeeded in guaranteeing people's rights. So government is the best friend of man's rights, while libertarianism is the biggest enemy. Libertarianism = corporate feudalism.
    - charonn0 14y ago
      they have the worst possible state government of the union Must be all the rich people that live here; they ruin everything!
      - mitchty 14y ago
        I was referring more to their referendum system.
        charonn0 14y ago
        Which diminishes my point not a bit.
silvestrov 14y ago
That has nothing to do with the article. No matter how inefficient the government is, they still need money. And the article is about who pays how big part of that money.
Retric 14y ago
'Entrepreneurs' are terrible at allocating capital. Just compare the ROI from venture capital funds vs the S&P 500 over the last 20 years to get some idea. And no the vast majority of CEO's of a fortune 500 company are not Entrepreneurs for any reasonable definition of the term. PS: It's important to include failures and opportunity costs when you talk about Entrepreneurs or your basically saying lottery winners are great at allocating capital.
nhangen 14y ago
I'm with you. Until the federal gov can prove it is willing to even attempt a balanced budget, is willing to stop giving handouts (to both the wealthy and the lazy), and proves it will actually invest in something other than bad cars and banks, then there's no reason they should get anything more than they already do. If you keep feeding a monster, all you get is a bigger monster.
- ghouse 14y ago
  Your argument assumes that people making spending decisions care about the debt. 30 years of government run by both sides of the aisle demonstrate that revenue and expenditures are entirely decoupled. Whether you feed or don't feed the monster doesn't impact the monster's size. If you stop funding government, all you get is a larger debt.
brianchu 14y ago
Where did you get the idea that "the many billions raised for 'education' went entirely to shore up the teacher's bloated pensions and benefits fund?" (emphasis added) As far as I'm aware, the majority of the money went to prevent spending cuts in education budgets, and the rest went into the general budget (http://voterguide.sos.ca.gov/propositions/30/analysis.htm http://voterguide.sos.ca.gov/propositions/30/analysis.htm). Hyperbole is not necessary to make your point.
- gwright 14y ago
  It is a mistake to try to analyze spending in this way. Dollars are fungible. Dollars directed to one particular budget item (education budgets in your example) simply frees up other dollars to be used elsewhere (pensions and benefits in the parent comment).
tsotha 14y ago
>For every dollar put to use, many more dollars are wasted due to incompetence or fraud. California's Proposition 30 was a wake-up call for me... You needed a wake-up call after the shenanigans we've seen in Sacramento over the last decade? They won't even spend the extra money. They'll use it as leverage to issue bonds. Tax increases in California have become mere guarantees taxes will be raised yet further at some future date.
alwaysdoit 14y ago
>Government is the least efficient allocator of resources. This is baseless dogma. Government may not always be the most efficient allocator, but it's not always the least efficient either. In cases of positive and negative externalities, the market does not allocate ideally. We need to move past this dogma of "All government is bad government" so that we can separate the good from the bad. Good rules are helpful. Bad rules are harmful. When we have low expectations of our government, we will unsurprisingly have low outcomes.
- ruby_on_rails 14y ago
  I think what nugget is getting at, is there are many government programs that are mismanaged (welfare, social security, education to some extent, and others). Who legitimately feels good that they pay taxes only to see other Americans living off of Welfare, generations unemployed, living off of welfare (which btw, I consider to be fraud). People that live on welfare (no, not people who use the program as it was intended, as temporary help), don't pay taxes and the benefit from those of us that do pay taxes. When confronted with situations like the one described above, any rational person would wonder why we want higher taxes, when we should really be focusing on reforming our broken social programs. Only then, when we take legitimate steps to reform our broken social programs, should we be considering higher taxes.
  - rayiner 14y ago
    Broken by what measure? Relative to what? Is the government mismanaged compared to say Google? The federal agency I worked for was a much tighter-run ship than the startup I worked for, or the medium-sized tech company I worked for. I'd wager the federal government, or at least most of it, is better-run than most small and medium sized businesses in the US. The caliber of people in most of the agencies is just extremely high compared to what you usually see at all but the top private sector companies.
    - rdl 14y ago
      Many areas of the federal government are actually pretty good by commercial standards (at least for caliber of employee), but most state governments are by comparison pretty horrible (particularly California). However, they're much more concerned with fairness and being abused by third parties, since they aren't as constrained to succeed or die. It is better for an employee of a government entity to follow process 100% correctly and ultimately fail than to take a calculated risk outside of normal process and fail, even if the expected return on the riskier path is far higher, or odds of failure lower. Startups are exactly the opposite, since they die by default. Big businesses are somewhere in between -- a new product failing usually won't kill the business if it fails cleanly, but could if enough corners are cut. The ultimate difference between private firms and government is that a private firm which is seriously screwed up will go out of business. A government agency can continue being dysfunctional for a long time (e.g. the Office of Thrift Supervision). The other big difference is that when a government entity is incompetent, it tends to hurt others a lot more than when a single commercial firm is incompetent.
forensic 14y ago
Entrepreneurs only work for human beings with money. Who works for those without? It doesn't matter how inefficient government is. Government is the only entity that works for the disadvantaged. Government is also the only entity capable of addressing collective problems.
- prostoalex 14y ago
  > Government is the only entity that works for the interest of the disadvantaged. oh rly? http://www.nps.gov/partnerships/fundraising_individuals_statistics.htm http://www.nps.gov/partnerships/fundraising_individuals_stat...
  - forensic 14y ago
    If you think private charity works for the disadvantaged, you are confusing the customer with the product.
    - prostoalex 14y ago
      Mmm, can you elaborate? Like Red Cross or local church's soup kitchen, how does their activity not benefit the disadvantaged?
      - forensic 14y ago
        Maybe some private charities do benefit the disadvantaged. But that doesn't mean those private charities work for the disadvantaged. Who is the customer of a private charity? Who is the product of a private charity?
- gyardley 14y ago
  You can't possibly actually believe this. When I'm doing volunteer work, I'm working for the interest of the disadvantaged. My synagogue collectively works for the interest of the disadvantaged through their social action programs. My town's interfaith food bank is run very well and addresses a collective problem without taking a dime of government support. Government plays a role in helping the disadvantaged but it doesn't play the only role, it's not necessarily the most effective role, and since it involves taking money from people involuntarily, we should make damn sure the help's truly necessary and there's not a better, voluntary way to do it first.
ianb 14y ago
This response has become the standard (non sequitur) response to proposals for progressive taxation, but it doesn't engage at all with the argument being made. The degree to which taxes are progressive doesn't determine the total tax collected, or the amount the government expends, it determines how that burden is applied to people. What we should really be comparing is: does an individual allocate their first $100,000 of income with any different efficiency than their second, third, or fifteenth $100k of income? If you give $1000 to a person who makes $50,000 a year, and $1000 to someone who makes $1,000,000 a year, who will allocate that money better? I think most of us would feel intuitively that the person making $50,000 would use it "better", but there's fair arguments to the contrary as well (including figuring out what "better" means). But only when you ask that question are you asking about progressive taxation, not just tax burden as a whole.
- gwright 14y ago
  Why are you framing the argument as if incomes are something that are owned by the government instead of the person who earned the money? The notion that taxation should be predicated on whether the government or the person can 'better use' the person's money is damn scary.
  - cdash 14y ago
    Its not really scary at all because that is what governments have always done, unless you are an advocate for no government at all in which case you are damn scary.
    - gwright 14y ago
      That is a false dichotomy. You want me to choose between anarchy or <insert your form of government here> where you've asserted that it doesn't matter what form of government I choose because they are all the same.
  - ianb 14y ago
    The whole point of my post is that progressive taxation is a question of which individuals pay what, not whether money stays with individuals or goes to the government. You appear to be caught up in the framing of political rhetoric.
mcantelon 14y ago
>Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. Not if they're burning through someone else's money. Then it's as big a shitshow as government.
chasing 14y ago
"Entrepreneurs are some of the most efficient allocators, because they are decision makers with a vested interest in the outcome. This concept is so rare as to practically not exist in the public sector." What a shitty, smug attitude to have towards the many very bright and motivated people who work in the public sector. They're not all perfect, but neither are all entrepreneurs. Not by a long shot.
- nugget 14y ago
  I didn't say that folks in the public sector are lazy or stupid, I said that there is rarely a direct connection between their performance on the job and their financial upside. Public sector workers are much more concerned about downside protection (i.e. avoid controversial decisions, cover your ass). In many cases, and I've seen this first hand, inaction is safer than action, whereas the opposite is usually true in business and especially in startups.
  - chasing 14y ago
    You're right -- I've never seen anyone in the private sector avoid controversial decisions or cover their ass. We should hand over all our nation's money to Bill Nguyen.
deleted 14y ago
[deleted]

tsotha 14y ago

Hey Warren, instead of an income tax, don't you think a wealth tax would be better? Oh, I thought not.

ianterrell 14y ago
At taxable income nearing $40 MM in recent years, I'd say he's a decent candidate for speaking on income tax. http://www.huffingtonpost.com/2011/10/12/warren-buffetts-income_n_1007516.html http://www.huffingtonpost.com/2011/10/12/warren-buffetts-inc...
- tsotha 14y ago
  Yes, well, with 1000x that in assets I'd say he's an even better candidate for a wealth tax.
damian2000 14y ago
It would be against the US constitution anyway. http://en.wikipedia.org/wiki/Wealth_tax http://en.wikipedia.org/wiki/Wealth_tax
- tsotha 14y ago
  Did you read that link? It would only be unconstitutional at the federal level, and even a federal wealth tax would be constitutional if the revenue were "apportioned among the states".

jaggederest 14y ago

Hmm, if only such a thing already existed... http://en.wikipedia.org/wiki/Alternative_Minimum_Tax http://en.wikipedia.org/wiki/Alternative_Minimum_Tax Although when anyone in my lowly tax bracket has to worry about it, it's pretty sad.

jcampbell1 14y ago
AMT + Deduction Cap would be the same thing effectively, assuming the deduction cap applied to everything. Right now the reason people make millions and pay no taxes is because they give generously to charities, and their investments are tax-free muni bonds. AMT still allows too many deductions to force all the top earners into paying taxes.
- rdl 14y ago
  The big deal is that AMT doesn't apply to capital gains (at least not directly; it can cause you to blow the exemption cap though)
- jaggederest 14y ago
  I suppose my point is that we have a feature in the tax code which is ostensibly designed to achieve his very goals, but it's become useless over time because a) it's not indexed to inflation, and b) it allows some deductions and generally adds complexity, rather than being a true flat minimum.

nhebb 14y ago

> I support President Obama’s proposal to eliminate the Bush tax cuts for high-income taxpayers. However, I prefer a cutoff point somewhat above $250,000 — maybe $500,000 or so. Personally, I don't care if the wealthy pay higher taxes. In the recent election, 8/10 of the wealthiest counties in the US voted for President Obama, and his stance on tax rates was clear. If those voters are willing to pay higher taxes, I'm fine with that. But what I really hate is the class warfare and populist messages driving fiscal policy. With the threshold at $250k, the tax hikes would still only bring in enough added revenue to cover 8 days of federal spending. And "fair share"? The top 5% pay 40% of the federal income taxes collected. In order to generate the kind of revenues that would make a significant impact on the deficit, taxes would have to go up across the board, which in turn would lead to an economic slow down.

sami36 14y ago
Or you could pursue a balanced approach. Raise taxes on the wealthy, a little bit & cut intelligently across all programs. The defense budget is bloated, SS could be means tested, Medicare must be both means-tested & some of the benefits curtailed.
r00fus 14y ago
> With the threshold at $250k, the tax hikes would still only bring in enough added revenue to cover 8 days of federal spending. Does that include the restoration of pre-Bush capital gains tax? Because I'm sure that would add up to a lot. In fact, I think that's the biggest thing that the ultra-rich have become addicted to in the past decade.
- cynicalkane 14y ago
  Talk about the "ultra-rich" becoming "addicted" to money is loaded nonsense, but never mind. The idea of taxing investment income leads to a lot of terrible, perverse outcomes. It steers wealth towards being locked up in big companies and funds, since this is how you compound investment fashion without that money being repeatedly taxed. It also makes sure the incentive to invest on one's own accord belongs primarily to capitalists, since the tax naturally compounds when you buy and sell on your own account. Non-capitalists must allocate their money in one of a handful of government-approved fashions, or be eaten by repeated capital gains taxes for things as simple as rebalancing. Capital gains taxes seem motivated by a broad desire to soak the rich, but you will find very few economists on the left (or the right) supporting this idea over alternatives like a progressive consumption tax. Capital gains taxes are one more example of a clueless "progressive" idea leading to outcomes that are poor to both progressive and non-progressive perspectives.

sunsu 14y ago

“Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist. The problem is not that the wealthy won't invest if they are taxed at higher rates. Its that they will have LESS to reinvest with after gains are taxed. Its strictly a matter of who you believe distributes resources more efficiently: the government or the people.

hackinthebochs 14y ago
Of course "efficiently" depends completely on what property you're trying to optimize for. Individuals work for themselves, government (theoretically) works for the people. It is not a given that "the people" will be more efficient for all such properties.
- w3pm 14y ago
  You misunderstand the context of efficiency. We're talking about efficiently allocating limited capital resources. This is done by 'prices.' The government by definition cannot efficiently allocate capital because there exists no market signal from capital consumers as to how the scarce resources should be best utilized. The government can only guess and spend.
  - hackinthebochs 14y ago
    I don't think I misunderstand the context. The definition that people generally use when discussing this is making some fundamental assumptions that simply do not hold up. Efficiency for efficiency's sake is meaningless--its always in the pursuit of some greater goal. For the private citizen, that goal is different than for a government. It is a flawed argument to assume that the government does, or should, have the same goal as a private citizen.
    - w3pm 14y ago
      There's a fixed amount of labor capital in the US. Who decides how it should be allocated? Let's pretend you believe we need to hire more teachers. Are you right? If you were the government, you'd wave your hands and make it so. But are you wasting labor on teachers we don't fully utilize? Perhaps we could have really benefited from additional plumbers. How can we know? The only known way to answer those questions is by asking the capital markets. We all share the goal of best utilizing every citizen to raise our collective standard of living. More broadly, it is in everyone's best interest to efficiently use every type of scare capital resource we are afforded. Waste helps no one. Now, the fact that the capital markets are distorted and borderline useless today is another discussion. Higher taxes won't solve that problem either.

ghouse 14y ago

If small government advocates really wanted a broad base of support, they'd insist that tax rates always cover government expenditures. Then people would be upset about big government. However, the current attack against raising taxes (from their current historically low rates) only raises the debt and weakens our fiscal foundation.

anigbrowl 14y ago

This thread is a sad example of why articles on politics are discouraged on HN. None of the comments engage substantively with the article and most consist of unsupported assertions, as well as failing at staatistics.

tinco 14y ago
Haha is this comment meant to be self referential?

bravura 14y ago

Is it possible for non-investors (i.e. small business owners) to avoid taxes using strategies like a "Cayman Islands mail drop"? If so, I propose this HACK to solve the tax issue: Create a site that disseminates information on how small businesses can avoid (not evade) taxes using these approaches that are typically only known to advanced acolytes. Evolve processes that significantly reduces the cost for avoiding taxes effectively. (I imagine that that these complicated loopholes aren't actually that complicated, just that the knowledge is rarified.) If many people, including a large portion of the upper-middle class, reduced their tax liability, this would significantly increase the amount of attention paid to this issue.

prostoalex 14y ago
Small business owners are least affected by capital gains increase, since the capital gains tax event is triggered only during sale. The proposed terms of sale (taxation included) don't make sense for you as the business owner? Then either ask for a higher price or don't sell.

neilkelty 14y ago

If Mr. Buffet is so concerned about the amount of taxes paid by the wealthy he should use this simple form (https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454 https://www.pay.gov/paygov/forms/formInstance.html?agencyFor...) to set an example.

arn 14y ago
This is an absurd (yet common) response. And if you are for a war, why don't you buy a gun and go fight?
- deleted 14y ago
  [deleted]
- neilkelty 14y ago
  Not quite sure why it's an absurd response?
  - w3pm 14y ago
    Agreed. Mr. Buffet is free to donate as much of his 'tail wind' wealth as he chooses. But please, hands off of my wallet.
    - owyn 14y ago
      He donated all of it. Whatever you got isn't that interesting. You know, I've never had a problem with the income taxes that I pay. They're taken out of my check and I work with what's left. I never think "oh man, they're taking my money" any more than I think "oh man, I totally deserve to win the lottery". I do think there's something about earning money through investments that makes paying taxes "feel" more like your money is being taken away from you. It's not automatically deducted. It's not there every week. Sometimes you lose money. You have to pay it all at once. Taxes are not part of the mental calculation of how much you made on that sweet stock investment. I think that's WHY the rates are lower. People just feel like the rates SHOULD be lower. But it's a psychological effect. When I look at the economic effects of the current tax scheme on a large scale, it seems to me that this kind of benefit is just a giant tax dodge. Let's say that the tax rate is structured in a way that the cost of doing productive "work" with your capital is 30%, but the tax rate for just shuffling the money around through a bunch of investment vehicles is %15. Well, you've suddenly got a free %15 to play around with. And if you only need to return %10 to be considered a pretty good investment, then it seems like you really can't fail as long as you've already got enough money to play a different game than the rest of us. But those guys are already orbital, and the rest of us can never achieve escape velocity. I'd prefer to not live in a cyberpunk future where the rich get their own orbital gardens and the rest of us have to live in the ruins they left behind.

001sky 14y ago

A major problem is income != wealth. -- And it took a constitutional amendment to tax income.

AnthonyMouse 14y ago

>But what I really hate is the class warfare and populist messages driving fiscal policy. This. The thing that really gets me are the people who should know better, like Warren Buffet. You read the article and he's making straw man arguments about billionaires stuffing their cash in mattresses because their taxes are too high -- nobody is arguing that. The real problem is that taxation is economically distortionary and the higher you raise the rates, the greater the distortion. Because taxes are only due when assets are sold (and in the meantime the owner is collecting asset appreciation on the portion of the value that would have been due in taxes), capital gains tax encourages investors to hold their existing assets rather than seeking out more economically efficient ones. It encourages them to invest in more stable assets that can be held for a long period of time to defer taxes, rather than taking a risk on a startup that could cause tax to be due sooner when there is an IPO etc. Or the tired numbers about how the rich are a lot richer now than they used to be and their taxes are lower, without providing evidence of causation rather than correlation. I mean sure, the richest might have 4.5X as much as they did twenty years ago instead of 5X, but is that really the big problem? Or is the real problem the regulatory capture and Wall St. shenanigans that allow the rich to double their money every five or ten years while Main St. loses their retirement fund to the same stock market? At the same time, everybody just assumes that if you want to collect more tax money from the rich, raising the capital gains tax is the way to do it. Or the same with corporations and corporate income tax. But both of them are way, way too easy to avoid and for the same reason -- they depend on measuring profit, and it's gotten to be trivial to make an entity look unprofitable on paper. Raising the rates won't help that, it'll just push more people into tax shelters. If you want to tax the rich and corporate entities then you have to tax the stuff they don't have a choice about doing. Sales tax, but the tax is paid by the seller not the customer. Income tax, but the tax is paid by the employer, not the employee. If you want to do business you need employees and customers, so they can't avoid paying taxes with shelters and loopholes. That's how you tax the rich. Capital gains tax is just a shell game that encourages accounting tricks and offshore banking.

ianb 14y ago
I'd kind of dismissed the idea of a consumption/sales tax as terribly regressive, but it doesn't have to be, and lately I've been wondering what the distribution might look like. To make a sales tax more progressive, you might in effect say that the first $20,000 you spend is tax-free. If you have a 10% tax, then you just give every individual $2,000 cash (and ignore that some people spend less than $20,000 – that's the sort of loophole that can never grow very large). Given a system like that I'd be curious what the numbers might really look like. How high a tax would we need? What would the actual tax burden look like for different amounts of cash-back? Could we replicate something similar to the progressivity we have now? But there's still distortions. Consider high Shipping & Handling fees – these are often done because S&H is considered a service, and so sales tax is not levied on that portion of the cost. But a $0.01 book with $7 S&H is clearly bullshit. But who is there to call the seller on that bullshit? Why are goods taxed but not services? I've never been clear on that.