The 'Warren Buffet' Rule

[Shizensky]

Legislation has just been introduced that will require people who make at least $1 Million to pay no less than 30% of that in taxes.

It's named after Warren Buffet because he only paid 11% in taxes last year, and less than his secretary.

I agree that the really rich shouldn't be able to get away with paying less, proportionally or out right, than I do. However, I don't think they're going about this the right way. My (naive) hope is that this could be a step towards a flat tax rate that could be applied to all but the poorest 10% or so of Americans. The proper name of the legislation is the "Paying a Fair Share Act", and unless we start moving towards some kind of flat rate there's nothing really 'fair' about it.

We get a good drinking game out of this anyway. Let's take a shot every time they say "socialist" on Fox News this week.

[Ad Infinitum]

Fitting. Warren Buffet was one of the most wealthy pro-99% supporters out there.

[Eist]

Feb 1, 2012 15:35:14 GMT -5 Shizensky said:

My (naive) hope is that this could be a step towards a flat tax rate that could be applied to all but the poorest 10% or so of Americans.

I'm a firm believer of a progressive tax system, where the more you earn, the greater the percentage of it is taxed. I don't really feel like getting into this but I am interested in why you advocate for a flat tax system, but leave out the bottom 10%.

I have it in my mind that people that advocate for a flat tax system usually have notions about people keeping what they earn.

Basically, your idea seems to link the most ardent of libertarian ideals - the flat tax rate - and some sort of liberal welfare system.

It's just interesting to me

[Shizensky]

The welfare system is a good thing. For years my own family was fed only because of it. But then something bad happened because of it. When my mother finally earned enough that we no longer needed the support she was upset to be losing the assistance. It reminds me of the scene from 'Million Dollar Baby' where her mom gets upset about the free house because she would lose her welfare.

I do believe that people should keep what they earn. There should be solid rewards for hard work, dedication and perseverance. When I first had to actually pay out in taxes at 22, thinking I might get a refund because I was married and we had a child, I was a little upset. It felt like the rewards of success almost didn't exist and that I could net as much money on welfare, accepting more in refunds than I paid in payroll taxes, and with less stress in a demoted position.

I don't completely believe that a flat tax is a responsible goal, especially to the tune of 9-9-9. But a more level field, 'fair share' in the words of the President, would be to keep things at least on a slight slope, where the difference between the high and low is about 15% instead of 30%-40%

[Twobagger]

I like the idea of it, but I'm confused about the specifics. It seems like it would make everyone's favorite misconception of our tax system into a reality: once someone got close to earning a million dollars, they could get a small raise and lose a lot of money because they'd suddenly have a much higher marginal tax rate, going from an effective 10 or 15 or 20 percent rate just under the limit up immediately to 30 percent just over it. It seems like you'd have to revamp quite a lot of our current tax system to make this viable.

[Eist]

Feb 1, 2012 21:27:41 GMT -5 Twobagger said:

I like the idea of it, but I'm confused about the specifics. It seems like it would make everyone's favorite misconception of our tax system into a reality: once someone got close to earning a million dollars, they could get a small raise and lose a lot of money because they'd suddenly have a much higher marginal tax rate, going from an effective 10 or 15 or 20 percent rate just under the limit up immediately to 30 percent just over it. It seems like you'd have to revamp quite a lot of our current tax system to make this viable.

This is not how marginal tax rates work. I'll give you an example.

Say I earn $100,000/year. My tax rate is 20%. This means I pay $20,000 in taxes. My boss gives me a raise of $10,000. I'm earning $110,000, but oh no! the tax rate is 30%! Do I have to pay $33,000 in taxes, and take home less? Nope. The $100,000 is still taxed at 20%, and the last $10,000 is taxed at 30%, meaning I pay $20,000 + $3000 = $23,000 in taxes.

EDIT: I edited one part of my equation, and forgot the other

[Shizensky]

That doesn't sound like a terrible deal. That way, you're taking home what you earn for that level, and only being taxed higher on that next level, instead of the entire rate raising overall and discouraging people from wanting to enter the next bracket.

[Twobagger]

Feb 1, 2012 22:10:39 GMT -5 Eist said:

This is not how marginal tax rates work. I'll give you an example.

Say I earn $100,000/year. My tax rate is 20%. This means I pay $20,000 in taxes. My boss gives me a raise of $20,000. I'm earning $110,000, but oh no! the tax rate is 30%! Do you have to pay $33,000 in taxes, and take home less? Nope. The $100,000 is still taxed at 20%, and the last $10,000 is taxed at 30%, meaning you pay $20,000 + $3000 = $23,000 in taxes.

Yes. My point is that the tax system as is works because of these marginal tax rates. But from what I understand, this isn't a marginal tax rate applied to income over $1 million, it's instead applied to the entire income. For example:

Let's say I earn $900,000, and pay an effective rate of 20%. Then I'd be paying $180,000 in taxes, leaving me with $720,000. Then if I got a $100,000 raise, I'd be earning at least a million dollars, but my effective tax rate is less than 30%. So I'd pay exactly 30%, or $300,000, leaving me with $700,000.

I guess it's sort of a moot point: I doubt many people will be shedding tears over the new would-be millionaires having to make do with only seven or eight hundred thousand dollars. But as-is, you'd have to make some more changes to make it work as long as there's such a large discrepancy between the effective tax rate for people making just under the amount and the effective rate for people making just over the amount.

[Cerb]

I'm strongly in favor of flat taxation and I'd go as far as not excluding anyone. The primary value is simplicity and equality.

I think 9 9 9 was a bit off. I'd just make it a straight 15% for any income.

This would rather pleasantly render the IRS as completely unnecessary as a nice little computer can handle the majority of taxation for wage slaves that aren't self employed or have private taxable investments.

I do find it reprehensible that the richer you are, the lower the percentage tax rate. Just doesn't seem right. On the flip side I don't see hiking it up to 30% either.

[Escanaba]

Wasn't the Alternative Minimum Tax designed to capture taxes that the wealthy might otherwise avoid?

[tuhoe]

what ever tax rate is applied,if you have the knowledge,a good lawyer,accountant and financial advisor there will always be a way to pay less tax,a friend of mine does same job as me but because he has an accountant he created a shell company that doesnt produce any goods ,doesnt provide a service, creates no jobs, but only lowers his tax bill,all legal of course,how much money legally passes underneath the tax radar?

[Escanaba]

That sort of thing shows how much the tax code needs to be reformed. Not just to make the tax code less complex, but to increase fairness by having people with similar incomes pay similar taxes.

[Metaphysics]

If we are all "equal" in the land of equality then let us all pay the same amount of taxes. I say a flat tax on everyone.

[Escanaba]

A fair flat tax is starting to sound like an American version of the Valued Added Tax. A VAT seems a little odious to me as it is regressive but if a new VAT is truly revenue neutral then it can replace much of the convoluted tax code that now exists.

[whs]

I don't see why there is just a flat tax. It's fair. Nobody can cheat and find loopholes.

[Freecalifornia]

I support Buffet on this 100%
If wealth becomes accumulated in the hands of the few it destabilises Democracy.
Obama for me has been too soft in Iceland they are prosecuting the former PM for allowing all the banks to collapse because of his lousy regulation . Something like that would never happen in america with out people shouting Socialist !

Once you look at Discretionary spending the majority of it is spent on Defence . Social Security is in surplus till late 2020s

[Greek People Nation (GPN)]

Fair Tax! Warren Buffet is an idiot.

"When Buffett receives dividends and capital gains, it is true that he pays “only” 15 percent of that money on his tax return. But dividends and capital gains are both forms of double taxation. So if he wants honest effective tax rate numbers, he needs to show the 35 percent corporate tax rate."


And anyone who agrees with him is an idiot. To much wealth envy going on. Tired of hearing "Fair Share" Earn your money and quit mooching off the government and tax payers!

[Koharu]

@ Shizensky

To be fair, a flat Tax rate means that all pay the same Taxes. The reason why it's paying their fair share is they worked hard to build up their tax and the nation is thankful for it, so taxing the rich more is in a way, allowing the rich to contribute to the funding of the nation, for money dose have power and with their tax, they can then influence the government to do what is needed. The government wants them to be happy so although they are taxed highly they are celebrated as American Successes. The question on the Flat Tax Rate is who is paying the Flat Tax, you have to have it so that it is accommodating to all who pay, and with America's population of 311,000,000 if you tax .02 cents you get roughly $600 million, but again, they have the ability to pay more so they should in that they are contributing to their success, as with more taxes, there are more roads and jobs to buy products produced from the rich. In all the Buffet Rule is good, its hard to convince the selfish half of the government that it is. The two quickest ways to pay the debt is to increase spending on the rich and to cut spending on Defense. Sadly the right nor the left will do neither thanks to Bush and now thanks to the Split government and Obama.

[Heraldic Alliance]

30% is not even enough, people making over $1,000,000 should pay nearly 40%. There are rates in the world nearing 50% why let the wealthiest Americans get off the hook so easily. While I did support a "flat tax" whatever was deemed a fair number for someone making more than $1,000,000/yr to pay would probably still be too much for a person making minimum wage could afford. So a graduated system eliminating all deductions would be best, but I've never seen one presented that seemed like it would work.