雉的读音:Why Buffett is wrong about soaking the rich

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Why Buffett is wrong about soaking the rich

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2011-8-24 09:04


By Christopher Caldwell


Like Monty Python’s crime-fighter The Bishop, Berkshire Hathaway chief executive Warren Buffett arrived late last week to the congressional argument over the debt crisis. By the time he published his broadside in the New York Times to the effect that billionaires like himself are being “coddled” by US politicians, Republicans had already staved off tax increases until after the next elections. Both parties had passed $1,500bn in deficit reductions to a bipartisan committee unlikely to call for tax increases. And Standard & Poor was sufficiently unimpressed to downgrade the US credit rating.


Mr Buffett believes taxes on the “mega-rich” ought to go up, in the name of both fairness and debt reduction. He paid just under $7m in federal taxes last year, about 17 per cent of his taxable income. But his back-office employees pay 36 per cent. It is a spreading problem. In 1992, the top 400 US earners made $16.9bn and paid 29.2 per cent in taxes. Today their income is $90.9bn and they pay 21.5 per cent.


The rich pay less because capital gains and carried interest get taxed at a low rate. As Mr Buffett puts it, “those who make money with money” are treated better than those who “make money from a job”. In saying this, Mr Buffett subscribes to the religious understanding of money that was universal in the Christian world before the rise of Florentine banking (and of Protestantism) and has been restated in our own time by practitioners of Islamic finance. People are alive but money is not, which makes it wrong – because it is life-denying – to prefer the latter.


It is a powerful and even a beautiful argument, but there are two problems with it. The first is that just because something is time-honoured moral wisdom does not make it workable capitalist fiscal policy. Economics, in fact, prides itself on throwing aside such wisdom. It is inconsistent to argue on Christian grounds that paying interest on “sterile” money is sinful and then to argue on Keynesian grounds that thrift in a downturn is inefficient.


The demands of efficiency and of equality have always been at odds, but they seem to be coming ever further out of synch. The UK’s coalition government is riven over whether to keep Labour’s 50p-in-the-pound rate on incomes over £150,000. Whether one sides with the Tories (who would scrap it), or the Liberal Democrats (who would keep it, or find a substitute), it is striking how little revenue it raises: about £3bn a year.


There is a second inadequacy in Mr Buffett’s suggestion. Polls show a majority of Americans want rich people’s taxes raised. But soaking billionaires will not suffice to address the deficit and debt. The main US tax quarrels concern Mr Buffett (or Facebook founder Mark Zuckerberg, who stood alongside Barack Obama in April to announce that he was “cool” with seeing his taxes rise) only indirectly. The anger comes from a middle and upper-middle class that feels bankers and idlers have been freeloading off them. To view upper-middle class fury as an ideological preference for a small state is probably wrong. It is more a tax strike, based on the suspicion – one that arose during the debate over last year’s health care bill – that the middle class is being looted.


Doing as Mr Buffett suggests might actually exacerbate this problem. If those 400 mega-rich people could be taxed on their earnings at the top 35 per cent income tax rate, it would raise an extra $12bn in taxes. If they could be made to pay 50 per cent – an unlikely scenario, to judge from the UK’s difficulty maintaining such a rate – that would raise an extra $26bn. In an era of trillion-dollar deficits, soaking the mega-rich would get the country between an eightieth and a fortieth of the way to a balanced budget. Taxing the half-million- and million-dollar-a-year men, would help a bit. The rest would be loaded onto the backs of the same upper-middle class whose fury grows by the day.


The amount the rich are taxed is only one element of a larger problem – their influence over the political system. In the US, much of this influence comes through campaign contributions, but even more comes through the deductibility of “charitable” contributions. Mr Buffett himself has urged rich people to give half their wealth to philanthropy. This makes inequality look less embarrassing on paper, but it worsens the problem of plutocratic influence, because the deductibility effectively harnesses a taxpayer-funded matching contribution to the whims of the rich.


The suggestion of Vince Cable and other UK Liberal Democrats that a tax on large mansions be used to replace or supplement the 50p rate shows that things have gone further than Mr Buffett realises. The proposal has a mid-twentieth-century feel to it. It is a sign that what the public is eyeing covetously is no longer just the incomes of rich people but also their wealth.




The writer is a senior editor at The Weekly Standard
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