Why Doesn’t Warren Buffet Pay Extra Taxes?

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This WSJ editorial caught my eye, because it makes a seemingly valid point about wealthy people who call for higher taxes on the rich.

I wish I had a dollar for every time a wealthy liberal has declared he thinks he should pay more taxes. That list includes Warren Buffett, George Soros, Bill Gates Sr., Mark Zuckerberg and even Barack Obama, who now says that not only should rich people like him pay more taxes, they want to pay more. “I believe that most wealthy Americans would agree with me,” he said of his tax-hike plan. “They want to give back to the country that’s done so much for them.”

So why don’t they? There is a special fund at the Treasury Department for taxpayers who want to make “gift contributions to reduce debt held by the public.” But very few do. Last year that fund and others like it raised a grand total of $300 million. That’s a decimal place on Mr. Zuckerberg’s net worth and pays for less than two hours worth of federal borrowing.

I understand the basic satisfaction of saying, “Look, mister, if you really want to pay more taxes, no one is stopping you,” but I don’t think that it’s actually a very good argument. The reason why people like Bill Gates and Warren Buffet advocate for higher taxes but don’t voluntarily pay higher taxes than the law requires is pretty obvious: If the US raised the top marginal income tax rate and the capital gains rate in order to try to collect more money from people like Buffet and Gates, this would affect all people in that tax bracket. (If the current tax brackets were used, that would man any married couple making more than $379,000/yr.) This would mean that while high tax advocates such as Warren Buffet would pay more taxes, their relative wealth compared to the other wealthy would remain the same. Thus, Buffet’s ability to buy or control things via his wealth would not diminish relative to the other wealthy.

On the other hand, if Buffet decided to simply write an extra check to the Feds each year for $10 million, the result would be that his relative income (and thus buying and influencing power) would fall somewhat relative to other members of is class. Now, as someone who makes a number of high profile donations, Buffet is clearly willing to give money away, but when he makes a direct donation to a non-profit he has a pretty good say in how that money will be used. If he simply writes a check to the Feds, he has very little. As someone who supports higher taxes, he’s clearly okay with handing more money over to the Feds — but I think it’s pretty rational that he’s not willing to do so in a way that reduces his economic power, and doesn’t do all that much to stem the budget problems.

So really, I don’t see there as being much hypocrisy in the unwillingness of rich high tax advocates to voluntarily pay extra. Though at the same time, it’s important to understand there’s no virtue in their claim that “they’d be willing to pay more”. They are, clearly, willing to pay more (thus the advocacy) but only if they can do so in a way which doesn’t reduce their standing versus other rich people (and the rest of the country).

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  1. As Walter Williams and others have noted, higher tax rates on the rich, even rates of 100%, will not eliminate annual budget deficits and do nothing to address the cumulative national debt. Reduced spending is the only feasible mechanism for addressing the national debt.

  2. Total commie lib Dem idiot BS………….

    Is this the type of educational thought comming from Catholic schools?

    No wonder the brain washed Catholics tend to vote Democrat.

  3. Miller,

    Agreed. Federal spending is currently above the norm in relation to GDP (a little of this is due to GDP shrinkage during the recession, but not all of it) and the US has no history of collecting vastly higher percentages of GDP in tax revenues, so spending has to go down. (Some European countries succeed in getting much more of the GDP in taxes, but they do this by taxing the heck out of the middle class as well as the rich, and we in the US middle class won’t put up with that.)

    My point here is pretty modest: That it’s not really shocking that Warren Buffet doesn’t voluntarily pay higher taxes even though he advocates that everyone have to pay higher taxes, so long as one makes the reasonable and obvious assumption that he’s basically a self interested party who doesn’t want to reduce his standing in society. Or in short, he’s selfish.

    The mistake that liberals make is in thinking that there’s anything selfless about Buffet’s high tax advocacy.

  4. “Buffet is clearly willing to give money away, but when he makes a direct donation to a non-profit he has a pretty good say in how that money will be used. If he simply writes a check to the Feds, he has very little.”
    So Warren Buffet wants to direct his charitable gifts to organizations that will use the money as he wants it to be used but feels others should be taxed so that their monies will be used as the government decides and dictates.
    The Obama administration is considering reducing or eliminating deductions for charitable donations which will make his ‘what is good for me but not for thee’ reasoning obsolete.
    As a taxpayer and one who contributes to many charitable organization, both religious and secular, I want to control how my contributions are spent,just as mr. Buffett and not how and to whom the government supports which support or fund practice which I oppose on moral, ethical or religious grounds.

  5. “They are, clearly, willing to pay more (thus the advocacy) but only if they can do so in a way which doesn’t reduce their standing versus other rich people (and the rest of the country).”

    Actually, they want to reduce their standing compared to the less wealthy but not compared to the equally wealthy. They’re worried about income inequality. Or so I’ve been told.

    I hate it when Warren Buffet says he’s taxed at a lower rate than his secretary. Bershire pays taxes on his income but not on his secretary’s.

  6. Consider this instead of a gift contribution: a bonfire. Burn a million, cold hard cash.
    What gives a product, any product, value: supply. Reduce supply, value goes up. Burn up a million, take a million out of circulation, and its worth goes up.

  7. RR,

    Actually, they want to reduce their standing compared to the less wealthy but not compared to the equally wealthy.

    I guess sort of yes, sort of no. There are a couple million people in the top income bracket, and Buffet sits at the very top of that stack. If he gave more in taxes voluntarily, he’d effectively cede that place a bit, and since he doesn’t do that one assumes that he wants all of those couple million people (who virtually all make much less than he does) to take the same relative hit in high taxes that he does. But it’s true that compared to the other 98% of us, he’d be less unequal than before.

    I hate it when Warren Buffet says he’s taxed at a lower rate than his secretary. Bershire pays taxes on his income but not on his secretary’s.

    Yeah, no kidding. I’m but a lowly amateur econ wonk, but it’s downright disgraceful for someone of his stature to be going around acting as if he didn’t know that capital gains rates are lower than income rates on the theory that corporate profits are already taxed. You’d think someone like Buffet would be in a good position to advocate abolishing the corporate tax and setting capital gains to the same rate as income taxes, but no…

  8. Buffet and Gates of course merely gain cheap good publicity by these statements. They have set up their vast fortunes skillfully enough, using the most able attorneys and accountants that money can buy, that any tax increase on them would be de minimis. As partisan Democrats, Buffet and Gates can make these type of statements all the time realizing that the taxes would hit people other than themselves. If they were doing this out of simple patriotism I think they would write out huge voluntary checks to the Treasury, but the last thing they want is for the US government to get more of their money, as opposed to more of the money of other people.

  9. I think the point here: Buffett and Gates are talking about the government taking more of other people’s money.

    Up in the Bronx, they would say, “Talk is cheap.”

  10. FWIW, I find it very hard to imagine that Buffet imagines a tax increase on the rich could be crafted that truly only taxed “other people” and not him. So I suspect he would expect to pay more taxes in the scenario he’s advocating. He’s just unwilling to do it unless everyone else in his class takes the same hit.

  11. “FWIW, I find it very hard to imagine that Buffet imagines a tax increase on the rich could be crafted that truly only taxed “other people” and not him.”

    I do not. The tax code is one of the more byzantine productions in the perverted annals of the ingenuity of the tax man, and an individual with Buffett’s vast holdings can find plenty of legal ways to reduce his income to avoid paying taxes. His estate planning certainly indicates that he does not intend for the Feds to get much from his estate in regard to estate tax even though he is supposedly a big fan of the estate tax. When it comes to his theoretical love of taxes, Buffett is a fraud.

  12. so spending has to go down.

    I think expenditures on the military & foreign relations, the federal police and courts and regulatory inspectorate, unemployment compensation, and benefits to the elderly currently exceed 15% of domestic product. If we are optimistic, the ratio of federal debt held by the public to domestic product will reach a plateau at about 0.9, meaning we are looking at service charges in the range of 4-5% of domestic product when interest rates return to historically normal levels (provided we retain our AAA credit rating). Military expenditure &c. has external drivers, fewer police means more disorder, unemployment compensation has external drivers, and reduction in benefits to the elderly is properly undertaken on a slow cohort-by-cohort basis. If you welsh on servicing the federal debt, country go blooey.

    So, you have miscellanous federal services (currently about 1.5% of domestic product) and grants to state and local government (currently about 4% of domestic product if you factor out the portion of nursing home charges ultimately satisfied by federal expenditure) to play around with freely. Have a nice day.

  13. Art,

    Unless I’m much mistaken, however, federal spending is only a couple percent of GDP above it’s norm, while taxes are running a percent or two below their norm. There’s not a need for some massive change here. Cutting federal spending by around 2% of GDP in the long term (if it’s actually done) would pretty much re-stabilize the budget, although it wouldn’t pay down the debt with any great speed.

    The issue is, of course, that as you point out it’s not like there’s huge amounts of spending that can be cut without anyone noticing, and far too many voters currently support not cutting any real spending, while also not increasing taxes. (Whether they also support the tooth fairy and the Easter Bunny remains unclear.)

  14. Most voters really are not opposed to tax increases as long as they are increases on someone else, especially the “rich” which is what we now call high income earners — “high” being more than what they expect to earn anytime soon.

    Buffett could easily pay more taxes if he just paid himself a market salary which would be taxed at ordinary rates.

  15. Since there is no law that allows the feds to collect an income tax and all ‘tax payers’ are engaging in ‘voluntary compliance’ under threat of property confiscation and imprisonment your argument holds no water. Buffet is free to ‘volunteer’ more to the Treasury if he likes. He won’t. Buffet and other uber-wealthy libtards like him are totally aware that the federal government operates by debt alone. It is debt acquired through the usurious alchemy of the Federal Reserve scheme that funds government. Our taxes merely service the debt and are also used as wealth transfers to other nations, often our enemies.

    The income tax scheme is designed to ensure that other ‘wealthy’ Americans can never acquire enough wealth to rival the uber-wealthy like Gates and Buffet. The income tax scheme is nothing more than social engineering and granting of monopoly privileges to the uber-wealthy, who tend to be America-hating progressives and Marxists. Like all Communists, they expect to live in ultra-luxury and command all the political and economic power while the rest of us proles live in controlled squalor. Of course, they don’t want us revolting, so we need to be medicated and entertained, so we will be happy with our servitude. Notice also that both Gates and Buffet and the rest of their ilk are always in favor of tax-subsidized ‘charitable’ giving to ‘population control’ tax-free NGOs and foundations. The whole thing is sick and frankly a discussion about why or why not they will volunteer more in taxes or not is a distraction from the fact that the actions of these men and men like them are sheer evil.

  16. I prefer to play Marxopoly. It is a neat little game. I am the banker, no one else can be the banker. I print as much money as I want and I let some of the other players have some, of course, they owe me. I sit back and let them buy property, collect rent, etc. They have to make interest payments to me on the money I loaned them. I am always wealthier than all of them combined and every so often I will bankrupt one of them and take their property by crashing the market, of course I only take the choicest properties and I bail out some of the others so that they are even more indebted to me.

    They think they are engaged in a free market game and I just sit back and control everything through debt. if any of them catch on, I have the others wage war on the recalcitrant. Of course, they have to borrow more from me to wage the war and I make sure it lasts for a long time by funding both sides.

    We should play sometime. I always get to be the shark. 😉

  17. I like the American Knight’s Marxopoly. I wonder if the lay staff at the USCCB (the ones with Obama stickers on their cars in the USCCB parking lot in Washington, DC) and the liberal Catholics who vote Democrat (do they ever in their partisanship vote for anything else?) realize that that’s the game they are playing. Probably not. Sheep can sometimes be so blind.

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