Wednesday, April 18, 2012

on the Buffett Rule

My brother asked me about the Buffett rule. This is what I responded.

The biggest problem with the buffett rule is that it's very hard to implement it in such a way that it doesnt smash small businesses in the face, because a lot of them end up taxed through the individuals that own them. so that's a major, major issue - if you want to reduce unemployment, you need small business healthy, and taxing them that highly is a poor decision.

even if that were possible to avoid, i dont see the point of a 30 percent minimum tax on millionaires, seriously. it would raise miniscule revenue because there just aren't enough millionaires. It would introduce a massive incentive discontinuity so that someone would work very hard to "reduce their income" (usually by deferring it) to under a million if they were just above it, and that's really inefficient. you also want people to be able to take risks with the possibility that if they pay off, they wont be smashed in the face - it's already asymmetrically awful enough to lose on a startup, why make it worse? and in general, why do you want to introduce disincentives to work for the most productive members of society (because, generally speaking, if you're paid a milion dollars a year, youre doing SOMETHING difficult to do or that's hard to replace).

it also strongly discourages immigration of talented people, because we would then have the highest corporate tax rate in the world AND a nontrivially high tax on individual tax, and you have to pay both... so someone who starts a good business would end up paying like 65%ish of what they earn, and that's not even counting state taxes. Some Americans just won't start businesses or expand theirs or work harder, some will leave, and lots of the type of immigrants we want won't bother moving here, they'll go elsewhere or stay where they are.

it's very populist, and everyone loves the idea that they can pay for themselves with "other people's money", especially when those other people, in their mind, "won't notice it's gone". I'm not sure it's very efficient for society, and I think the house republicans were right to block it.

and as far as warren buffett is concerned, i understand he's playing by the same rules as everyone else when he doesnt pay much in taxes, but if he objects to how little he pays, he's welcome to donate more to the treasury or the cause of his choice - believe it or not, the treasury does take donations.

hell - i really don't see the point of raising taxes at all on productive activity with unemployment as high as it is. I'm just not sure the Obama administration and the Democrats currently in Congress really make the connection between redistribution and slower growth/higher unemployment. It doesn't have to be that way, and it hasn't always been this bad, but that's how it is right now.

1 comment:

  1. Productivity of what? Employment in what? For some reason work seems to be central in life-identity, but I think the age of work has come and past. Society is built, why put all the more effort into growing it? It barely needs maintenance. Why not figure out something new to do with our time other than collect money? Are you afraid of what lies beyond control? Are you afraid of what I would do or afraid of what you would do? It would be exciting to really live, and I wish there were peace, but there's a war, happening everywhere, even inside you. Isn't there a part of you that's knows this world really has nothing to do with you? I know the grotesque world of your biology, I can read your face, and all the debased thoughts, it sure would be swell to blow one on her belly, better yet her face. Reread your blog post. Do you feel what I feel, shallow, unimaginative, kinda numb, vacuous, narrow? Are you really the best and brightest, or perhaps the most slavishly obedient? You know everyone eventually sees through the veil, and find the otherside, most head back for their hollow comforts, because hey, they're scared. they tell themselves it's not so bad. But it is. And some venture on to act is if they phenomenal world exists, and they feel the heat of life. I thought of you in the desert, smiling; why did you have to be my enemy; why couldn't we be brothers in arms, in a fight, not against evil, but in a fight for good? I hope you take my words seriously, they come from caring.