Sure, a large inheritance is undeserved. But when you get right down to it, everything you have and everything you are is undeserved. You can't choose your parents, you can't choose your DNA. You can't choose the country you're born in, the ideology you're raised with, the opportunities you'll have, the events in your life that shape your psyche, the friends and enemies that taught you who to be.
Even when you make decisions, take action, seize opportunities, the grit and courage and insight and endurance that enables you to do so originally came from somewhere else. Someone taught you that. Something made you that way.
I am the sum of the curses and blessings and happenstances of history. You cannot factor them out of my identity. There would be nothing left. Asking who I would be had I been born in Bangledesh is like asking what a square would be if it had been a circle. The question is wrong-headed. I would be someone else.
And asking whether the son of Sam Walton deserves wealth is like asking whether Audrey Hepburn deserves to be beautiful. It's the wrong question. Gifts--from parents or forefathers or strangers or the universe--are never a matter of deserving. They are not to be worked for or worked off. They are to be embraced with gratitude, and cherished with an earnest effort to make the most of them.
The idea that gifts should be received with guilt, that jealousy on the part of those who don't receive them justfies taxing or destroying them to make things a little more fair, is the attitude I find repugnant.
Perhaps Albert Einstein does not deserve to be so intellectually creative, but that does not mean half of his intellectual energies belong to the state. Perhaps you or I do not think the son of Sam Walton deserves wealth. It is irrelevant; it only matters that Sam thinks he does. What he does with the wealth is his responsibility, as what you do with your gifts is yours. The fact that these things are gifts does not in any way change the fact that they are ours.
Everything you say is correct, but I believe it misses the point. This isn't about what's deserved, it's proactive: it's about things that Buffet thinks are good actions to take for a better running society. It's split into two parts: build up some barriers to the establishment of an entrenched American aristocracy and try to increase the opportunities for those who weren't graced by as fortunate of a birth.
This is beautifully written, and I'd add that tax is almost always imposed on earnings where you deserve the money - so saying that inheritance isn't earned and therefore must be taxed doesn't really fit with the rest of the tax system.
What you are ignoring is that some of these gifts actually help people by creating wealth, while others do not. Albert Einstein happened to be really smart, and this is a gift that he used to help society, by inventing the theories of special and general relativity. If we had taken away Einstein's intelligence, we would all be worse off for it.
However, simply being handed a pile of money as an inheritance rarely helps anyone other than you. If the government had taken 90% of Alice Walton's fortune, who would be worse off? Alice? Not likely; even a billion dollars is more than you can practically spend during a lifetime. Most Americans? No, most Americans would be better off, because they would have to pay less income tax. Wal-Mart customers? Nope; Wal-Mart would almost certainly still be there, since there's no way in hell Sam Walton would have just given up just because his kids would only inherit one billion each instead of ten billion each. So who, exactly, would be worse off?
Well, wealth can be used to create wealth, too, or even to help society directly. Some think that all of the wealthy are Donald Trump, but some are Gates and Buffet and Rockefeller and Carnegie. It does not seem to me that intelligence is always spent so wisely. There are investors like Stephen Hawking, philanthropists like Norman Borlaug, and then there are people like William J. Sidis. Wealth squandered or consumed is extremely visible, but I think many capable inventors and entepreneurs stay in grad school and go on to quiet careers--using their brilliance a nothing more than a ticket to a slightly easier life. The equivalent of quietly living off an inheritance.
Your gifts belong to you. Spent or given back or squandered, they are yours to do with what you will. It is repugnant to me to claim that because The Gifted are not going to use their Wealth optimally for the Common Good, the State is entitled to seize it and spend it more Wisely. The idea stinks of jealousy and avarice; it is an excuse to take, not an appeal to justice. It does not matter how people use their gifts; the gifts are theirs.
You can scale the idea right down to Christmas morning. All the same arguments still work, but the fundamental injustice is clearer. If I want to give my brother a bike, anyone could object that he did not work for it and does not deserve it. He will probably use it foolishly in childish revelry and break it in some ill-advised stunt. He only got it because he had the good fortune of being my brother; there are strangers I don't know who need and deserve a bike far more. Certainly he isn't going to create wealth with it, in fact, for all we know it's just going to collect dust in the garage. Surely the state is entitled to take it and give it to someone more deserving, and leave my brother a skateboard in its place?
Ptui.
My money is mine, and who I choose to give it to is my business. If I choose to enrich friends and family who I love, that is up to me--and is one of the main points of having money in the first place. You can criticize my choices or appeal to me for the common good or explain to me why it's okay for you to help yourself to what, in your opinion, I'm not using. It's all irrelevant. The point of ownership is that I still have the right and responsibility to use my gifts as I best see fit.
I don't have kids, but I am reasonably sure that when I do, I might choose to work harder than otherwise in hopes of providing a better life for them. That includes leaving them money after I die. I might be gone, but the money is a product of my labors. It was still mine to spend.
Furthermore, I have never found Buffet's malinvestment in lucky scions argument convincing. Yes, they were born lucky, but you shouldn't handicap them for that reason. Morover, clearly some very wealthy people do chose to give most of their money away as opposed to giving it all to their heirs. Buffet and Gates have both pledged to do so with most of their money.
Merging the two ideas: if the government is collecting assets to prevent malinvestment in unworthy heirs after the proven patriarch dies, why shouldn't the government chose to confiscate the wealth of those who they deem to be making bad investments while they are alive?
The purpose of the estate tax is not so much to ensure that the capital being taxed is put to better use (which I'm not sure would be the case on average; the government would surely be a better entity to entrust with the money than a profligate son, but those are not the norm from what I can tell, and wiser offspring could be better investors than Uncle Sam), as to ensure the continuation of the meritocracy in our society. By their inherited wealth, scions of prominent families can exercise significant power over the rest of the nation, and this power will tend to be exercised to the detriment of meritocracy, since a system that rewards talent and energy runs exactly contrary to the interests of the inherited-wealth class. (Humans care about relative wealth and power socially, even though absolute wealth production is not a zero-sum game)
However, it is true that being able to pass on wealth to one's children can be an incentive to produce more, so that on the other hand points to the benefit of a lower estate tax.
So, I think the best compromise is somewhere between the pro-meritocracy 100% tax and the pro-short-term-productivity 0% tax; that way there is still a significant incentive to earn for one's offspring, but if 1/x of the money is taxed away in each generation (and the important thing is not where it goes, but that it is taken out of the hands of the rich family), there is an exponential-decay curve for the wealth and power of the family. However, it's important that the tax is high enough to counteract the interest gains that even uninspired investing can bring. I won't venture to propose a sweet spot, but I think that approach should provide the most balance and social benefit overall.
I think wealth decays naturally anyway; especially if the descendent are not fit. Inflation and the exponential growth of offspring are already pretty good tools of attenuating growth. Moreover, it is easier to lose a fortune than to make one.
However, I do agree with you that it might be a robust guard against the inherited wealth class gaming the system. I would prefer to intervene when such injustice is committed, but admit that that is not always easy to do. The argument you use for curtailing that risk is similar to the argument I would make in favor of term-limits.
You would be surprised how hard it would be to lose billions of dollars. That kind of wealth is usually locked up pretty tight such that access is only available to some trickle of dollars coming out of the interest, trust funds, etc...
If a trustee loses everything then the next year, they have access to another annuity distribution.
Which is to say, they are well diversified. With increasing diversity and massive assets it becomes more and more difficult it to earn exceptional rewards. Does most paths of asset returns exceed inflation and familial growth?
This is actually an interesting experiment. I'll run a crude test this weekend bootstrapping against the S&P500 to see how likely it is for wealth to propagate X generations into the future and report on Monday.
That is interesting. Warren has a bet out against someone that a portfolio of hedge funds will not outperform the total market returns after accounting for taxes, management fees, etc.
as diversity approaches 100%, performance approaches market returns.
The question is, how long can extreme wealth remain extreme wealth? Considering the wealth gap is increasing, I would suggest forever unless there is a "market correction" like socialism or something.
I don't think a 50% tax that only aply's after the first 3+ million is going to change the lifestyle of your children. It's mostly a question of what happens to their children's children.
The advantage of a large (40+%) estate tax is to avoid creating an old money aristocracy. There is a long history of the problems created when people who never earned it get great wealth. Granted some people build upon inherited wealth, but it's far less common than you might think and looking at the net worth of people who inherited 100+ million you find few examples of people that did much better than investing in mutual funds.
Bill Gates might be considered a great CEO but he also inherited money and exploited family connections to sell an OS he never developed to IBM. None of which would have been impacted by estate taxes.
PS: Consider the Walton family the five of them all have about 15.3 - 15.7 billion because none of them are using it to actively generate more wealth. Even though they inherited it 15+ years ago it's just stagnating.
One of Sam Walton's 5 children was a VC in solar energy before he passed away young, another owns Arvest Bank, and another is still running Walmart...
I also bet a majority of their wealth is still in that stock, as major sell-offs of insider holdings suggests a company may not continue to produce growing profits - which hasn't been the case. However, I'm sure some still have quite a bit with extremely capable money managers.
I would not call that wealth stagnating in the least bit.
I don't know how accurately their wealth is measured, but hiding a billion is not that easy so I will assume it's reasonably close. Anyway, ((15.7 / 15.3) ^ (1/15)) - 1 = 0.17% per year difference in wealth generation and spending per year for 5 people.
I expect they are all playing around with side investments of one sort or another, but they have had plenty of dividends to work with and little to show for it. It's not that I think the government would do all that much better, rather taxing society more to help maintain such wealth has zero benefit from what I can see.
How in Cthulhu's name does this not mention that Warren Buffett's father was a Congressman, Howard Buffett of Nebraska (http://en.wikipedia.org/wiki/Howard_Buffett)? Probably, I think, because it would sound bad. It sounds modest to say "I didn't get here entirely by my own efforts; I was lucky to have been born in the US, instead of Bangladesh." It doesn't sound modest to say "I didn't get here entirely by my own efforts; my father was a Congressman who had a strong personal friendship with Murray Rothbard, one of the most famous economists in history."
"How in Cthulhu's name does this not mention that Warren Buffett's father was a Congressman, Howard Buffett of Nebraska"
Because he's trying to make a general statement about estate tax in the United States, so talks about the general condition of being born in the US. If he talked about his specific childhood, it wouldn't have the same generality. I doubt it has to do with modesty.
He owns lots of maturity-mismatched assets. He hasn't done much with gold. He's bought into lots of highly regulated companies. And he advocates punitively high income taxes on some activities, and high income taxes on most other activities.
So no, I don't think Buffett is a Rothbardian. He's similar only in the sense that he understands economics very well.
One of the commenters on this post made the salient point that the existence of the estate tax is probably one of the biggest drivers for the life insurance industry.
Every tragedy benefits someone. Right now the makers of Purell and other instant hand sanitizers are having banner years due to swine flu. That isn't an argument in favor of epidemics. Oil companies made a fortune due to increased demand when people started flying less after 9/11. That isn't an argument in favor of terrorism.
I think the point is more then this. It brings up a question: can you really stop people from leaving wealth to their children in some way? How many loose ends will you need to chase down. Inheritance is intertwined with property & ownership.
Life insurance is one way around estate taxes. I'm sure there are others.
> The odds were fifty-to-one against me born in the United States in 1930. I won the lottery the day I emerged from the womb by being in the United States instead of in some other country where my chances would have been way different.
This isn't true - the odds of Warren Buffet being born in America, given that his parents were American and had him, were 100%. There's no random chance associated with where you're born - it was the result of what your parents and their parents did. They worked hard to get over to the States, or wherever else, and to make a good life for their kids.
Actually, that whole viewpoint that's come into fashion these days worries me a little. Before, one of the biggest ethics to live for was "making life better for your children" - you'd work hard, and sacrifice, knowing your kids would have a better life than you did. It's what my Great-Grandparents did, what my Grandparents did, what my Parents did. All came up poor, I came up lower middle class, my kids will probably come up reasonably wealthy.
But nowadays, a lot of people write that off as the "birth lottery", or luck, or chance, and think that happiness in your own life, right now, is the highest virtue. They even almost look at it as a bad thing for parents to work very hard for their kids specifically to have the best life they could, calling it things like a birth lottery or random chance. There's nothing random about why I was born in the States, or why my kids will be - it was a direct result of five or six generations of slogging towards a better life from miserable conditions elsewhere.
Ignoring the argument is silly, you don't chose your parents. So, you don't chose the single largest impact on your success but, that's not the issue. The question is "Do we want a society primarily controlled by those who inherited money?" The reason we had huge numbers of smart people become investment bankers was the fact that conning stupid wealthy people is profitable. But, it's also a zero sum game that does little to help society at large. It's far better for society when the most efficient method for gathering wealth is generating it.
> The question is "Do we want a society primarily controlled by those who inherited money?"
There's a Dutch expression, "Clogs to clogs in three generations." It means the first generation, who wears clogs (regular people's shoes), they work hard and make money, they know struggle, they're frugal.
The second generation doesn't know about making money and struggling, but their parents explain what it was like and teach the kids how to manage money and keep the fortune alive.
The third generation doesn't learn these things from their parents, because their parents don't really know either, and the third generation wastes the money and winds up back in clogs - regular people's shoes.
So - will society be controlled by people who inherit money? Not unless there's government backed heredity privilege, like European nobility, the Japanese samurai system, or the Indian caste system. If not, things balance out over time. How many of the astoundingly wealthy families from 1850 are controlling society now without having added anything? Not many.
> The reason we had huge numbers of smart people become investment bankers was the fact that conning stupid wealthy people is profitable.
I would rebut this, but I don't think it's a well thought out view. Some investment bankers moved money around without doing anything of value. Many did incredibly valuable things. They built and developed real estate, ports, railroads - heck, I know a guy who put the money together for researching technology for non-government spaceflight. Pretty cool stuff.
> But, it's also a zero sum game that does little to help society at large.
First, I think it's very easy for someone not inside an industry to claim that their work is useless/easy/unimportant while maybe missing the intricacies in it. Second, I'm not sure what this has to do with my comment, which is that I think the mental concept of "birth lottery" and de-emphasis on family is a scary thing. It seems to say that people should support and even things out for everyone irrespective of what their parents do, while parents working hard to give their children a better life is a huge motivator and has been for almost all time, much more so than improving the common good. If you look at history, for instance, whenever farming was nationalized under a war economy or communism, output fell. People working to feed the nation work less hard than people working for themselves and their children. This has been borne out in many different places, throughout ancient and recent history.
> It's far better for society when the most efficient method for gathering wealth is generating it.
Agreed. Getting back to your original point, I'm not ignoring the "birth lottery" argument - I think it's flawed, and I'm addressing that flaw. The question isn't about who gets to control society, it's about what is the fundamental unit of society? Is it the individual? The family? The community? The nation? The whole planet? The prevailing Western view seems to be focusing on things on a national level. I don't think that's a good thing. I think a mix of individual choice, strong family support structures, and entire planet development is the answer. I think, arguably, the nation is one of the worst places to work on developing humanity.
That's my opinion based on my reading and research into behavior and history, but it seems like societies that empower individuals do well, it seems like societies that promote family do well, and it seems like societies that promote the whole planet do well. It seems where things are controlled by the nation more than by the individual, family, and whole planet do more poorly.
I'm not worried about inherited money controlling the planet, because it really only has a heavy influence in the next generation, many of whom do great things and make their own contributions. After that, without contributions it burns itself out. I am worried about national level empowerment, because it grows on itself and doesn't burn out unless it collapses in a bad way.
This is my opinion based on my readings and research, and I'd be happy to hear others' opinions who agree or disagree.
I've heard that saying as well (only it was "Rags to Riches in three generations, rags to rags in four"), but as far as I can tell, the Rockefellers are still around, still rich, and are at the sixth generation ( http://en.wikipedia.org/wiki/Rockefeller_family ---the legacy section of that page makes for interesting reading). The Kennedy's are still around, still rich and are in the fourth generation ( http://en.wikipedia.org/wiki/Kennedy_family ). History has yet to see what happens to the Bush family ( http://en.wikipedia.org/wiki/Bush_family ), currently on the fourth generation.
I think what grandchildren are going to do with money is somewhat random.
My grandfather understood building wealth through investments as do I. However, my mother and older sisters don't. A friend of mine's grandmother had real wealth, as in her home was featured in home and gardens etc. He had a multimillion dollar trust fund and burned out on drugs until he died after his fourth or fifth motorcycle accident.
I know many young people with enough money to never work again and mostly they are fine. But, it's the people with handed great wealth that seem to be hardiest hit by it.
I've no idea why you're being down-voted, let me try to add something which might clarify: yes, Warren Buffet's children are lucky to be the ones born into the family they're in. But from Mr. Buffet's perspective, there's little luck involved in having children. When he decides to have kids, someone is going to be born into that position: there's a ~100% chance that if Warren has children, they'll be born into his family.
As for the dangerous meme of "the ovary lottery": even though it's true and useful in the context of talking about estate tax, it's a very dangerous idea. It's way too easy for that meme to inhibit the idea that "if you work hard and work smart, you can create wealth", which is at the heart of the American dream, and the work ethic of the American entrepreneur. I've known one too many upper middle class kids who slack off all the time, and feel Mr. Buffet's "ovary lottery" somehow implies that the existence of inherited wealth means creating your own wealth is pointless.
Why the hell is this reply, and its parent, being downvoted? They're both insightful opinions by users who have made really insightful contributions here for a while.
I find it interesting that (at least in the given extract) Buffett only highlights one of the two sources of unfair advantage (unfair starting conditions, but not unfair monopolies) that help people get exponentially rich with a non-corresponding increase - or even status quo - in the level of effort, quality of work, irreplaceability or risk to quality of life.
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Banded tax - versus flat rate - is not fair. But neither will your fourth million dollars be.
From society's point of view, until we have more rationality and ideality of labour-reward on the income side, I don't think fairness arguments can really be mounted to the abolishment of taxes that make it unfairly expensive to be rich.
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That said, with regards to inheritance tax, I have always really struggled to find any theoretical solution to the inconsistency I perceive in the system - children will always have unequal starts in life related to the efforts and success of their parents; be that in somewhat intangible notions like forming a great network of contacts, or right down to trying extra hard to woo a mother/father that will give the kids a great genotype. Why start - or stop - at money? Has political, social or economic science ever sought to justify that?
Not sure what you're getting at, but going all the way back to Plato's Republic, there have been proposals to engineer society with children. More recently,
Children's Societies were one of the features of kibbutz life that most interested outsiders. In the heyday of Children's Societies, parents would only spend two hours a day, typically in the afternoon, with their children. In Kibbutz Artzi parents were explicitly forbidden to put their children to bed at night. As children got older, parents could go for days on end without seeing their offspring, other than through chance encounters somewhere in the grounds.
My question is whether society is better served by
1) the destruction of excess money
2) preservation of meritocracy
and furthermore, whether interests of children of wealthy parents are better served through
1) leaving them oodles money
2) leaving them a society where
a) things are affordable because there's less money chasing goods
b) meritocracy reigns
c) not to peg one's identity to money alone
In the small, accumulation of money is a fine thing. In the large, you have corporations whom - in the name of profit - bribe, cajole governments and government agencies, that result in sending people to war, poisoning your food, and endorsing medicines that do not work. Setting a limit to the accumulation of a mere number means that humans can turn their attention towards other activities that are beneficial to society as a whole.
Things can become more affordable by innovations in technology, production and distribution. Services may not become more affordable because service is provided by human being. And by definition, the above average service always costs more than average.
I don't think in the name of profit is the cause to the problem. Lacking of political power to punish corporation corruptions and being oblivious of public wellness are the root cause.
It is unfair that your country of birth is arbitrary. Surely the appropriate policy to ameliorate that is to relax immigration barriers? That seems more relevant to the problem than estate taxes.
That's dismissive of his very valid points. Buffet is one of the most selfless rich guys of all time. Also one of the most infamously direct and honest. He's not saying that as part of some sort of Orwellian consipiracy to quell the masses. He's saying that because its true.
He points out regularly injustices such as the fact that his secretary pays a higher tax rate than he does, thanks to the ridiculous capital gains laws in this country. He points out regularly that people like him should have to pay higher taxes, including the estate tax. He lives less lavishly than most people who have .1% of his wealth.
He's already given most of his fortune (the largest single donation ever) to charity and will give the rest when he goes. He's a real-life Robinhood.
He points out regularly injustices such as the fact that his secretary pays a higher tax rate than he does, thanks to the ridiculous capital gains laws in this country.
Corporate tax rates plus capital gains tax rates exceed normal income tax rates. The only way you can claim that he pays less in taxes on selling stock is if you assume that the company's profits -- the sum of which, discounted to the present, is the value of the stock -- somehow don't affect the value of the stock.
If we cut capital gains taxes to zero and added an equivalent amount to corporate profits (say, a 40% annual tax rate instead of 35%), the government would make an equivalent amount of money from the same economic activity, and Buffett's theoretical tax rate would go down. Similarly, if corporate income taxes were zero and his capital gains were taxed at 40%, he'd pay much more than his secretary, but the government would collect the same amount.
If the strength of his argument is independent of the magnitude of the problem he's arguing against, there is a flaw there.
Buffett is an admirable guy. But the line about his secretary is a rhetorical flourish, nothing more.
They're his words (paraphrased) not mine, and it is impossible Buffet is unaware of corporate tax. My guess is its more than rhetorical flourish too since he's not known for that.
Your making the argument that corporate taxes reduce his personal income, and therefore should count as his taxes. Ok. But if corporations did not have to pay taxes, they would pay their employees more, including secretaries. It's impossible to say for sure that a 35% corporate tax rate reduces secretary salaries by 35%, but it is something highly significant.
In a roundabout way the secretary is paying that corporate tax too. Its effect is not as directly measurable on her as it is on Buffet, and might not be 1 for 1, but it's undeniably there and equally applicable to her tax rate.
Also Social Security reduces her pay by 12.4% (half of which is paid by her employer but again would likely go to her if not). Since its capped at $100k income, it rounds to 0% of Buffet's yearly earnings.
*I should point out that I am aware I've grossly oversimplified the effect of the corporate tax on the secretary, I trust but you get the point.
Profits and pay for workers are in competition. So raising the cost of profits actually increases the incentive to pay workers more. This is why many actual nonprofits are poorly managed; they are funneling profits to workers rather than to shareholders.
Profits and pay for workers are in competition. So raising the cost of profits actually increases the incentive to pay workers more.
That is not how it works. When car companies start losing money, they don't give people raises; they fire them. When Goldman has a great quarter, they don't cut people's pay -- they give them bonuses.
Nonprofits are managed because they exist to spend money, not to spend it well.
You are missing the point. A company has money after expenses (I'll abbreviate it MAE) which must be distributed. (Or in the case of GM, they have negative money after expenses.) You are discussing the behavior of companies in response to changes in MAE.
I'm discussing how a fixed amount of MAE is distributed in response to changes in incentives. Each dollar of MAE can be given either to shareholders, to employees, or can be invested. If you raise the cost of distributing money to shareholders (this is what the corporate tax does), companies will divert money to employees and investments. I.e., no one will pay dividends if there is a 100% dividend tax.
I think you're mistaken in thinking that money will be distributed to the average worker in this scenario. It would all be paid out to the same shareholders as a salary instead of capital gains. The regular employees wouldn't see an extra dime.
Your making the argument that corporate taxes reduce his personal income, and therefore should count as his taxes. Ok. But if corporations did not have to pay taxes, they would pay their employees more, including secretaries. It's impossible to say for sure that a 35% corporate tax rate reduces secretary salaries by 35%, but it is something highly significant.
And if he paid less in taxes, he'd buy more goods and services, too. In fact, he probably spends money more intelligently than your average bureaucrat -- certainly, he's able to balance the budget, and that's without even owning a monopoly on first-class mail delivery and taxation of income!
>And if he paid less in taxes, he'd buy more goods and services, too.
I disagree. Buffett is so wealthy that it simply doesn't matter if his bottom line is reduced by 35%. His net worth is $40 billion. It is simply impossible for him to run out of money at this point.
Think about this for a moment. At $200M each, he could have a personal Boeing 777 on call in every state in the country ($10B) and still have $30B left over. The most expensive house in the United States is a $165M compound in Beverly Hills with 72,000 square feet of living space. Why not build 100 of them around the world for $16B? There's still $14B left for the cheap stuff: Ferraris, Bugattis, servants, chefs, and whatever else you can dream up.
Barring any bad business deals, it's effectively impossible to squander away one billion dollars much less forty. A 35% tax hike or cut won't affect his spending in any way, shape, or form.
Only if you define "spending" as "immediate spending on consumer goods." Saving is just that kind of spending, deferred -- in Buffett's case, deferring it increases the amount that's spent, since he compounds his net worth at an above-average rate. So take whatever numbers you'd use assuming my previous comment was correct, and bump them up drastically.
> If we cut capital gains taxes to zero and added an equivalent amount to corporate profits (say, a 40% annual tax rate instead of 35%), the government would make an equivalent amount of money from the same economic activity, and Buffett's theoretical tax rate would go down. Similarly, if corporate income taxes were zero and his capital gains were taxed at 40%, he'd pay much more than his secretary, but the government would collect the same amount.
Neither of these are equivalent. The "only capital-gains tax" scenario creates incentives for foreign investors in US corporations. The "only corporate tax" scenario creates incentives for US investors in foreign corporations.
The current scenario seems to be a "get some tax revenue from whomever we can" strategy, but it might be worth tinkering with the ratios, especially to determine whether a more capital-gains-heavy, corporate-tax-light regime might increase overall tax revenue, by altering in the US's favor the flow of foreign capital, domestic capital, corporate relocations, and corporate expenditures.
I should have considered that. If you either a) assume we're only talking about US citizens, or b) assume that this law would also force foreign investors to pay, the point still stands.
"Real-life Robinhood?" Really? I think its far more likely that he is a damn smart businessman. Consider this fact:
Buffet spoke out about keeping the Estate Tax, because, as he said, rich people need to pay more. In reality, the Estate Tax generates over $ 12 Billions dollars a year for big life insurance companies, which Buffet either owns stock in or controls.
If Buffet was a "real-life Robinhood" he would say repeal the Estate Tax (as it destroys jobs and small businesses) and make ME pay more directly.
Don't agree about the Estate Tax? Watch this video http://www.youtube.com/watch?v=Urvkfi134Ew and tell me how you figure.
Even when you make decisions, take action, seize opportunities, the grit and courage and insight and endurance that enables you to do so originally came from somewhere else. Someone taught you that. Something made you that way.
I am the sum of the curses and blessings and happenstances of history. You cannot factor them out of my identity. There would be nothing left. Asking who I would be had I been born in Bangledesh is like asking what a square would be if it had been a circle. The question is wrong-headed. I would be someone else.
And asking whether the son of Sam Walton deserves wealth is like asking whether Audrey Hepburn deserves to be beautiful. It's the wrong question. Gifts--from parents or forefathers or strangers or the universe--are never a matter of deserving. They are not to be worked for or worked off. They are to be embraced with gratitude, and cherished with an earnest effort to make the most of them.
The idea that gifts should be received with guilt, that jealousy on the part of those who don't receive them justfies taxing or destroying them to make things a little more fair, is the attitude I find repugnant.
Perhaps Albert Einstein does not deserve to be so intellectually creative, but that does not mean half of his intellectual energies belong to the state. Perhaps you or I do not think the son of Sam Walton deserves wealth. It is irrelevant; it only matters that Sam thinks he does. What he does with the wealth is his responsibility, as what you do with your gifts is yours. The fact that these things are gifts does not in any way change the fact that they are ours.