This op-ed in Forbes is really weird. First, the author spouts a lot of Ayn Rand stuff that could have come out of Atlas Shrugged. And he attacks Warren Buffet who, recently, surpassed George Soros as the most hated billionaire by arch-conservatives.
But then he writes stuff that I have been trying to tell everyone:
The liberal billionaires feel guilty about their value-transferred wealth, while the conservative billionaires like the Koch brothers make a show of believing in Ayn Rand because they are trying to convince themselves as much as anyone that they are entitled to their good fortunes.
The author of the op-ed goes on about the rich liberals:
Let’s back up in the op-ed and examine why the author is wrong about recommended policies:
However, very very few of the super-rich got to be super-rich by passively investing their own money. (I am reminded of the old joke. One guy asks the other, “how did you make a billion dollars in the stock market?” The other guys answers “easy, I started with two billion dollars.”)
Most people who are rich from investing (such as Warren Buffett) got rich by investing other people’s money and taking a cut off the top for themselves. Yes, I believe that the money these people make should be treated as ordinary income and taxed at the same rate as someone who works as an employee. They really aren’t that much different than commissioned salesmen, and salesmen have their commissions taxed as ordinary salary income (which means it’s subject to full income tax plus FICA taxes).
Other people get rich from being active investors in businesses. And I think we need to stop over-praising business owners. People start businesses to make money and not to be altruistic. I don’t think that there’s anything wrong with wanting to make money, but there’s nothing especially noble about it either (especially if it involves value transference and not value creation). They should be taxed at the same rate as people who work as employees. One may, in fact, consider every person who has a job to be a business owner; employees are in the business of selling their own services. Just as with the owner of a business who reports his income on a schedule C or a schedule K or a form 1120, the employee may have had to invest a substantial amount of money in his business in the form of college education, but unlike the more highly-praised “business owner” he doesn’t even get to deduct the cost of education as an expense against his income.
Some people think I have abandoned belief in free markets (whatever that means), but it’s not true. I truly do believe that markets do a good job of allocating resources. Which is why I believe that all economic income should be taxed at the same rate. That way, everyone will focus on how to maximize their income rather than doing stuff for the sake of lowering their income taxes. In an ideal income tax system, to lower one’s income taxes would be the same as lowering one’s true income and that’s not something anyone would ever want to do.
* * *
Also, when I’ve previously blogged about Warren Buffett, people have criticized him for giving his money away to a private charity rather than the federal government.
Three years ago I wrote that we should eliminate tax deductions for charitable donations, and I haven’t changed my mind about that.
And just because Buffett says some stuff about income taxes that I agree with doesn't mean he's a paragon of virtue. But it’s funny how libertarian conservatives do like to look at rich people as paragons of virtue, which was Ayn Rand’s viewpoint, and the Buffett editorial has created cognitive dissonance in these people who now feel the need to demonize Buffett for disagreeing with them. So they say he’s a hypocrite for not giving his money to the federal government, or that he is a hypocrite for setting up his businesses in such a way as to minimize the taxes he pays. But how has Buffett behaved differently than anyone else in his social class?
But then he writes stuff that I have been trying to tell everyone:
Buffet is only the most famous of the richest liberals in recent U.S. history; others include FDR, the Kennedys, Ted Turner, Bill Gates, George Soros, and Jamie Dimon. Working on Wall Street in the 1980s I found the richest to be the most left-leaning, and nothing like the stereotypical “country club Republicans” we’re all told about. Those most sympathetic to capitalism weren’t CEOs and bankers but street vendors, truck drivers, waitresses, and barbers. During the 2008 election season America’s richest investors, including many hedge fund moguls, gave their money mainly to candidate Barack Obama.
Although wealthy pro-capitalists also exist (see the Koch brothers), they’re a distinct minority – indeed, the only minority liberals prefer to attack than coddle. Many polls show the wealthier to be more statist than capitalist, and data from campaign contributions confirm the basic pattern.That’s right. But what does he prove by pointing this out? If most billionaires are liberals, maybe it’s because they know something about being billionaires the he doesn’t? Maybe billionaires know better than anyone else that they didn’t create billions of dollars of value themselves and that their wealth is a result of transferring value from the real value creators who are toiling away at five figure salaries (or some at low six-figure salaries)?
The liberal billionaires feel guilty about their value-transferred wealth, while the conservative billionaires like the Koch brothers make a show of believing in Ayn Rand because they are trying to convince themselves as much as anyone that they are entitled to their good fortunes.
The author of the op-ed goes on about the rich liberals:
Leftists hope this little secret will remain a secret, since it defies their populist cries for class warfare and mocks the hate speech they spew at “millionaires and billionaires, Big Oil, hedge funds and corporate jet owners.” These types are hardly the GOP’s puppet-masters, as is blithely assumed; in truth the “fat cats” tend to be solidly pro-Democrat. Since the typical voter doesn’t know this, class warfare rhetoric can still easily induce him to reject the GOP.Is it leftists trying to keep this secret? I don’t think so. I think that conservatives want to keep this secret because it goes against their belief that billionaires are billionaires because they personally created billions of dollars of value. It seriously weakens their argument that billionaires themselves don’t believe they created billions of dollars of value.
Let’s back up in the op-ed and examine why the author is wrong about recommended policies:
In [Buffett’s] op-ed, complaining about the disparity between effective tax rates on the rich, with incomes derived mainly from investments (taxed at 15%) than salaries, and effective tax rates on those with small (or no) portfolios, with incomes derive mostly from salaries (taxed at 0% or up to 35%, depending on level), Buffet ignores the fact that taxes paid by rich investors constitute double and often triple taxation. Sums invested were retained after prior tax payments (on ordinary income). Thus the rich investor pays 15% on dividends and capital gains in addition to the higher rates he already paid on previously-earned ordinary income – that is, 35% if earned in the past decade and higher still (50%-90%) if earned during the 1950s, 1960s or 1970s.I have previously stated in my blog that I support the 15% tax rate for passive investors in corporations (or possibly some better-implemented means of addressing the issue of double taxation). Unfortunately, this distinction doesn’t get highlighted enough by either side of the political debate.
However, very very few of the super-rich got to be super-rich by passively investing their own money. (I am reminded of the old joke. One guy asks the other, “how did you make a billion dollars in the stock market?” The other guys answers “easy, I started with two billion dollars.”)
Most people who are rich from investing (such as Warren Buffett) got rich by investing other people’s money and taking a cut off the top for themselves. Yes, I believe that the money these people make should be treated as ordinary income and taxed at the same rate as someone who works as an employee. They really aren’t that much different than commissioned salesmen, and salesmen have their commissions taxed as ordinary salary income (which means it’s subject to full income tax plus FICA taxes).
Other people get rich from being active investors in businesses. And I think we need to stop over-praising business owners. People start businesses to make money and not to be altruistic. I don’t think that there’s anything wrong with wanting to make money, but there’s nothing especially noble about it either (especially if it involves value transference and not value creation). They should be taxed at the same rate as people who work as employees. One may, in fact, consider every person who has a job to be a business owner; employees are in the business of selling their own services. Just as with the owner of a business who reports his income on a schedule C or a schedule K or a form 1120, the employee may have had to invest a substantial amount of money in his business in the form of college education, but unlike the more highly-praised “business owner” he doesn’t even get to deduct the cost of education as an expense against his income.
Some people think I have abandoned belief in free markets (whatever that means), but it’s not true. I truly do believe that markets do a good job of allocating resources. Which is why I believe that all economic income should be taxed at the same rate. That way, everyone will focus on how to maximize their income rather than doing stuff for the sake of lowering their income taxes. In an ideal income tax system, to lower one’s income taxes would be the same as lowering one’s true income and that’s not something anyone would ever want to do.
* * *
Also, when I’ve previously blogged about Warren Buffett, people have criticized him for giving his money away to a private charity rather than the federal government.
Three years ago I wrote that we should eliminate tax deductions for charitable donations, and I haven’t changed my mind about that.
And just because Buffett says some stuff about income taxes that I agree with doesn't mean he's a paragon of virtue. But it’s funny how libertarian conservatives do like to look at rich people as paragons of virtue, which was Ayn Rand’s viewpoint, and the Buffett editorial has created cognitive dissonance in these people who now feel the need to demonize Buffett for disagreeing with them. So they say he’s a hypocrite for not giving his money to the federal government, or that he is a hypocrite for setting up his businesses in such a way as to minimize the taxes he pays. But how has Buffett behaved differently than anyone else in his social class?
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