Warren Buffet and Me

Warren Buffet is an evil man, and alas, a sycophantic Ben Stein doesn't seem to realize it. The latter's NYT op/ed promoted me to post this over at the American Scene:

I read Ben Stein's Op/Ed. He lost me here:

"[The rich] don’t pay a lot of taxes as a percentage of what they can afford to pay . . ."

What does that mean? Seriously, Ben Stein should know that "afford to pay" has little economic meaning. At best, when it is used colloquially, as in "I can't afford a new 'Vette," it means that my $60K provides better marginal utility when spent on other goods (house payment, good food, 401K, high-speed internet) than on a sports car. I can't imagine how the term applies to taxes, where my choices are to pay or go to jail.

Assuming that he isn't outright lying when he writes that "the rich" pay a lower average tax rate than their housekeepers, Stein is practically lying when he leaves out how he got that result: adding in Social Security contributions, also known as payroll taxes. True, the payroll tax only applies to earned income below $75K/year, so in that sense is steeply regressive. But since benefits are tied to contributions, "the rich" will receive no more benefits than "the poor" who make the same contributions.

So you wanna change that? Come clean and admit that the present Social Security system is nothing more than a transfer program that taxes young people to pay old people. Bush himself it last year, and we know how that turned out.

So Buffet's income presumably consists entirely of dividends and realized capital gains. As an investor, this gives him huge latitude in minimizing his taxable income long before he so much as looks at a 1040. But considering that corporations pay their stockholders dividends after they have paid corporate taxes, Buffet is, in effect, paying more taxes than he gives himself credit for.

But okay, I'm all for taxing the Buffets and the Gates of the world as much as we can without creating perverse incentives. But I am not in favor of raising taxes on people whose families scrimped and saved from modest incomes so that they could invest their way to a measure of prosperity. And I fear that this will be the result, and possibly the intent, of Buffet's advice.