NYTimes: In Class Warefare, Guess Which Class is Winning?

[Beaudry]

This was written by Ben Stein, which is what is really suprising. If somebody as rich as Warren Buffet says "tax me more", we am I am argue?

http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?ex=1322197200&en=0cf877b05b918674&ei=5090&partner=rssuserland&emc=rss

NOT long ago, I had the pleasure of a lengthy meeting with one of the smartest men on the planet, Warren E. Buffett, the chief executive of Berkshire Hathaway, in his unpretentious offices in Omaha. We talked of many things that, I hope, will inspire me for years to come. But one of the main subjects was taxes. Mr. Buffett, who probably does not feel sick when he sees his MasterCard bill in his mailbox the way I do, is at least as exercised about the tax system as I am.

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Illustration by Philip Anderson

Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap.

Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

This conversation keeps coming back to mind because, in the last couple of weeks, I have been on one television panel after another, talking about how questionable it is that the country is enjoying what economists call full employment while we are still running a federal budget deficit of roughly $434 billion for fiscal 2006 (not counting off-budget items like Social Security) and economists forecast that it will grow to $567 billion in fiscal 2010.

[Predicto]

Warren Buffett is a remarkable person.

[Midnight Judges]

Holy crap I agree with Ben Stein! Honestly, he came off as a hopeless partisan hack the last few years but it looks like he does have integrity. Bravo Ben Stein. :applause:

In fact, the federal government collected roughly $1.004 trillion in income taxes from individuals in fiscal 2000, the last full year of President Bill Clinton’s merry rule. It fell to a low of $794 billion in 2003 after Mr. Bush’s tax cuts (but not, you understand, because of them, his supporters like to say). Only by the end of fiscal 2006 did income tax revenue surpass the $1 trillion level again.

But I thought that conservatives were supposed to like balanced budgets. I thought it was the conservative position to not leave heavy indebtedness to our grandchildren. I thought it was the conservative view that there should be some balance between income and outflow. When did this change?

Oh, now, now, now I recall. It changed when we figured that we could cut taxes and generate so much revenue that we would balance the budget. But isn’t that what doctors call magical thinking? Haven’t the facts proved that this theory, though charming and beguiling, was wrong?

[AJ_Skins]

I see he's taken his lecture on "voodoo economics" from Ferris Bueller and turned it into an article for the New York Times. Woo hoo. Ben Stein is a very liberal Republican.

[21KO]

Is Buffett writing checks to the gov't?

Anyone who feels they're not paying enough taxes can always do that.

[Midnight Judges]

Is Buffett writing checks to the gov't?

Anyone who feels they're not paying enough taxes can always do that.

We are paying interest on the national debt.

Gross interest on Treasury debt is approaching $350 billion a year.

That's a lot of money. For those of us who plan on being around in the future, we might be better off getting that payment out of the way.

[iheartskins]

That's a lot of money. For those of us who plan on being around in the future, we might be better off getting that payment out of the way.

Do you understand corporate finance and/or why people use debt financing? And /or the crucial role that treasuries play in the securities markets?

And how do you plan on getting rid of $10 trillion in debt? Who is going to pay for that? And do you think that will have any affect on our current currency values?

I've got questions. I'd like to hear your answers.

[The 12th Commandment]

Do you understand corporate finance and/or why people use debt financing? And /or the crucial role that treasuries play in the securities markets?

And how do you plan on getting rid of $10 trillion in debt? Who is going to pay for that? And do you think that will have any affect on our current currency values?

I've got questions. I'd like to hear your answers.

If I have a balance on my credit cards of more than 80%+- it counts against my credit score. The assumption here is that I'm not paying down principle, I'm just making my minimum payment. My question would be, if it's considered bad for me why isn't it bad for a government to do the same thing.

I'll admit my knowledge of corporate finance is minimal. I do know if the situation is right it's better to play with someone else's money than your own. I haven't seen any info on the situation for the national debt in this regard, though I think I'll look. But while this is good for a corporation, is it what the government should do?

The purpose of government is very different from the purpose of a company. While it shouldn't fail to take advantage of financing in it's duty to take care of our money, should it really do so to influence the economy in general? If the economy is dependant on it, then it has to be perpetuated. Forever really. Like paying my minimum payment till I kick the bucket. Even the government will eventually run out of credit, won't it?

[iheartskins]

The government will never run out of credit. The US Government has the highest credit rating in the world as measured by Moody's and S&P. If the US government defaults, that is, it runs out of credit, then we're going to have much, MUCH bigger problems than issues related to taxes.

[DCsportsfan53]

I see he's taken his lecture on "voodoo economics" from Ferris Bueller and turned it into an article for the New York Times. Woo hoo. Ben Stein is a very liberal Republican.

How about you comment on the fact that one of the richest men in America, while not even trying to avcid taxes, pays a lower % than his secretarial employees? Is their any way in the world that can be right? Now that your done discrediting Ben Stein, how about the qoutes about class warfare from Buffett?

[Larry]

The government will never run out of credit. The US Government has the highest credit rating in the world as measured by Moody's and S&P. If the US government defaults, that is, it runs out of credit, then we're going to have much, MUCH bigger problems than issues related to taxes.

And therefore, we should just keep running up the credit card, because we're nowhere near the limit?

Sorry, I'll freely admit that there exist times and reasons in which defecit spending may be a good idea. But I need a reason why debt is a good idea for a specific reason, in this particular case.

(To stick with the credit card example: It's one thing to go into debt to get a bigger house, or to start your own business. It's something else to take out a second mortgage to spend on Christmass shopping.)

(To use an example: I've discussed my support for a concept called Space Colonization, here, before. That, to me, would be an acceptable reason for defecit spending. It's a project that can't be performed at any lower "level" than the US government (nobody else has the money to pay the startup costs, let alone the will to do so on a project with no projected returns for 15 years), but it's a project with a specific "endgame", it will pay back it's investment (just not for 20-25 years), and it benefits the entire country (and, I'd think, the world.) (Complete energy independance for the US, and the ability to meet the world's energy needs, indefinately, with zero polution, strike me as a reward that justifies going into debt.))

So far, I haven't seen any good reasons to be cutting taxes while initiating two overseas wars and creating completely new domestic entitlements.

[Midnight Judges]

Do you understand corporate finance and/or why people use debt financing? And /or the crucial role that treasuries play in the securities markets?

And how do you plan on getting rid of $10 trillion in debt? Who is going to pay for that? And do you think that will have any affect on our current currency values?

I've got questions. I'd like to hear your answers.

1. working on it

2. yes

3. not so much

4. gradually

5. the American people

6. not so much

Yes, this is indeed the point of asking questions.

[AJ_Skins]

How about you comment on the fact that one of the richest men in America, while not even trying to avcid taxes, pays a lower % than his secretarial employees? Is their any way in the world that can be right? Now that your done discrediting Ben Stein, how about the qoutes about class warfare from Buffett?

I guess if you're in the odd position of being someone whose primary source of income is dividends and capital gains, it is possible. He's in a very small group, though. Maybe it should be looked at as a "loophole" to be closed, rather than an excuse to slam the entire tax paying public with an increase? :whoknows:

[Winslowalrob]

I guess if you're in the odd position of being someone whose primary source of income is dividends and capital gains, it is possible. He's in a very small group, though. Maybe it should be looked at as a "loophole" to be closed, rather than an excuse to slam the entire tax paying public with an increase? :whoknows:

Yes, Buffet said that the entire tax paying public should be slammed with taxes. Oh wait, no he did not. Was that an accidental misquote or putting words into his mouth , I wonder?

[DCsportsfan53]

I guess if you're in the odd position of being someone whose primary source of income is dividends and capital gains, it is possible. He's in a very small group, though. Maybe it should be looked at as a "loophole" to be closed, rather than an excuse to slam the entire tax paying public with an increase? :whoknows:

Um, I agree. When did I say I wanted to raise taxes on everyone?

[AJ_Skins]

Isn't that what Ben Stein is saying?

[iheartskins]

Larry--there's a difference between responsible spending/borrowing and absurd spending without regard for the future. As you know, I certainly was not advocating the latter, and I bet that we'd disagree with respect to where to draw the line with the former.

Here are a few economic postulates (in my eyes at least):

1. Governments will spend as much capital as they can raise via taxes or via borrowing (i.e., bond financing).

2. Governments will rarely leave a surplus or a scrap on the table for fear of alienating an otherwise unfunded constituency or for fear of taxpayers claiming that they are being overtaxed.

3. The tax base, and the revenues that the government expects to receive therefrom, is less than the budgetary outlays--which means that the government either has to raise taxes or it has to borrow (or some combination thereof) in order to remain afloat and avoid defualting on outstanding obligations.

Now, even if we wanted the government to run a balanced budget (including payments just for the interest related to the outstanding debt obligations), then there would still be an ENORMOUS burden on the economy in order to pay down the principal on the remaining debt burden. A debt obligation of some trillions of dollars cannot be paid back overnight. So how can this problem be solved? By raising taxes...or? That's really the only capital raising option that you've provided the government.

So we're basically back in the same place, unless we want to devote hundreds of billions of tax dollars to paying off debt every year...and I doubt that people are going to jump at the chance of a higher tax burden only to pay off the national debt.

BTW: the Space Colonization project sounds cool.

[portisizzle]

The conversation about our debt load in the U.S. is somewhat meaningless unless you put it in perspective.

So long as we have an economy growing faster that our debt load we are in good shape.

Also out debt load is easily rolled over, we never really need to pay it back.

Try this website out for a good analysis on this subject.

http://www.optimist123.com/optimist/

[chomerics]

Larry--there's a difference between responsible spending/borrowing and absurd spending without regard for the future. As you know, I certainly was not advocating the latter, and I bet that we'd disagree with respect to where to draw the line with the former.

Here are a few economic postulates (in my eyes at least):

1. Governments will spend as much capital as they can raise via taxes or via borrowing (i.e., bond financing).

2. Governments will rarely leave a surplus or a scrap on the table for fear of alienating an otherwise unfunded constituency or for fear of taxpayers claiming that they are being overtaxed.

3. The tax base, and the revenues that the government expects to receive therefrom, is less than the budgetary outlays--which means that the government either has to raise taxes or it has to borrow (or some combination thereof) in order to remain afloat and avoid defualting on outstanding obligations.

Now, even if we wanted the government to run a balanced budget (including payments just for the interest related to the outstanding debt obligations), then there would still be an ENORMOUS burden on the economy in order to pay down the principal on the remaining debt burden. A debt obligation of some trillions of dollars cannot be paid back overnight. So how can this problem be solved? By raising taxes...or? That's really the only capital raising option that you've provided the government.

So we're basically back in the same place, unless we want to devote hundreds of billions of tax dollars to paying off debt every year...and I doubt that people are going to jump at the chance of a higher tax burden only to pay off the national debt.

That is so not true Iheart. The best way for a government to balance a budget and create a surplus is to curtail spending, NOT to raise taxes!!

You also mention "who will pay for it" we will. Our children will, it will show up in things like inflation and services will decrease. it is not wise for a government to run budget deficits, and you KNOW this. I am surprised that you are taking this side of the argument. heck, when you run a deficit, you take away many of the monetary tools governments have to help stimulate the economy during a recession. it is bad fiscal policy both in the short term and in the long term.

As for the article, yes Buffet is spot on, and it is a complete joke. He pays less of a % in taxes then the secretaries and janitors that he employs, and it needs to be fixed. The income gap is widening, and he has realized what we have been saying all along.

Maybe there is a soul in Ben Stein, or maybe he has realized the tide of conservatism has changed and he has abandon ship with the rest of the rats. . .

[chomerics]

The conversation about our debt load in the U.S. is somewhat meaningless unless you put it in perspective.

So long as we have an economy growing faster that our debt load we are in good shape.

Which we have not for the past 4 years. . .

Also out debt load is easily rolled over, we never really need to pay it back.

That's BS and you know it. We pay interest on the debt every day, and the only way we can run a deficit is if countries decide they want to finance it. What happens if China, one of our rivals, decides not to buy our debt? We're ****ed, and you know it.

[The 12th Commandment]

We have never, in the history of this country, run up such a budget deficit that it couldn't be paid off through a combination of taxes, decreased spending and growth. That is what I was getting at. When we make economic health dependent on borrowing, aren't we putting ourselves in this position. Is there a name for this sort of economic model?

[Kilmer17]

This debate always boils down to the simple question-

Why should person A pay more than person B just because they can?

[JohnLockesGhost]

We have never, in the history of this country, run up such a budget deficit that it couldn't be paid off through a combination of taxes, decreased spending and growth. That is what I was getting at. When we make economic health dependent on borrowing, aren't we putting ourselves in this position. Is there a name for this sort of economic model?

Keynesianism?

[zoony]

Well we should clearly look to Europe for their model of fiscal policy.

And they have such a vibrant economy, and no class struggles at all. That's what is so great about socialism and the European model!!

Yaaaaay, socialism!!!!!

.......

[DCsportsfan53]

This debate always boils down to the simple question-

Why should person A pay more than person B just because they can?

The even better question is, why should perons A pay a lower PERCENTAGE of their income than person B just because they have the resources to get away with it? That's what Buffet was saying and he's spot on.