Double Taxation and Buffett's Lamentation

UPDATE: Pure deliciousness. 

Why conservatives hate Warren Buffett

By E.J. Dionne Jr., Published: September 28

Maybe only a really, really rich guy can credibly make the case for why the wealthy should be asked to pay more in taxes.

You’ve got to love how he says that the wealthy should be “asked” to pay more in taxes. Much in the same way as the police “ask” you to put your hands behind your head when they arrest you for tax evasion.

You can’t accuse a big capitalist of “class warfare.”

I can and I do. Buffett is obsessed with the idea of not being rich in spite of being fabulously wealthy. It’s why he lives in Omaha. It’s why he keeps a modest home in a modest neighborhood. It’s why he gives monumental sums to charities (usually run by fellow self-loather Bill Gates) instead of reinvesting it all in economically productive projects. That he’s embroiled national tax policy in his own self-loathing glorification of the everyman merely shows that class warfare canard of the nefarious rich has already worked on him, in spite of his many marketable talents.

That’s why the right wing despises Warren Buffett and is trying so hard to shut him up.

We despise him the same way we despise anyone trying to raise our taxes. Buffett’s personal guilt is not a valid impetus to impose a sacrifice on me--especially to fund a federal government rotting through to the core due to the bloat of incompetency, mismanagement, corruption, aimlessness and philosophical wrongheadedness.

Militant conservatives are effective because they are absolutely shameless.

What, exactly have conservatives to Warren Buffett that has been shameless? Ask him to back up his assertions with the physical evidence provided by his tax returns?

Many of the same people who think the rich should be free to spend unlimited sums influencing our politics without having to disclose anything

Pay attention to the sentence structure here: “the people who think [ambiguous group] should be free to [do something]…[derisive dismissal].” It should be clear that the issue here isn’t campaign finance laws; it’s freedom. 

are now asking Buffett to make his tax returns public.

And unlike “asking” the rich to pay more taxes, some conservatives are actually asking—in the sense that he actually has the option not to comply—Buffett to make his tax returns public as evidence to support his assertions.

I guess if you’re indifferent to consistency, you have a lot of freedom of action.

This is America; everyone has a lot of freedom of action. Regardless, there is no contradiction. Buffett has provided factually dubious claims. Wealthy political donors do not make any factual assertion that needs substantiation. Treating them the same would be unreasonable and kind of silly.

Buffett has outraged conservatives by saying that he pays taxes at a lower rate than his secretary.

Assume Warren Buffett makes $650M this year in his equity position in Berkshire Hathaway from dividends (it keeps the math round). Corporations pay a top income tax rate of 35%. This means that to provide the $650M that Buffett received, Berkshire Hathaway would have had to produce $1,000M in EBT. Buffett then pays $97.5M  in taxes on the $650M of dividends. As a result, Buffett effectively pays $447.5 million in taxes on $1,000 million of income. That’s an effective tax rate of 44.75%--for federal taxes only. He’s still got to pay state income tax, state sales tax, school district taxes, gasoline taxes, payroll taxes, and ten thousand other things that the government has designed to piss us off. His secretary pays no more than 28%. QED, bitches.

He’s said this for years,

And has been wrong for years.

but he’s a target now because President Obama is using his comment to make the case for higher taxes on millionaires.

Exactly. If he followed the laws, I wouldn’t care a lick if he did pay less than his secretary, or if he thought it was unfair. But Buffett wrote an Op-Ed, revised it, got input from an editor, and published it in one of the largest papers in the country. It's not like some intrepid reporter caught a few off-the-cuff remarks and injecting them into the national debate. What makes me care about Buffett's views on tax policy is that now he wants to leverage this colossally stupid and factually misguided nugget to make me pay more taxes than his secretary. More to the point, Obama is using Buffett’s sterling reputation to imply that this blatant stupidity somehow has the credibility of Buffett’s investment acumen. It doesn’t, and it's sad that Buffett is allowing a failing president to use him.

Thus did the Wall Street Journal editorial page call on Buffett to “let everyone else in on his secrets of tax avoidance by releasing his tax returns.”

I didn’t even read that editorial, and even I know that it’s a tongue-in-cheek way to imply that Buffett is lying about the facts of his tax return to make a case—which is provably false even if everything Buffett is saying is true.

Somehow, the Journal did not think to ask its friends who battle vigorously for low taxes on capital gains to release their tax returns, too.

Why would it?

But aren’t they just as engaged in this argument as Buffett?

Of course, but they aren’t using their personal narrative as a bludgeon in political theater. They’re using fact, data, and logic to win the narrative in the sphere of ideas.

Shouldn’t accountability go both ways?

This isn’t about accountability; these aren’t public fiduciaries. It’s about verifying factually dubious claims that have a material impact on public discourse. If not verified, jackasses like you, EJ Dionne, fill an entire column with wild non-sequiturs and factual errors that avoid entirely the reality we live in. If the Wall Street Journal wants to tell Buffett to disclose his tax records in an Opinion piece, why are they then also obligated to demand tax records from hundreds of other people?

Nor did the Journal suggest that the Koch brothers could serve the public interest by releasing a full accounting of all their political spending.

How many times is he going to keep going to that well before he realizes that it’s dry? 

Buffett’s sin is that he spoke a truth

If it’s truthful, what’s the harm in conservatives asking him to verify? 

that conservatives want to keep covered up:

If we wanted this argument covered up, we’d allow the narrative to wilt by ignoring it and rely on Boehner to kill Obama’s absurd policy. We would then collectively move on with our day and collectively have a ham sandwich. Instead, we have fixated on this because--in spite of our collective desire for ham--we believe that this is an argument that simply must be refuted because anything more than a cursory glance at Buffett’s claims show them to be downright laughable.

Taxing capital gains at 15 percent means that people who make their money from investments pay taxes at a much lower marginal rate than those who earn more than $34,500 a year from their labor.

Unless, of course, that money has already been taxed. Oh wait.

That’s when the income tax rate goes up to 25 percent. (For joint filers, the 25 percent rate kicks in at $69,000.) For singles, the 28 percent bracket starts at $83,600, the 33 percent bracket at $174,400.

Thanks for looking up the tax table for me. It’s very kind of you. Of course, it’s completely irrelevant to the argument, but very kind nevertheless.

So if an investor such as Buffett pockets, say, $100 million of his income in capital gains, he pays only a 15 percent tax on all that money.

See above for more reasons to laugh at EJ Dionne. Also, he put $100M out there for no discernable reason since he didn’t actually do any math.

For everyday working people, the 15 percent rate applies only to earnings between $8,500 and $34,500. After that, they’re paying a higher marginal rate than the multimillionaire pays on gains from investments. Oh, yes, and before Obama temporarily cut it by two points, the payroll tax added another 6.2 percent to the burden on middle-class workers. That levy doesn’t apply to capital gains or to income above $106,800, so it hits low- and middle-income workers much harder than it does the wealthy.

Do we get to talk no about how the employing company pays payroll taxes as well, and that those payments are further deducted from the money available to pay capital gains? No? Shucks.

No wonder partisans of low taxes on wealthy investors hate Warren Buffett. He has forced a national conversation on (1) the bias of the tax system against labor;

Refuted.

(2) the fact that, in comparison with middle- or upper-middle-class people, the really wealthy pay a remarkably low percentage of their income in taxes; and

Refuted.

(3) the deeply regressive nature of the payroll tax.

Payroll taxes are things like Social Security and unemployment insurance whose expenditures massively favor the poor. You want to know what insurance wealthy investors have against unemployment? Bankruptcy.

(Because this column appears in The Post, I should note that Buffett heads a company that owns a substantial minority share in The Washington Post Co. and for many years held a seat on the company’s board of directors.)

Warren, I don’t want to tell you your business, but it’s probably time to cut bait here.

It’s worth noticing that while conservatives who talk about religion get a lot of coverage

[FOOTAGE NOT FOUND]

— and I will always defend their freedom to speak of faith in the public square —

This is really taking a leap. Okay, I’ll stick with you, I guess.

what really get the juices flowing on the right these days are tax rates.

Considering that the Bush tax cuts are about to expire (again) and that the President has shown himself to be a flip-flopping lunatic on an issue that materially impacts economic prospects...yeah, it kind of makes us nervous.

I’m not sure that a politician who renounced the Almighty would get nearly the attention Buffett has received for his renunciation of low capital gains taxes.

He wouldn’t, because your assumption that faith is of primary concern to conservative voters simply isn’t a grounded assessment of the right. It’s a caricature from pretentious north-easterners who use their atheism as an excuse for moral laziness and inconsistent philosophical meanderings. (And I am an atheist.)

Advocates of higher taxes on the wealthy do not want to “punish” the successful.

Taxation is synonymous with disincentivization, which is a fancy way of saying punishment. Unless you’re arguing that success and wealth are not congruent in this context—a nuanced point that is as irrelevant to the conversation as it is unlikely to be grasped by Dionne--you’re arguing against a definitional assertion.

Buffett and Doug Edwards, a millionaire who asked Obama at a recent town hall event in California to raise his taxes,

Subsequently, Doug Edwards got his first erection in twenty years seeing his own name in the paper.

are saying that none of us succeeds solely because of personal effort.

Horseshit.

We are all lucky to have been born in — or, for immigrants, admitted to — a country where the rule of law is strong, where property is safe, where a vast infrastructure has been built over generations, where our colleges and universities are the envy of the world, and where government protects our liberties.

If I’m reading this argument correctly, the very existence of a prosperous and structurally stable country negates the ability for individual success? Obviously Dionne wants this to be true because it means that none of us fails solely because of personal incompetence.

Wealthy people, by definition, have done better within this system than other people have.

The reason that capitalism is the best system that the world has ever known is that it places every producer and every consumer on the level playing field of free commerce. It chooses winners and losers based exclusively on the merits of active competition. By dampening the rewards of success for the meritorious, you have fundamentally changed the risk/return equation that defines the system that you have claimed is responsible for the success in the first place.

They ought to be willing to join Buffett and Edwards in arguing that for this reason alone,

And yet, the system is not what defines who is successful; their inputs into the system do. This is why capitalism works with such ruthless efficiency.

it is common sense, not class jealousy, to ask the most fortunate to pay taxes at higher tax rates than other people do.

This is, of course, both inaccurate and wrong. It’s inaccurate because the argument is actually about whether the wealthy should pay more than others, or whether they should pay much, much more. It’s wrong because a flat tax or a consumption tax would be a simpler and more efficient means for raising the revenues the government needs to produce the healthy economic ecosystem Dionne so lazily describes.

It is for this heresy that Buffett is being harassed.

Buffett isn’t being harassed. He injected himself into the public discourse. When he was questioned, he continued to stay in the public discourse. He’s a big boy. He can handle himself. Crying harassment is like bemoaning an NHL hip-check as assault.

The scorn is not for his heresy. It is for the mendacity of his unfounded assertions. It is the arrogance that his petty and ill-defined notions of self-loathing should define my taxes. It is the indignity of being talked down to by a man clearly suffering from the Nobel Prize Complex. It is the aggravation of being expected to defer my judgment to the implicit authority of the Oracle of Omaha. 

Fuck off, Warren.