Goolsbee and Kemp are now onto taxes. Just on debating points, my old professor is wiping the floor with the good Secretary.
In part, this is because he has the better side of the argument--Jack Kemp is trying to defend moderately hard-core supply side arguments that don't really add up. And Goolsbee justly points out that under the current system, Warren Buffet's secretary has a higher average tax rate than he does.
I'm not actually on board with Austan's main project, which is to get the government spending more money. But neither am I on board with the Republican tactic of making stuff up in order to win the argument. The problem is, the only good way to win the argument is to talk about the economic effects, not of lower tax rates, but of lower spending. And no one wants to be the guy telling the voters he's gonna take away all their government goodies.
And Goolsbee justly points out that under the current system, Warren Buffet's secretary has a higher average tax rate than he does.
Well, shouldn't she? All it means is that she is spending her money, while Buffett is saving his, i.e., putting it to good use growing the econonmy.
Now that's a shame. Kemp should do better.
The whole fallacy that Buffet's secretary pays more taxes than him can easily be disproven.
Just make the case that:
1. Social Security & medicare taxes are supposed to be akin to pension contributions plus an insurance component. (So don't count them. Advocate for privatized systems.)
2. Corps pay tax. The incidence falls upon shareholders.
3. Corp tax plus dividend tax > income tax on wages.
FYI - I am the marginal taxpayer. I've seriously entertained the idea of disclaiming US citizenship for tax reasons. I've not done that, and probably never will... But there does come a point beyond which tax rates become immoral and unethical. What has "the state" done to deserve half of my money? What value do I get for that? Why should Obama and Pelosi get to dictate what I am allowed to do with half of my income?
33% all-in is defensible, in my subjective assessment. Anything more than that is confiscatory in my view. Again, that's just my opinion, and I don't plan on breaking any laws.
I think Goolsbee would be referring to the fact that Buffett's income is largely capital gains, which is taxed at a lower rate than ordinary income. That's a better argument rhetorically than economically, though, given that the basis for Buffett's gains hasn't been indexed since the 60s, 70s, 80s, etc. as his earnings have gotten reinvested.
Which gets back to the ultimate problem hinted at by MMM: even an economist isn't going to try to score points using good economics instead of rhetoric when the average voter is so completely ignorant of economics. They will, like any good politician, continue to indulge the average voter's willingness to be bribed with their own money, as if those "goodies" are someone else's cost.
"Warren Buffet's secretary has a higher average tax rate than he does."
Only because she is paying 15.3% payroll tax to help pay for Warren's Social Security and Medicare benefits, which he is collecting right now.
Warren should volunteer: "Rich people like me don't need these transfers from my employees at Dairy Queen, so let's means test me and Bill and the rest of 'the rich' out of these entitlement programs".
That would do far more to solve the federal fiscal problem than Warren's selfless suggestion that the government not only keep the estate tax but increase the rate of it that he's never going to pay.
Dang, hit the send button too soon.
I meant to add as point (2) that your former Prof is using the rhetorical trick of matching Warren's wealth against the secretary's income to whip up the feeling of tax rate "injustice" here.
But anybody who cites an injustice for political purposes should also propose a solution.
In this case a solution is easy: some form of meaningful wealth tax, such as "mark to market" valuation of Warren's holdings each year, with the net increase taxed at the same rate as the secretary pays. Injustice ended!
Do either your former Professor or Obama support such a thing? Would Warren?
Considering the immense amount of untaxed income Warren receives each year on average through market appreciation, compared to what the secretary receives, anyone who seriously believes in progessive income taxation must consider their being taxed even at the same rate an outrage.
Let's get serious and tax capital appreciation!
"And Goolsbee justly points out that under the current system, Warren Buffet's secretary has a higher average tax rate than he does.".
Are we talking about effective tax rates here (i.e., the percentage of your income that you actually pay in taxes)? I'd really like to see the secretary's tax return and Buffett's tax return before accepting this claim at face value. According to CBO data, effective federal tax rates in America (taking into account payroll taxes as well) are highly progressive. In 2005, the lowest quintile of earners had an average effective federal tax rate of 4.3%, and the highest quintile had an average effective federal tax rate of 25.5% (the top 1% paid 31.2%).
It's possible that the ultra-wealthy such as Buffett have lower effective tax rates than the top 1%, because nearly all of their income comes from capital gains, but Buffett is disingenuous on this subject in several respects:
@Stephen Stanton
If you are going to ditch your citizenship, you better move fast, very fast. See http://www.economicpolicyjournal.com/2008/07/checkout-of-us-anytime-but-your-money.html
@ Jim Glass
You haven't been following Buffett closely. He's basically a socialist, when it comes to other peoples money. He, however, employs every legal tax dodge there is. He is very aggressive and adept at dodging taxes, YET HE IS THE ONE who originally brought up the fact that his secretary has a higher average tax rate.
I think he is a strange guy.
Holy $%^*! That's an insidious tax! I know some green card holders heading overseas soon. Dang!
Thanks for the info, Robert.
And yes, Buffet's moral compass is not attuned like most others... He makes the perfectly rational decision to save every penny the law allows, then complains about his ability to do so.
That's like giving RadioHead a penny for their "pick your price" album then complaining about the unsustainability of the pricing model.
Oh yes, let's drive all small businesses out of business. Force the coin laundry to sell off a few washers and driers to pay the government.
Or perhaps you just want an annual accounting of stock shares. Since the market is down this year, do we write Warren a check?
How can anyone possibly argue that Buffett pays a lower tax rate than his secretary? Buffett's income is probably ~100% from profits in companies he owns (or part owns). I'm guessing most people ignore the fact that corporate profits are already taxed by the time Buffett sees them when they count his tax rate, which is bogus because without taxes, he would be able to keep this. Corporate profits are taxed at a 35% rate (which is on top of the 15% dividends tax). Even with a 12.5% payroll tax, his secretary would need to be in about the highest bracket to pay more than that.
Josh,
Your point is well made. That's what is bizarre about Buffett. Buffett is the one who originally complained that his tax rate is lower than his secretary's!!