Why Warren Buffett Can't Solve Our Tax Problem

Last week, I shared a quote from Warren Buffett about how wealthy folks like himself should be taxed more. The article touched a nerve, drawing in more than 200 comments from you Fools, which was completely unexpected. So thank you to everyone who chimed in.

One of the most frequent comments, and the topic of several emails I received, went like this: If Buffett wants to pay more taxes, he's free to make a donation to the Treasury. Problem solved.

Clever. But anyone who thinks this is a logical fix or a rational argument is both underestimating the size of our tax hole and ignoring a theory called "the tragedy of the commons."

First, the size of this mess. In 2009, the federal government collected nearly half a trillion dollars less in tax receipts than it did in 2007. Between now and 2014, the projected budget deficit is a cumulative $4.6 trillion. Buffett donating his entire $50 billion slug of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) stock to the Internal Revenue Service would not make one iota of a difference. One man -- even one very wealthy man -- won't make a dent in the hole.

Then there's the tragedy of the commons. This theory, first put forth by Garrett Hardin in 1968, is perhaps best explained by game theorist Ken Binmore:

Critics ask how can it possibly be rational for a society to engineer its own ruin. Can't we see that everybody would be better off if everybody were to grab less of the common resource? The error in such reasoning is elementary. A player in the human game of life isn't some abstract entity called "everybody." We are all separate individuals, each with our own aims and purposes. Even when our capacity for love moves us to make sacrifices for others, we each do so in our own way and for our own reasons. If we pretend otherwise, we have no hope of ever getting to grips with the Tragedy of the Commons.

Basically, we sometimes rationally look after our own interests even when doing so ruins society as a whole. This is why, during the oil crisis of 2008, throwing spit wads at ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) was our preferred response over what would have actually solved the problem: putting on a sweater and driving less. I want to solve the energy/global warming crisis as much as anyone else, but I'm going to keep driving, polluting, and draining finite resources because it makes my life convenient and I like the sound of pistons. That's the tragedy of the commons.

Here's another example. As far as I know, no one has voluntarily given up their Social Security or Medicare benefits in the name of fiscal discipline, even though these programs have our country's finances hurtling toward misery. Not that anyone should give them up. Cashing those checks as long as they're sent to you is the rational thing to do individually. Collectively, though, it's debilitating.

With Buffett's taxes, or anyone's taxes for that matter, the tragedy of the commons is relevant in the sense that you'd have to be certifiably irrational to voluntarily pay a higher tax bill than you're charged, even when you can, like Buffett, acknowledge how wacky and in need of repair the system is. Given a choice, the sensible thing to do individually is to pay in as little as possible while extracting as many benefits as possible. That's rational behavior, and actually explains a lot of why our deficits are so huge today. Frankly, I'm thankful we have people like Buffett who acknowledge the misfortune in this and push for the legal changes that the tragedy of the commons tends to prevent us -- even him -- from making individually.

Greece, most of whose tax code could be accurately described as "voluntary," probably wishes it would have come to the same conclusions a few years ago.

I'll go out on a limb and say some of you disagree. Sound off in the comments section below.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway and ExxonMobil. Berkshire Hathaway is a Motley Fool Inside Value choice and a Stock Advisor selection. Chevron is an Income Investor selection. The Fool owns shares of Berkshire Hathaway and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool has a disclosure policy.


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Comments from our Foolish Readers

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  • Report this Comment On October 13, 2010, at 12:50 PM, jargonsays wrote:

    I believe that a lot of the purist anti-tax sentiment is based on the fact that these folks believe that they and only they are responsible enough to decide what to do with their money. It is all personal. That is how they see the world. Society per se, shouldn't exist, and if it does, it is immoral if it wants to make decisions regarding their money. It is a part of the capitalist identity that the amount of money one has is the primary measure of the value and power of the individual. They really don't like this democracy thing all that much because it empowers people of lower income/wealth status to make big decisions, but they don't want to get rid of it because they know that it gives them outsize influence over elections. As a result, the "tragedy of the commons", essentially is irrelevant and just another academic justification for stealing their money. Personally, I find this sentiment to be immoral unless it is tempered by the admittance that there are real problems that are often ignored or created by the capitalistic system we have in the US.

  • Report this Comment On October 13, 2010, at 12:52 PM, c5700 wrote:

    Morgan,

    The real problem is that Buffet's comment misses the underlying problem. Tax revenue will rise when the economy begins to grow at a decent clip and more people join the work force and salaries rise. Right now, Obama's been throwing $800+ billion in all directions and has produced no significant boost to the economy; he certainly has not created any significant number of jobs. His policies are simply encouraging businesses to cut costs (ie. layoffs) and hoard cash. Buffet's notion that he (and other "rich" people) should be paying more taxes to fund Obama's debacle is no wiser than giving another beer to a drunkard.

    Similarly, regarding the "oil crisis", this country has energy resources (oil-coal) that it is deliberately not tapping or using. A growing economy needs energy.

    Similarly, regarding voluntarily giving up my Medicare/Social Security....Hey, I am paying (actually being forced to pay) into the system. If I'm not going to get the benefits back, then I have simply been burdened with higher taxes. Why not about allow Social Security taxes to be paid into your own retirement account? And letting your Medicare taxes to be paid into your own Medical Savings Account?

    The tragedy of the Tragedy of the Commons is that one gets shamed/duped into doing things that don't really address the problem.

    c5700

  • Report this Comment On October 13, 2010, at 1:33 PM, mrwizard555 wrote:

    the "tragedy of the commons" and the "tyranny of 50% plus 1" together have brought us to this.

    as long as more than half of the voters can decide that we can all take more than a "fair" share from the commons, the commons will die.

  • Report this Comment On October 13, 2010, at 1:47 PM, TheDumbMoney wrote:

    1) c5700, merely by looking at jobs today, you can't say the stimulous has created few, because obviously things could be a lot worse than they are; I don't know how many jobs the stimulus created (if any!), but I do know your comment is bloviatory opinion, and not fact-based.

    2) I agree with jargonsays, the tragedy of the commons applies to what is going on now with tax and spend, I think. Our entire fisc has become the commons, in which everybody (conservatives included) thinks they personally, or their family, should get their social security, or their medicare, or their federal disaster funds when a hurricane hits in Florida, or job training assistance, but nobody wants to pay for it. This all started when the Republican Party under Reagan ceased to be the party of governmental fiscal rectitude, and as Dick Cheney famously said, "Reagan taught us deficits do not matter." Since then, we have had not one but two major parties that are perfectly content to stab the future in the back for the sake of present comfort. The only thing unique about Republicans is that unlike the Democrats, who are often just brazen about it, the Republicans have also been massive hypocrites ever since "Reagain taught [them] deficits did not matter." Of course what Cheney should have said, and what the Republican Party should adhere to, is in fact the following maxim: "Deficits only matter when Democrats are in control." Their behavior durring the succession of the Reagan (deficits don't matter!), Bush I (maybe they do...?), Clinton (deficits are horrible, balance the budget!), Bush II (deficits, schmeficits, pass prescription plan, do tax cuts, fund wars at same time), and Obama (Obama is the god of all deficits and must be destroyed!) presidencies has I think amply shown that to be their attitude. I say this not as a Dem partisan but as a frustrated independent who sees most sanity right now in moderate Dems, but not a lot of sanity at all frankly in either party, or on either side of the tax debate generally.

  • Report this Comment On October 13, 2010, at 2:16 PM, TMFPhillyDot wrote:

    Another great article Morgan, enjoying these two pieces!

    Fool on,

    Jordan

  • Report this Comment On October 13, 2010, at 2:22 PM, CPACAPitalist wrote:

    Since this is election season, I have been seeing lots of ads on tv regarding how a certain tax should be cut, and how irresponsible this opponent has been, etc. etc... At the end of the day, if you want your government provided services, subsidies, and protection, then you need to pay tax. Not just 5-10% tax either, i'm talking a decent chunk of tax. Now you might be saying, I don't want all those programs! Those are for poor people, who are lazy, and no good, and ugly! etc. etc... Well like it or not they are Americans too, and if you want to change things then get together with your like minded friends and fix it. Until then, belly up to the bar.

    The system will remain broken until we as a people decide to stop trying to get something for nothing. You want to live in the greatest country on earth, well it ain't free bub.

  • Report this Comment On October 13, 2010, at 2:37 PM, Frank360 wrote:

    I find Mr. Buffet's comments very self-serving. If Congress were to pass a specific tax law provision that taxed Mr. Buffet at 95% with no deductions, credits or off-sets would he object? Plus, would Mr. Buffet object if he were not allowed to protect his assets from the estate tax and that his estate were taxed at 95%?

    My guess is that he would - strenuously.

    Mr. Buffet confuses the effective tax rate with a progressive tax rate. It is not that his rate is too low, it is that he doesn't pay his secretary enough.

  • Report this Comment On October 13, 2010, at 3:08 PM, TMFMMTInvestor wrote:

    Morgan,

    The comparison w/ Greece is inapt, like apples and oranges. They exist in a single currency system (effectively a gold standard-like monetary arrangement) that constricts them: they're revenue-constrained. The USA, however, is the monopoly supplier of a non-convertible currency in a floating exchange rate system; as such, the US Federal Gov;t is not, operationally speaking, revenue-constrained. Thus, we don't need to raise taxes. More on this in an upcoming post on the Inside Value boards.

    Scott

  • Report this Comment On October 13, 2010, at 3:10 PM, JoKingMe wrote:

    The issue isn't that Buffett's tax rate is too low, it is that his taxable income is too low (line 37 on the 1040).

    Like it or not, rules should be different for the super-rich for taxes, just as they are for everything else. They can control how much income they make and thus how much tax they pay.

    Solution is simple. Impose a 'asset tax' on individuals with 'net worth' of > $100,000,000. Require that their line 37 on the 1040 form be the higher of their actual income or 5% of their 'net worth'.

    PROBLEM SOLVED.

  • Report this Comment On October 13, 2010, at 3:12 PM, FleaBagger wrote:

    The tragedy of this article is that so many, this article's author included, ignore the difference between economic production and political production, namely, that economic production promotes higher productivity and greater creativity, while political production merely steals from sources of economic productivity and redistributes the loot with varying degrees of waste. Because people just assume that "experts" know what they're talking about, they go along with things that are silly on their face, like letting a gov't-chartered banking cartel take complete control of our money supply, or believing that gov't just needs to spend money to jump start our economy and prevent a deflationary spiral, and it doesn't matter that there is no productivity anywhere in the spending - because if government does it, it's free, right? They have infinite money, so who cares how profligate they are! Right? The real danger is the "deflationary spiral," right? You wouldn't want the necessities of life to become more affordable or the means of production to wind up in the hands of successful entrepreneurs who are pleasing their customers - what a disaster! We need the banking cartel to print more money for our government to use to distort demand in the economy and divert labor and materials from more productive uses! Sounds right!

  • Report this Comment On October 13, 2010, at 3:26 PM, inflatablemonkey wrote:

    @c5700,

    The notion that the Obama administration is "throwing" hundreds of billions of dollars at the American economy in vain is mythology based on a misinformation campaign. Firstly, let us not forget that the largest bailout was enacted before the current administration took office. Secondly, bills that would increase infrastructure spending (something that WOULD create jobs) as per Obama's wishes have not been passed in Congress. Increased Medical spending has not kicked in yet. There indeed has been a total of about $600 million in the Recovery Act which, incidentally, was 40% in the form of tax breaks. Problem is, that amount is peanuts compared to what WOULD make a difference and actually stimulate this gigantic economy. This administration simply has NOT "thrown" money at this thing at anywhere near the rate critics are saying. The problem is really that they've been repeatedly stopped from spending enough. I didn't come up with this myself: http://www.nytimes.com/2010/10/11/opinion/11krugman.html?ref...

    -Dave.

  • Report this Comment On October 13, 2010, at 3:28 PM, fennecfoxen wrote:

    You know, I could have a modicum of respect for government taking money from people and spending it more wisely than they would have otherwise, to the benefit of society.

    I just don't respect the way the government spends money.

    Moreover, I resent the attitude (expressed to me yesterday in electioneering literature in my mailbox) that cutting taxes (on billionaires) is a handout. Because - of course! the government deserves all the money that we make. I'm just lucky that the government gave me tens of thousands of dollars in handouts this year!

    Meh. But the Motley Fool obviously *likes* populist screed. It helps sell their Stock Advisor service! "wall street is dead and we're dancing on its grave!" OMG!

  • Report this Comment On October 13, 2010, at 3:44 PM, mikecart1 wrote:

    Buffet doesn't know what to do because the dude is the most overrated investor of all time. He is still living on his snowball he created in the 60's and 70's. He hasn't done anything great the past 10+ years. I don't know why people keep talking about him. It is like saying MSFT and WMT are awesome investments since they were awesome 20 years ago. Let's get serious guys. There are far better investors than Warren Buffet.

  • Report this Comment On October 13, 2010, at 3:47 PM, goldilocks52 wrote:

    Good article! I think the crux of the problem is that rich people don't want to pay taxes for services they don't think they benefit from, e.g., food stamps or public education when they send their kids to private schools. They think they should be able to keep the income they make on their BP stock investment as their right. What they fail to factor into their analysis of rational self-interest, is the effect on their lives and their children when their fellow citizens are hungry or homeless, or poorly educated or their children are spreading contagious diseases for lack of medical care because they can't afford health insurance or, literally starving to death for wont of the food stamp program, for instance. The wealthy may not be factoring in the cost of the additional crime as society breaks down and these desperate poor people take up lives of crime as their only alternative to their children starving in the street. Is living in this kind of society worth it? Or would it be better for the rich to give up the purchase of their 5th airplane or 50 carat flawless diamond, or whatever else the rich spend their money on, in order to make America a kinder and gentler nation for all? The question the rich, as well as the middle class, may want to consider is whether they are really better off living in Pottersville than in Bedford Falls. Was old man Potter really being rational to be the richest and meanest man in town? How did his money benefit him in the long run? Wasn't Ebeneezer Scrooge actually exercising more rational self-interest when he started giving his money away and became beloved in his community? Maybe what the rich really don't like about paying taxes is they don't feel they get enough acknowledgement or appreciation for it. Maybe the government should initiate a special Appreciation of the Wealthy Day, where all those individuals paying over $1 million in taxes are honored and their names published in the Congressional record and announced on the evening news. Then the rich may feel better about what their tax dollars are purchasing.

  • Report this Comment On October 13, 2010, at 3:48 PM, zymok wrote:

    Trolling again, Morgan? For shame :)

    Seriously, I often find it difficult to have a rational discussion of tax rates because of the ridiculous complexity of our tax system.

    Forty percent or so of all wage earners pay no federal income tax. By this standard, they are getting a free ride and their taxes should be raised.

    On the other hand, they do pay payroll taxes. But how much? Do you count the 7.6% employee tax, or do you include the employer matching tax as well?

    This doesn't even begin to include all the other tax-modifying factors, like tax deferred accounts, differing tax rates for different kinds of income, taxable and non-taxable fringe benefits, etc. etc. etc.

    This is why I prefer a flat tax. No exemptions, no deductions, one tax rate, and greatly simplified arguments.

  • Report this Comment On October 13, 2010, at 3:49 PM, GEORGE611 wrote:

    Silly people, presidents do not spend money. Only Congress can authorize any government spending, read the constitution. They are the only people who can authorize the issue of debt so they can spend more than they take in, in revenue. As everyone, who cannot print their own money, knows that you need to live within a budget. You must keep your expenditure consistent with your revenue. This is fiscal responsibility, if a company or person fails to maintain this responsibility, you will lose everything.

    Solution, fire the irresponsible, we have an election coming up-vote out all incumbents in congress. If the next group don't get the message, fire them, eventurally we will get a group that gets the message.

    Anyway, would it be fun to watch the carnage.

  • Report this Comment On October 13, 2010, at 3:59 PM, GEORGE611 wrote:

    you want a tax policy, here's a tax policy.

    Get rip of all tax exemptions, set the tax rates to something like >$50MM 60%, >$10MM 50%,

    >$1MM 40%, >$500,000 35% >$100,000 30%,

    >$50,000 20%, <$50,000 get money to bring you up to $50,000. All investment income: capital gains, dividends and intrest earned, 1/2 your tax rate.

    Here's the kicker...No corporate or business income taxes, period. corporations do not pay income taxes, people who buy their products, pay corporate income taxes....How many companies would like to come to America, now....I bet we can find work for everyone, including the 20 MM illegal aliens...

  • Report this Comment On October 13, 2010, at 4:05 PM, dfrizzle03 wrote:

    @ GEORGE611

    great idea!!! tax everyone who buys products made in the U.S. so that everyone buys overseas. YAAAAYYY!! our problems are solved. instead of decreasing our imports, we'll increase them, that should fix everything.

    all i have to say is good thing the oracle only has one vote come november of 2012.

  • Report this Comment On October 13, 2010, at 4:13 PM, mdk0611 wrote:

    Tragedy of the Commons? Couldn't that also be defined as the nearly 50% of workers who pay zero income tax expecting this problem to be solved not by spending cuts or an across the board tax increase but a tax hike on a select group of taxpayers. If they all had Mr. Buffett's wealth that's one thing. But ask a 2 income family making a combined 250k with 2 kids in college how much they have in common with Mr. Buffett. A PG rated answer would be "not very much".

    BTW - The thought of everybody valuing their homes, portfolios (do we extend to furniture and automobiles) to pay an annual tax on wealth is ridiculous.

  • Report this Comment On October 13, 2010, at 4:30 PM, Thaeger wrote:

    Two things. The economy was never stronger than in the 40s -> 60s, where the top marginal tax rate was actually 90% +. It wasn't until Reagan (and others) slashed it to <50% that we started to see the boom/bust cycle again, as those with excess wealth simply dumped it in the stock market, creating bubbles that invariably burst when people realized how inflated prices were.

    http://markmaynard.com/wp-content/uploads/2010/02/taxthresh3... (chart of the top marginal tax rate over the past century)

    Also, think of government spending as an investment. Spending a dollar on welfare or infrastructure creates nearly two dollars in wealth and value for the economy, while spending a dollar on corporate / capital gains tax cuts yields a return of ~.30.

    http://www.globalresearch.ca/articlePictures/bang-for-the-bu...

    That's right, the government creates nearly 7 times as much wealth, helps the economy 7 time as much, by spending money on infrastructure and social programs compared to tax cuts for the wealthy, and yet people still cry foul any time someone mentions the government investing money where they'll obviously get the highest returns...

  • Report this Comment On October 13, 2010, at 4:31 PM, lctycoon wrote:

    Letting the taxes expire on the rich (as Obama proposes) will increase the Federal Tax take by $70 billion annually. That won't make a bit of difference.

    Letting all the tax cuts expire will increase revenues by $300 billion annually. That also won't make a bit of a difference.

    We need fundamental reform and real reductions in the size and federal budget.

  • Report this Comment On October 13, 2010, at 4:35 PM, smjcee wrote:

    Enjoyed reading all articles to aid in my education. I am mid class but have the advantage of having family members on both sides of the economic spectrum (both sides having a lower middle class background). What I see, is that the members that have become wealthy have a very hard time sharing! The nicest presents come from those members that have least, the time spent on inquires as ones health/wellness and happiness come from the side with the least. I believe that it all boils down to VALUES. Unfortunately many of the children now are raised with a "me" mentality and the educational system encourages it....only the smartest and most talented get the awards! (we know awards for 'best attendance" dont REALLY matter) and do the parents of the smartest and most talented say " gee isnt your "gift" wonderful and be thankful of your gift by sharing and helping those that dont have your gift? or do they say " YOU are such a smart person , now go to the best school, GET the best job, and Make the most money!!" For whatever reason, Somehow these basic values are created and they shape ones perspective on everything. Until we change the "global perspective" the same problems will continue......with the Bill Gates and Warren Buffet's that are willing to share and all the wonderful guys at Enron with the "me" mentality. I predict a rise in the "me" mentality numbers AND therefore, we will need to have a mandatory tax on those that have never learned to share!

  • Report this Comment On October 13, 2010, at 4:36 PM, Thaeger wrote:

    To clarify the previous comment...with a higher top marginal tax rate, there was a strong incentive to reinvest wealth into a company, rather than piss it away on high taxes. Investing money in infrastructure always creates lasting, _real_ value, vice just the perception of value that you obtain from, say, offering billions in dividend payouts to investors.

  • Report this Comment On October 13, 2010, at 4:43 PM, vitof wrote:

    Let's get away from this Robin Hood mentality. let's face it you tax the rich ,they buy less. who builds the yaths, corporate/personal planes, cut the diamonds buys the clothes. give them a break when they buy more and we the common folk will work more. just simplify the tax structure. you'll never see that happen because it affects most of the politicians on capitol hill. fool on

  • Report this Comment On October 13, 2010, at 5:09 PM, mitchm0 wrote:

    It's nice to see that, now that he is very old and not long for this world, Warren Buffet is willing to be taxed more. How grand! He has had his and does not need much more, especially since any additional tax of his income, no matter how high, will still leave him a multi-multi millionaire and have little impact on his life.

    What also irks me are the governement officials and workers who, through fabrications and outright manipulation, increase their salaries just before they retire so that their lifetime pensions, typically covering them and their spouse for life, plus medical benefits, are maximized. In Illinois, this is a high art form that enables rather humdrum officials to retire with pensions of $200,000 to $250,000 a year. "Rich" people, with no pensions, would have to save an awful lot of money to guarantee themselves that sort of payment for the joint lives of they and their spouses.

    So, our government officials, who manipulate the system to make sure they are taken care of, and people so filthy rich that taxes are irrelevant to them, are agreed that those of us without pensions, who work harder than any of them (well, maybe not than Buffet) should pay higher taxes. They are so principled!

  • Report this Comment On October 13, 2010, at 5:12 PM, bozo0330 wrote:

    I really appreciate the fool bringing up this subject that many feel afraid to discuss.

    If you were in debt would you not only reduce your spending but, and maybe more importantly, try to increase your income?? It is unbelievably simple to me, and we HAVE to do something or our once great nation won't be anymore.

    These tax increases aren't that, but simply letting large cuts for the very wealthy expire! And why is it the wealthiest people I know are so freaking chintzy and self absorbed? Don't they feel a responsibility to better the country and hard working people the provided a way for them to be so wealthy?

    A strong nation is one with a very large and contented middle class, and our middle class is struggling while the very wealthiest pile on more millions.

    With out the care for our nation that many of the wealthiest of our fore fathers had, like Adams and Jefferson, we are slipping down hill on an ever steeper slope, while our wealthiest get try to figure out how they can hoard more.

  • Report this Comment On October 13, 2010, at 5:13 PM, mtracy9 wrote:

    The American economy never did so well as it did after President Clinton raised the top marginal income tax rate

    for those making more that $250,000/yr. from 33% to 39%. It even produced record budget surpluses.

  • Report this Comment On October 13, 2010, at 5:15 PM, indydealmaker wrote:

    I dare say that more taxpayers would be willing to pony up more dollars and/or draw less upon their benefits if there was a credible likelyhood that the additional available funds would be wisely dispersed. Our congress has become all too adept at squandering this nation's revenue in a manner that is designed to buy votes to ensure re-election or to ensure a golden parachute type income after retirement as a reward from special interests.

  • Report this Comment On October 13, 2010, at 5:20 PM, beterlatethnnrvr wrote:

    I have a problem with the middle class bearing a ungodly dispportionate income tax burden:

    > the poor don't care about tax, 50% of all U.S. income tax filers pay ZERO tax (of this group 50% roughlt receives money from the government through tax credits)

    > the real rich can afford to pay even 50% of their taxable income in, if you get $5 million and pay $2.5 million you still have $2.5 to spend,

    >the middle class makes $250K to $500K and pays over $100K to the government...

    bottom line...

    Poor pays zippo or gets a refund,

    Rich keep $2.5M which goes a long way,

    Middle class keeps $150K which does not go as far as $2.5M (last i checked anyway)...

    Why is $250K considered wealthy? Politics pure and simple. Can's tax the poor (hurts the consituents on the left) and can't tax the rich (hurts donors on both sides).

    The middle class of doctors, laywers, and small business owners get smoked under our tax system.

    And no one will ever fix it, thanks Warren B, Congress and the Prsident for igniting class warfare in our Country.

  • Report this Comment On October 13, 2010, at 5:22 PM, Upstream123 wrote:

    As long as 50% of the population that doesn't pay any tax can vote for entitlement programs that others pay for we will never get out of our collective mess. I firmly believe that a true flat tax paid by ALL would yield a future that everyone would be truely bought in to. Wasteful spending would impact and concern everyone since everyone would be a vested. The flat tax should go hand and hand with a blanced budget amendment!!!

  • Report this Comment On October 13, 2010, at 5:23 PM, timeinthewind wrote:

    Perhaps then the tragedy of democratic government is that the shareholders can vote the board in and out but cannot sell their shares if they don't like how things are run. Long ago many corporations were forced by shareholders to tighten their belts by getting rid of corporate jets and other high spend items. Yet we would not or could not stop Nancy and others from getting themselves new jets. While I know the cost of these jets also pale in comparison to the size of the debt, consider it a metaphor for all that they spend in so many wasteful ways and how little they apply themselves to fixing the major fiscal challenges we face.

    Of course the metaphor breaks because those that pay (the tax paying "shareholders") receive proportionally much less of the benefit of the spending than the rest who also get a vote but don't pay.

    So the tragedy of the commons, as the examples in the article shows, is as much about those that can afford more tax but don't want to volunteer it as it is about those that receive the handouts and aren't likely to ask for less. It is up to the leaders / legislators to force the change from handout to handup and to lower the fraud, bad laws and policies and program loopholes. Yet in their own part in the tragedy, they put their careers at grave risk by so doing.

    Insurmountable problem or opportunity for better leadership?

  • Report this Comment On October 13, 2010, at 5:23 PM, amt77 wrote:

    I agree with you Morgan and I am glad you said it!

  • Report this Comment On October 13, 2010, at 5:36 PM, stan8331 wrote:

    Excellent, thoughtful post.

    In terms of the comments, I'm largely in agreement with dumberthanafool. As much as I despise most of today's politicians, they're only selling the public what we're willing to buy. Rational discussion of serious problems isn't likely to make a comeback until the public stops responding favorably to blatant pandering and staggering hypocrisy.

    I'm not holding my breath.

  • Report this Comment On October 13, 2010, at 5:38 PM, kalho13 wrote:

    indydealmaker you hit the nail on the head. Our tax dollars are not spent on what is best for the country, but for what will get the politician re-elected. Without terms limits there is little hope throwing more money at the problem with improve anything!

  • Report this Comment On October 13, 2010, at 5:41 PM, umh wrote:

    1) I do know someone who has never collected their SS; They didn't need it.

    2) I don't mind paying taxes if they would do the things that need to be done. We could start with simple things like fixing potholes is that shovel ready enough! We could put sidewalks in place; many times I've walked around and had a sidewalk end where ...

    3) Almost anything is better than giving more money to bankers!

  • Report this Comment On October 13, 2010, at 5:42 PM, Thaeger wrote:

    @ beterlatethnnrvr : It's worth noting that our government needs to borrow trillions from other countries just to afford all the tax cuts and other welfare aimed at the wealthy.

    And on a side note, there's three types of people in any economy:

    Poor people, who have things they need or want, but no money to spend on them.

    Rich people, who have plenty of money, but nothing they want to spend it on.

    And the middle class, who have both things they need, and the money to buy it.

    Obviously the middle class contribute the most to our economic health, but less obvious is that giving welfare to the rich doesn't help the economy nearly as much as getting wealth into the hands of the poor (ie social programs, or better yet, by investing in infrastructure, creating both jobs and real, lasting value), as poor people will be much more likely to actually spend the money.

    More people buying things => more demand and growth => more jobs => larger middle class, and so on. Unsurprisingly, everyone benefits from a strong economy, even the top 1% (especially the top 1%).

  • Report this Comment On October 13, 2010, at 5:43 PM, mythshakr wrote:

    If Mr Buffet would like to do some private sector forward looking economic stimulus instead of paying more taxes he should instead invest a chunk of his money to have BNSF electrify all it's long distance rail lines. It's a very large capital intensive job that will create jobs in several sectors all over the US from semi skilled labor to very skilled high tech, has long term "green" benefits and would help any supporting US industries catch up competitively in the world market for rail, read infrastructure, projects.

    If you want to prove that the private sector will step up to the plate instead of relying on the government for big ticket things that's a starting point. Right now it's obvious the private sector financial system is either too incompetent to greedy or too cowardly to step up to much of anything right now, which is why the Feds had to step in.

  • Report this Comment On October 13, 2010, at 5:45 PM, aggie9711 wrote:

    You Fools still seem to be ignoring the opposite side of the argument and accepting that the government has to grow bigger and more involved in our lives as a rule. About the only thing I think we might agree on is that every citizen should pay at least some taxes (like say a minimum of $250 a year) to get everyone in on the game.

    How about we take away the "common" fiscal trough Congress has created to fix this "Tragedy of the Commons" rather than force us to pay more to keep making it bigger.

    The biggest tragedy here is, through the government involving itself in the munificence business, true charity that could help those in need productively gets squeezed out. Forcible charity through government force is not charity.

    And to all the posters in the "it's wrong for people to think they can just keep all their income, pay up" crowd, please send me your address so that I may come make my claim on the fruits of your labors. :)

  • Report this Comment On October 13, 2010, at 5:46 PM, GEORGE611 wrote:

    @dfrizzle03

    You miss the point, when a business sells something, they factor in all the costs of making and selling the product, then add a profit to the sale price, so they can make money, the point of being in business is to make money. Well one of those costs are taxes. When a company sets a price, it includes what they pay in taxes on the profits. This is passing along the taxes to you so you pay the corporate tax in the purchase price.

    Read more carefully

  • Report this Comment On October 13, 2010, at 5:48 PM, danoren wrote:

    Lets talk about capital.

    Where do the earnigs of a sub s corporation go?

    In most instances the earnings go to pay down debt the sub s owner has incurred in previous years. If the owner is lucky and his profits are strong enough and his business is growing, he can make additional investments in capital equipment and grow his business. The investments are what requires the entrepeneur to hire additional people. Without these investments, he cannot grow his business and will not hire. Some say that the investment is a write off, so he does not pay taxes on the expense. He can write off a portion of a capital investment, depreciation, but the great majority of it must be written off in future years.

    A sub s owner who reports earning a million dollars to the irs very likely has no cash to show for it. He has used all of his income to pay down a portion of his debt. He does not have savings. He is spending all of his money on his business.

    In some instances even a small increase in taxes makes it impossible for him to make payments as payments must include not just interest expense, not just amortization, but equity. Banks do not lend to borrowers without attempting to insure that they stay ahead.

    Even a non-growing corporation usually needs to replace warn out and obsolete equipment.

    Higher taxes on profits, at least in a capital intensive business, necessarily means fewer highers. The entrepeneur is not being greedy. He simply has less money left over with which to purchase equipment and hire employees.

  • Report this Comment On October 13, 2010, at 5:54 PM, Ravi786 wrote:

    The above article is logically built with sound reasoning addressing all the ills of the american economy. The very core of capitalism says that individual greed and actions will lead to a better economy. It has been proven again and again that it is not the case. It is the duty of government and leaders to ensure that the individual greed and actions do not produce "tragedy of the commons". However the US government has failed to prevent that. It pandered to the wealthy sections of the society and sold the US assetts and future to foreigners. The US needs to cut spending and increase taxes simulteously to sustain itself. So for taxes, every american should pay according to his ability which means that the wealthy need to pay more compared to the common man. It is as simple as that.

  • Report this Comment On October 13, 2010, at 5:54 PM, bloghorn wrote:

    Jared Diamond's book Collapse recounts situation after situation where civilizations collapsed, meaning ceased to exist because those with the most power made decisions that were good for them at the individual level but terrible for everyone else. Our tax and spending situation is like this.

    For what it is worth, we had a surplus after Clinton and deficits after the two Bush presidents. Thinking that the GOP has answers is nuts. They have never had answers. And the powerful rich Republican are acting like those in power in Collapse. They are paying for lobbyists and the media to promote what is in their best interest but what is ruinous for everyone else.

  • Report this Comment On October 13, 2010, at 5:56 PM, mtracy9 wrote:

    "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." --Warren Buffett, CNN Interview, May 25 2005, in arguing the need to raise taxes on the rich

  • Report this Comment On October 13, 2010, at 5:57 PM, dutchmanii wrote:

    Again we have all distractions included here.

    The real problem is the complexity of our TAX code which is written so as the generate the illusion that people like Buffet which has a lot of wealth and maybe not so much INCOME as you would think. Think about a guy like Rush Limbaugh, he buys a big group box to treat his advertisers during the Super Bowl and writes it off as a business expense, even the travel to that game is charged against the expense. Now did Rush write that law? NO he didn't. Is it available for him to take advantage of his TAX situation? YES, just like it is for you as well. Do you think Buffet pays for the food and meeting expense for his corp where ever it is held?? NO, he doesn't he has the meeting but it is written off just like El Rushbo in the above example.

    So how did we get so off track the SUPPOSEDLY reason there are TAXES... you know the typical BS such as build roads/infrastructure, pay for police/protection/military, on and on. Well that all sounds good but in reality there are many entities that most people think get taxed but in reality they don't. Such as Corporations. They don't get taxed because they just pass the expense of doing business on to the consumer of their product or service in the mean time they will have the corportate write offs (under the current system) and pass those super bowl tickets on to you in the end.

    So what's to do. Well stop and think of all the people who don't pay any tax at all. I can name a few, such as Pimps, drug dealers, hookers, and people who do work under the table or other shady means.

    Now what to do? Well that is where you need to educate yourself with this information and no it isn't a Sales Tax, it isn't a Level tax, but it is a fair tax. Check it out here http://www.fairtax.org/site/PageServer

    Just remember, only new items are part of the inclusive taxation in the Fair Tax not used items.

  • Report this Comment On October 13, 2010, at 6:14 PM, ynotc wrote:

    I agree with c5700. The real problem is that government does not behave like a rational person or business. When times are good they spend all of the money and much of it on useless things that are beyond the scope of what it was chartered to do.

    In bad times it rarely cuts much of the budget if any. Instead they find new ways to get in our pocketbook.

    I am not counting on Governement for my retirement and therfore it matters not if I recieve the money but if it is available you bet I am going to take back what was confiscated from me. If Social Security was an investment and analyzed as you do other stock funds no one would invest in or reccomend it.

    Of course there is no money in the system for me anyway because the dollars that I put in today are already being spent. That my friends is called a Ponzi Scheme. This mess will make the derivative problem look like childs play. By some accountings we have unfunded committments in excess of 100 trillion dollars. But I am sure that taxing a few rich guys will solve the problem.

  • Report this Comment On October 13, 2010, at 6:21 PM, scottr8924 wrote:

    Morgan,

    I think you are picking too much on the people who made the comment that Warren could write a check to pay more tax. They know that the problem is not solved by that and it is a tongue-in-cheek comment they are making at best.

    The more compelling argument is whether hiking the tax rate on the "rich" would actually work. I have to say that I cannot see how that would get rid of the deficit by itself. It is debateable if it would even help.

    I am skeptical that higher tax rates forces/causes reinvestment that is beneficial etc. I am also skeptical of the data showing periods of higher rates having a positive impact. I think there are other factors that are in effect.

    I do appreciate his personal (Warren's) willingness to contribute more. It shows some character on his part, but unfortunately the Ponzi scheme isn't eventually going to work.

    The interest bill is going to get ridiculous during my lifetime (next 40 years I hope). We paid over $500 Billion interest from 2007 thru 2008 (and we accrued almost that much more that wasn't paid during that time). A lot can be done with a trillion dollars in two years!!

    It may get to the point that it isn't sustainable. Then what?

  • Report this Comment On October 13, 2010, at 6:23 PM, Thaeger wrote:

    @danoren simply raising the top marginal tax rate would actually encourage companies to reinvest capital into their business--updating technologies, creating value, etc--as the primary tax burden would come from dividends and the like.

    If business is slow though, even if they have gobs of cash burning a hole in their balance sheets, chances are they'll lay workers off in droves just to conserve that cash while waiting for things to pick up. This probably lost us more jobs in the recession than anything else (look at Germany, their unemployment actually _decreased_ during their recession), and now that increased unemployment rate will be affecting our recovery for years.

    Also, people hire new employees when it becomes profitable to do so--namely, because their workload increases in response to an increase in demand for their services/product. If business is doing well enough that they need to hire more bodies, then chances are they'll have enough revenue coming in to afford it.

    ---

    Just look at all the articles lately about share buybacks or the wealth of dividend offerings in less established companies--many companies have cash than ever, and they're just using it to buy back shares, give out dividends, etc, rather than creating wealth or jobs.

    http://www.bloomberg.com/news/2010-09-19/stock-buybacks-surg...

  • Report this Comment On October 13, 2010, at 6:53 PM, rtichy wrote:

    Oh for Pete's sake, Morgan, please stop these discussions entirely. Unfortunately, even here at Motley Fool, the average post on the internet is uneducated, explosive blather. Rather like the Tea Party, really. Nothing is more exciting about the Tea Party than the idea that it's made up of ordinary folks instead of elitist academics or elitist rich people. But that knife cuts 2 ways-- the Tea Party is made up of the average uneducated American who does not know enough to value what he or she gets from his or her government(s), let alone how to value those services.

  • Report this Comment On October 13, 2010, at 7:01 PM, johndog19 wrote:

    Spot on, Morgan.

  • Report this Comment On October 13, 2010, at 7:20 PM, Kilstofte wrote:

    Increasing tax rates on the "wealthy" won't make enough difference in the deficit to have any impact on the economy. The elephant in the deficit room that nobody wants to discuss is the huge and growing military expense part of the budget, which in turn is attributable to a complacent electorate too busy "getting and spending" to learn the impact of this spending on our deficit and then do something about it. Until that happens, our economy and our nation will continue on the path to second class status.

  • Report this Comment On October 13, 2010, at 7:23 PM, DavesHere wrote:

    The tragedy is that our elected representatives, responsible on paper solely for the whole, but chiefly concerned for themselves, will sacrifice the whole and pander to the individual in order to get re-elected. We might bite the bullet if we were shown that there was no other way; we have done so before in times of crisis. But the spineless brats we elect to public office cannot and will not lead. And just in case anyone thinks that some new party will come to our rescue, we have been here before too. Most of those currently in office were reformers, elected when we saw through the B.S. of the last wave of sound-bite grabbing bums. So, who can blame us if we take an every-man-for-himself approach. Nobody wants to be the only one to make the sacrifice.

  • Report this Comment On October 13, 2010, at 7:23 PM, BruinAlum77 wrote:

    One of the biggest problems in this discussion of over taxes on people making more than $250K per year is that no one really defines what a middle class existence is.

    As Thaeger wrote earlier:

    "The economy was never stronger than in the 40s -> 60s, where the top marginal tax rate was actually 90% +."

    Think about what middle class meant back in those days: dad working in the factory, mom at home with the kids; one salary being able to buy a house and put the kids through college. But they lived in a 1500 square foot house, had one car, maybe a television and a cheap Saturday matinee at the movie theater; and the company provided affordable health benefits.

    Now, think about how you and our consumer-driven society define "middle class" in the present day. Does it include a 3000-5000 sq. ft house, cars for each parent and driving age kids, multiple TVs, game systems, DVD players, computers, professional grade kitchen appliances, and constantly eating out?

    We were lucky enough to buy a smaller house (2400 sq ft) at the bottom of the market just after the Northridge earthquake and always took care to live within our means. Otherwise, I have no idea how people can afford to buy a house in L.A. and live a middle class lifestyle making $100K. But seriously, people are crying about struggling with only $250K per year?

    I would love to hear an honest description of your desperate middle class existence.

  • Report this Comment On October 13, 2010, at 7:26 PM, TDL5150 wrote:

    As many have pointed out - I believe there are two issues that I would want to be addressed before willing agree to pay more taxes.

    • Fiscal responsibility - Fiscal responsibility is just as important to governments as it is to corporations and individuals. I take responsibility to manage my finances and I expect both Federal and State governments to do the same.

    • Tax Reform – I don’t have the answer but something needs to be done. One thing I am certain about – is that tax brackets need to be redefined. Living in Southern California – 250k a year for a couple is not rich by any stretch.

    So since I can’t print money and don’t qualify for TARP Funds – clean up your act before asking me for more.

  • Report this Comment On October 13, 2010, at 7:27 PM, Justsomefool1 wrote:

    Anyone having a net worth of more than five million in my opinion is ridiculous. If they can spend that in a lifetime, they are over spending. As an average everyday person, I see men and women everyday that live from paycheck to paycheck supporting their family on $10 an hour or less while we have popular music artists and actors/actresses trying to save people in other countries from poverty.

    Actors, music artists and athletes are all over paid. I don’t know how many times I have seen some popular athlete that has made over 20 million in just a few years file for bankruptcy.

    Minimum wage should be at least twice what it is with our economy. Every time they raise the minimum wage, everything else goes up with it.

    In my opinion, any individual that has a net worth of five million or more should have everything over that five million mark seized and invested into the working families of America. Not put into a fund to save some other country from poverty, but to help our brethren in the United States of America too have that chance at the American dream.

    A group of great minds created the Bill of Rights. Maybe we need to have a new group of great minds from our time that are not politicians come in and take into account the current world we live in and work together to fix our economy.

    I might just be rambling now, but it is nice to express myself through our first amendment 8)

  • Report this Comment On October 13, 2010, at 7:34 PM, LACEYLEE wrote:

    FIRST, I AM NOT WARREN BUFFET. I DO UNDERSTAND THE THEORY OF THE TRAGEDY OF THE COMMONS. NOW HERE IS WHAT IS TRAGIC: MOM BORN IN 1920. PAID INTO SOCIAL SECURITY ALL HER LIFE. DIED AT 63 AND COLLECTED ZERO. IF I AM FORTUNATE TO MAKE IT TO 62, YOU CAN BET YOUR BIPPY THAT I AM GOING TO COLLECT WHAT IS DUE ME. I HAVE WORKED FOR 45 YEARS AND OUR GOVERNMENT EXTRACTED SOCIAL SECURITY TAXES FROM EVERY ONE OF MY PAYCHECKS. DURING MY LIFETIME, I HAVE NEVER COLLECTED A DIME IN WELFARE, UNEMPLOYMENT OR ANY OTHER FEDERAL OR STATE BENEFIT. NOTHING, NANA.

    I HAVE HOWEVER SERVED IN THE MILITARY AND RECEIVED ABOUT $240.00 A MONTH. (1968 DOLLARS) AS COMPENSATION. BUT EVEN UNCLE SAM TAXED THAT TOO.

  • Report this Comment On October 13, 2010, at 7:56 PM, SpiffGriff wrote:

    I think it is a nice gesture for Warren to make a statement like this in the last years of his life...But I truly wonder what the Warren Buffet of the 50's/60's (who built the fortune) would say about it!

  • Report this Comment On October 13, 2010, at 8:16 PM, sprsprt wrote:

    "As far as I know, no one has voluntarily given up their Social Security or Medicare benefits in the name of fiscal discipline..."

    My great-grandfather, who died in 1963 at the age of 85, refused to accept social security. He felt it was an unwarranted handout that would only foster dependence on government.

  • Report this Comment On October 13, 2010, at 8:19 PM, cheesepare wrote:

    Whether it is taxes or charitable giving (ironically, a way of avoiding taxation), Buffet takes on an air of moral superiority. It essentially is his only argument. "I'm willing to pay more so you should (must) as well."

    The reason why some people (not me, btw) are suggesting that Buffett can voluntarily pay more taxes is not because they think he has enough resources to make a serious dent in the deficit. Instead, they're reminding people that Buffett is trying to spend other people's money. He appears to be bored spending his own.

  • Report this Comment On October 13, 2010, at 8:38 PM, tpearse wrote:

    Our income equality in this Country is totally out of whack! No one person needs more than say 1 million dollars in a year to spend invest or otherwise. They just don't spend it.. If a lot more people made a decent living then we would have a lot more spending gone on. If there was better income equality... we wouldn't need all of these public services. I don't like the growing gap between the classes. I don't think people need annual incomes in the millions and I don't think Corporations need annual net incomes in the Billions. I don't know what the solution is as we are so far down the wrong path that it will be hard to correct. For the short term, taxes need to go up for everyone so we can start making a dent in the national debt. I don't want higher taxes but it is the right thing to do!

  • Report this Comment On October 13, 2010, at 8:46 PM, scottr8924 wrote:

    Laceylee, you go ahead and cash those checks. If anyone deserves it you do and thanks for your service.

    Sprsprt, your great-grandfather was a great American and should be commended for the stance he took during his life.

    As far as I am concerned, they can keep the money they have taken from me so far and give it to people like LaceyLee. I'll try to live without it.

    But in exchange can I opt-out??? I didn't think so...Oh well take it anyway, I still don't want it.....

  • Report this Comment On October 13, 2010, at 8:50 PM, xetn wrote:

    The real issue here is the amount and extent of government spending vs the amount of resources to pay for it. Government has no money of its own: only what it is able to steal (tax) from various sources or through borrowing through the issuance of debt. As long as these two sources exit, there is no limit to how much the government will spend and no limit on new ways to spend. And, with the aid of the Federal Reserve, which can create money out of thin air, which drives down the value of the money, government can repay (if it ever does) with much cheaper money. So, the magic formula for a successful political career, is to constantly look for new votes by providing new entitlements. Just look at the growth of government over the last 20 years, or even the last 10 years. We now have over 50 of the citizens receiving some form of government payment.

    As long as these conditions exist, there will be no end of government spending and the need for new taxes.

    The only solution for taxes is to cut spending and that should be drastic cuts. Government spending is competing with the private sector and winning. Every dollar spent by government is one less private sector dollar available for investing (capital formation) and less incentive for job creation and expansion plans of business.

    Unless government begins to drastically cut its spending, we will see a complete collapse of the dollar and a default on our solvereign debt.

  • Report this Comment On October 13, 2010, at 8:52 PM, TheDumbMoney wrote:

    betterlatethnnrvr, you said:

    "Why is $250K considered wealthy? Politics pure and simple. Can's tax the poor (hurts the consituents on the left) and can't tax the rich (hurts donors on both sides).

    The middle class of doctors, laywers, and small business owners get smoked under our tax system."

    Well, sir, to that I say...great quote!

  • Report this Comment On October 13, 2010, at 9:00 PM, Bert31 wrote:

    I don't have the exact figures, but doesn't something like 50% of the population pay 90% of the tax revenues recieved by teh federal government? and 10% pay somethin around 70% of the taxes? With no skin in the game what does have the population care about fiscal responsibility? Isn't paying taxes patriotic?

  • Report this Comment On October 13, 2010, at 9:30 PM, trac1964 wrote:

    Man o man these r great comments--hope somebody makes it down to mine! It is a a simple matter of time-those with the benefit of silver heels having the extra time/resources to manipulate the system, generate more income from investments, real estate etc. that is not diminished by payroll, fica ,ss taxes etc. And meanwhile as decades pass, who gets squeezed but the working class, who actually produces goods and services, like Buffets secretary. My opinion is that we have reached the tipping point on labor and people will stop devaluing the very class that creates GDP. Then their returns for investment will start to produce more wealth and they wont mind paying a little more tax.

  • Report this Comment On October 13, 2010, at 9:51 PM, nemaline wrote:

    What WEB should ask himself and others should ask themselves: Will the government be able to make the most of the tax money received.

    If not, then increased taxation is morally wrong. If so, then bring it on, within reason.

    The government will never be able to use our tax money better than we can to revive the economy, in my opinion. So, logically, it is just a matter of cutting governmental costs.

    Let's cut costs and stop spending on fashion ties for Buffett, and other govermental costs. I am amazed, and nauseated by the still extreme luxurious experienced and expected by our members of Congress. And I don't want to pay for it no more...

  • Report this Comment On October 13, 2010, at 10:28 PM, AZBehr wrote:

    Ok, so Buffet writing a check wouldn't cover it. But he and his friends like Gates, Sr. could raise $500B by making phone calls- prove me wrong.

    Overall I'm sickened by Buffet's lack of comments on government spending. Like local governments whining that police and fire departments budgets will be cut without more tax, I have no sympathy until you show me and the rest of the voters what you refuse to cut. Then let's have a talk to see if taxes really need to be raised, or if the budget deficit can be addressed by cutting spending.

  • Report this Comment On October 13, 2010, at 10:43 PM, peters46 wrote:

    Obama said over 250k was rich. Buffet, talking about the rich is talking about the top 2% of income (earners?) who actually take in more than the other 98% combined. I guess that 2% starts between 10 and 100m. Talking about marginal tax rate - if you are taliing about $10m, up to that point you would pay exactly the same as everyone else and the marginal rate would apply only to the amount over $10m. Buffet was against getting rid of the estate tax from the beginning. That was also passed by Democrats besides Republicans, because they were tired of hearing about the loss of family farms. A family farm would be successful and build up to a value of 1, 2, or 3m, and would then have to be broken up or sold to pay the estate taxes. The estate tax could be much more fair and still not be gotten rid of, if it applied only to estates valued at more than $10m. And that would apply to the value over $10m, with the first $10m not taxed.

  • Report this Comment On October 13, 2010, at 10:56 PM, newbie19since09 wrote:

    aggie9711 wrote about true charity and forced charity. The problem with much of what is considered "true charity" only goes to those who believe the same as the donor.

    dutchmanii talked about the Fair Tax and said only new items would be taxed. In his article he talked about hookers. Obviously they wouldn't be taxed as they don't fall in the new category.

  • Report this Comment On October 13, 2010, at 11:09 PM, amt77 wrote:

    "Yet in their own part in the tragedy, they put their careers at grave risk by so doing. ". The first thing we need to do is put Fair Elections Act into play. That will end some corruption and abuse...

  • Report this Comment On October 14, 2010, at 12:24 AM, predfern wrote:

    Here are some points from the latest Thomas Sowell article:

    http://www.investors.com/NewsAndAnalysis/Article.aspx?id=550...

    1) "it would take a very poor index mutual fund to do worse than Social Security, even if the investor retires when the stock market is down."

    2) "It has been shown so many times, in many administrations, as well as in other countries, that reductions in tax rates do not imply lower tax revenues. Often it has meant more tax revenues, when people change their behavior in response to tax cuts, and the resulting increase in economic activity generates higher incomes."

  • Report this Comment On October 14, 2010, at 12:30 AM, dukebond wrote:

    It's clear that more taxes need to be paid for the level of services or government delivers. But some services also probably need to be trimmed. It's not as simple as just raise taxes or cut spending, we have to do both to get out of debt. I don't think the upper middle class (where I would rank myself) pays alot of Fed Gov't taxes. In 2008 and 2009 after deductions,.... I paid 6% of AGI and 4% of AGI. That's really not alot. People should stop complaining about paying taxes and stop being so selfish. Of course there are going to be some programs you pay for that you don't use, but there are some you probably get an amazing return from. It's all about compromises. We are a society and need to work together as a team to get out of this mess.

    With regards to Social Security, why can't we start with just tweaking the knobs a little bit. Reduce annual increases a bit, raise the starting age a little over a period of years. Raise the contribution limit a bit more. Having a program like Social Security is good for society or else your going to find yourself surround by many more poor elderly and that is just a depressing thought and one that I'm willing to pay a little to not happen. If there is too much separation between the haves and have nots, our society will rot away. Common programs help to give us common goals and help to address common needs. If you are overly wealthy and don't need to use common programs, then great -- don't. But don't expect to pay less tax.

  • Report this Comment On October 14, 2010, at 1:14 AM, logiclibrary wrote:

    Your commentary correctly points out that the only feasible solution to our tax problem is to grow our way out of this mess. With that as a backdrop, would Warren Buffetts' billions have more of an impact by investing in growing companies or paying for government? I think we all know the answer to that question. So Warren, keep your billions and invest in our collective future. Giving more of your wealth to the government will neither solve our budget crisis nor grow our economy.

  • Report this Comment On October 14, 2010, at 1:21 AM, richvermil wrote:

    Milton Friedman explained that deficits are not the problem. It is the total amount of government spending as a percentage of GDP that is debilitating.

    Don't spend the money. Free up enterprise. Use government only to provide a hospitible environment for investment, business and yes, profits. After all, the more profits and income the more tax revenue. All this without raising the rate of taxation.

    "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

    Alexis de Tocqueville

  • Report this Comment On October 14, 2010, at 1:46 AM, dbman5 wrote:

    I'd really like to know where this "50% of people pay no taxes" comes from. That would mean that 50% of the people are living in abject poverty - making less than their allowable deduction. I can believe that 50% don't pay any *additional* taxes when they file but I do think that the vast majority of workers are paying withholding taxes in every paycheck - and that counts as "taxes" just as much as what you pay at the time you file.

    As for rich folks buying enough yachts, planes, etc. to support the rest of us, that's just crazy talk. I did some internet research and found that the total boat building industry employees 57,000 people and that includes even the small boats. I couldn't find good info on airplane manufacturing employees because it was mostly commercial but Cessna and Piper combined was about 20,000 then add another 10,000 for Gulfstream and let's assume another 10,000 for Bombardier's jet manufacturing (they do a lot of other things as well so the total company is much larger). We have now employed 97,000 people BUT many of them are building things for the middle class - small boats and small planes. But just to be generous I'll give you the 97,000 people because all those tax cuts for the rich are going to really increase the demand because there will be so many more rich people. Heck, I'll even double that and say they can now employ 200,000 people (yeah, right!). So the big question is, "Now that we've employed 0.13% of the population by increasing the fancy boat/plane demand by a factor of at least 4, what do the other 150,000,000+ people do?"

    I'm sorry but there is no way that demand from 2% of the population can support the other 98%. We can't have a strong economy without a strong middle class to provide the demand for products.

  • Report this Comment On October 14, 2010, at 3:18 AM, xetn wrote:

    Perhaps this will end the debate:

    http://www.lewrockwell.com/north/north893.html

    Read it all the way through; it is worth it.

  • Report this Comment On October 14, 2010, at 5:50 AM, Zumba wrote:

    Politicians tell voters what they want to hear, and voters are more than happy to listen. Both voters and our political leaders need to realize that you cannot have both lower taxes and higher benefits and lower deficits. You can't have it all - the problem is, we all like to pretend that we can.

  • Report this Comment On October 14, 2010, at 6:59 AM, BruinAlum77 wrote:

    The link to LewRockwell.com is an article by Gary North.

    The suppose the article ends the debate if we define debate as an argument where each side uses logic and facts to prove their assertions. His article about the coming Great Default and America's rosy future has the same kind of intellectual consistency and fact-based relevance of any religious screed.

    I love his list of U.S. advantages. It sounds like a David Letterman top ten for knowing when you're talking to someone whose political agenda is based on the End of Days and the Rapture:

    5. English

    7. Dying trade unions

    8. Widespread literacy (we have 20-25% functional illiteracy in this country - is he suggesting that we're doing well?)

    9. Freedom of the press

    10. Internet replacing the press

    11. Widespread gun ownership

    12. Growing skepticism regarding Congress

    15. Facebook

    16. Politicians who are on the defensive

    17. Political gridlock in Washington

    18. Talk radio

    19. An escape hatch: bankruptcy laws

    Finally, anyone who writes a 20 volume series called "An Economic Commentary on the Bible," and makes all of his books available for free download has about the same relevance as those evangelicals who knock on your door to give you a copy of "The Watch Tower."

  • Report this Comment On October 14, 2010, at 8:40 AM, SAMSCREEK wrote:

    I have read all 77 responses, and I think most people agree that something needs to change.

    I am assuming that the responses are from all over the country. As long as the politicians keep us splintered and spread out to the point that we can not effectively change anything, they will keep on doing the same old things.

    We need to get back to some of the things that made this country great in the beginning. We also need to make new changes to our laws and taxes.

    I live in the Middle Tennessee area and we are about to elect a new Republican Governor and hopefully two new Republican congressmen.......

    BUT none of these politicans ran on the platforn of trying to change the governments system of collecting taxes or term limits, neither have the Democrat candidates.

    I know, I know, I said we can't change things, but we can. A lot will change this election, but how many candidates across the country are running on the platform of changing the tax system or term limits?

    I am not saying that the Republicans or Democrats are the better party, but the individual that is running. Until we get candidates that are willing to run on these issues and stick to their guns after arriving in Washington, we're just flapping in the wind.

  • Report this Comment On October 14, 2010, at 8:54 AM, howboutme wrote:

    W.H.

    Nice article but forget that!

    I have spent my lifetime sacrificing enjoyment in this life, watching what I buy, fiscally responsible for my own budget and retirement while watching 50% of the rest of the world do whatever they want when they want to. NOW your telling me to stand along side you and give you more of my already responsible life so you can continue on wasting it all away just like you always have?? I would rather take on the role of God for a moment and take that 50%, slap them across the face and tell them to wake up and get their act together or they will spend the rest of their life unprotected.

    As for paying taxes, I always tell every democrat that says taxes should be raised......This year, add more to your tax return and give the government more. You guys always want to pay more in but never do it until your forced to. WHAT kind of spirit is that when your constantly asking for it? STAND UP LIKE A MAN, SET AN EXAMPLE AND PAY MORE IN YOUR TAXES THIS YEAR. Maybe the rest of the world will follow.

    If you morons knew anything of economics, you will never have one complete middle class and no upper/lower classes. IT IS AN IMPOSSIBILITY. What would people work towards? what would make the lazy hold their ground?

  • Report this Comment On October 14, 2010, at 10:08 AM, wymanmoney wrote:

    i beleive the first thing to do is get rid of the big goverment (corruption)no more special treatment for these guys. they should have the same as us commoners. pay their own retirement,medical and no free money for the rest of their lifes. then they might actually care about us commoners.the goverments need to regulate not use are money to take over failed buisnes. stop printing paper money with nothing to back it. this is against the law and in the constitution it says any political leader that counterfits are money faces the death penalty. check that out. the problem is it is only agaist the law if commoners do it . i dont know how we the people let this get this bad.

  • Report this Comment On October 14, 2010, at 10:10 AM, jeb67 wrote:

    Warren Buffet supports higher taxes, but does everything he can to aviod them. He publically supports the Death tax, but makes sure that his succession plan gives the lion share of his money to the Gates foundation wich takes it away from the goverment/taxpayer. We can argue over the honor of these actions or the tragedy of the commons, but the reality is that the country is BK and can no longer afford to subsidize charity to this extent. We ALL need to pay more and the the governent needs to spend less otherwise it is all going ot end very badly.

  • Report this Comment On October 14, 2010, at 10:15 AM, CentexDem wrote:

    As a percentage of GNP, taxes are at historical lows. Also, our so-called progressive tax rates thanks to Reagan and Bush II are the least progressive in decades. Medicare and Social Security demands on the federal budget are increasing. Trickle down tax cuts to the wealthy does not work. The wealth and wage gap is now a chasm. It is way past time for America to eliminate waste from the federal budget, give meaningful tax relief to most Americans (starting with no income taxes on family incomes of less than $100,000 per year funded by a greater array of increasingly progressive tax rates on higher incomes according to ability to pay. Simply returning to the first round of Reagan tax breaks would be a good start to solving our federal budget crises. Keep low capital gains tax rates on small business to create jobs. American prosperity in America is waining because big banks, big oil, Wall Street and transnational corporations outsourcing American jobs buy elections resulting in a "democratic deficit" where the genuine needs and legitimate demands of most Americans are ignored by Congress in favor of the big business elites of this country where mergers create these collusive oligarchies that destroy free markets, true capitalism, and the American dream. Need proof? Simply study the collaborate efforts of the Federal Reserve with the biggest 12 banks in our country and the collusive efforts of the Bush II GOP controlled Congresses with the likes of Enron, AIG, and Goldman Sachs.

  • Report this Comment On October 14, 2010, at 10:23 AM, lctycoon wrote:

    "Your commentary correctly points out that the only feasible solution to our tax problem is to grow our way out of this mess. With that as a backdrop, would Warren Buffetts' billions have more of an impact by investing in growing companies or paying for government? I think we all know the answer to that question. So Warren, keep your billions and invest in our collective future. Giving more of your wealth to the government will neither solve our budget crisis nor grow our economy."

    Growing our way out of this mess would require that the USA maintain double-digit GDP growth rates for the next 75 years. The highest growth rate the USA has ever achieved in the post-war period is 3.2% in 1999. What are the odds that we can pull off double-digit growth for more than 75 years? I think I'd have a better chance winning the PowerBall 30 times in a row.

  • Report this Comment On October 14, 2010, at 10:27 AM, lctycoon wrote:

    "As a percentage of GNP, taxes are at historical lows. Also, our so-called progressive tax rates thanks to Reagan and Bush II are the least progressive in decades."

    Straight from the IRS: The top 1% of the population pays 40% of all total taxes in the country and earns 22.5% of income. The top 5% pays 60% of all taxes collected, and the top 50% pays 97% of all taxes collected.

    How is that not progressive?

  • Report this Comment On October 14, 2010, at 10:58 AM, danoren wrote:

    @thaeger

    You are talking about c-corps.

    S corps do not operate that way.

    Higher marginal tax will not incent a business to invest in new capital.

    Sub-s corps pay a higher initial tax than c-corps and are not taxed on distributions. Most sub-s corps are not paying out distributions. They are investing everything. The question they ask themselves is, do I pay down debt or do I purchase capital and incur greater debt?

    Even in a poor economy there is incentive to purchase more effiecient equipment. But it is very discouraging to reinvest capital and go further in debt knowing that it is going to take even longer to pay off your debts due to increased taxes.

    Would you invest $5 million on a deprecaiting asset knowing it was going to take 10 years to pay it back instead of 7?

    Or would you hunker down and earn less but pay down debt?

    It doesn't really matter what you would do because the bank likely won't lend you the money on a 10 years amortization.

  • Report this Comment On October 14, 2010, at 11:18 AM, john795806 wrote:

    I am beginning to wonder if democracy as practiced in America has any future. In this country, our politicians are so beholden to special interest groups that the common good is no longer considered. So, what is good for oil companies, insurance companies, health care/big pharma, and big banks rules. You can't get any legislation that promotes the common good through Congress. We pay more and get less for our health care than almost any developed nation, but can't get any semblance of a public health system going--though it has worked the world over. We can't make any strides against reducing our carbon footprint--while China and Europe are investing big money into alternative energy. And the great deregulation of the banking industry almost brought down the global economy--and yet we can't get decent regulations back in place. We whine about the national debt, but don't want to pay taxes! We cut spending on education while engaging in military activities that do little or nothing to promote national security--once again, a big military lobby and special interests are involved. Our real problem is that we have a semblance of democracy--where people vote and their vote counts--but not the reality of democracy--because the legislators we choose from are all beholden to special interests who really run the show.

    I fear for our country, my friends. A lot of the rest of the world is getting it together. We are not.

  • Report this Comment On October 14, 2010, at 11:20 AM, lctycoon wrote:

    Danoren,

    It is partly true with C-Corps as well. While you can invest with pretax money, the return needs to be higher in order for you to accept the project if taxes are higher.

    For example, you require a return of 10% on every investment after taxes in order to be willing to risk the money on that project due to the risk. The higher taxes are (since this is an after-tax return), the higher the before-tax return needs to be. So as a result, higher corporate taxes actually discourage business investment because more and more projects will be stopped because they won't deliver enough return.

  • Report this Comment On October 14, 2010, at 11:22 AM, RavenManiac1968 wrote:

    I find it so very pathetic that some people seem to think that "middle class" means households making $250k to $500k. Hilarious - what neighborhood do you live in? Here are some 2005 tax stats from the IRS website (granted it is 5 yrs old - but things haven't changed that much).

    NOTE - this represents a total of 52,505,729 MFJ tax returns-which would represent mostly two wage earners:

    1. AGI $0-$15k 8.2% (i'm guessing really old folks)

    2. AGI $15k-$30k 13.5%

    3. AGI $30k-$50k 17.6%

    4. AGI $50k-$100k 37.5%

    5. AGI $100k-$200k 17.5%

    6. AGI $200+ 5.7%

    This tells us that 37.5% of all MFJ returns submitted to the IRS in 2005 has AGIs between $50k and $100k. These are the middle income Americans. Can any of you imagine trying to raise a family of 4 on less than $50k? These folks are the janitors, grocery store cash register clerks, office clerks, receptionists, office cleaning crews, nursing aides, and elder care assistants. These are the forgotten masses that rich people ignore. These are the masses that all called the working poor and are in desperate need of pay raises. Imagine what a $10k pay raise would mean to someone earning $40k a year. That would be a 25% pay increase!!

    bettrlatethannever - actually thinks that middle class means between $250k and $500k and defined them as doctors, lawyers and sm business owners. Less than 5.7% of the MFJ tax returns filed during 2005 were for households with an AGI greater than $200k. Dude what world do you live in?

    And to those misinformed clowns saying that poor people don't pay income taxes - their income taxes are withheld from their paychecks like everyone elses. If you GROSSED $40k a year you have $6k withheld from your paycheck just in Fed income tax in addition to State income taxes and FICA!! Their net after tax take home pay is around is right around $30 per year - 75% of their gross!! They are paying income tax, Uncle Sam just recognizes that they are struggling and shouldn't have to pay AGAIN on April 15th.

    Households making over $100k should be grateful and not greedy. I make $120k and my wife makes $55k parttime. We're lucky and know it. I'm grateful for my good fortune and will not forget the masses.

  • Report this Comment On October 14, 2010, at 11:28 AM, lctycoon wrote:

    "And to those misinformed clowns saying that poor people don't pay income taxes - their income taxes are withheld from their paychecks like everyone elses. If you GROSSED $40k a year you have $6k withheld from your paycheck just in Fed income tax in addition to State income taxes and FICA!! Their net after tax take home pay is around is right around $30 per year - 75% of their gross!! They are paying income tax, Uncle Sam just recognizes that they are struggling and shouldn't have to pay AGAIN on April 15th."

    That data comes from the IRS. The taxes are with held, yes. But it ALL comes back in the form of a refund. That's 47%. They still pay FICA taxes, however. Many people that get the earned income tax credit actually get back more in a refund than they paid in.

  • Report this Comment On October 14, 2010, at 11:45 AM, bjnumb9 wrote:

    A rational voice amongst an irrational mob crying "less taxes, less taxes." Good article.

  • Report this Comment On October 14, 2010, at 12:05 PM, jrj90620 wrote:

    As long as you have this confiscatory "progress" tax system you will always have a divided society,where the ones paying nothing vote for too much govt since they aren't paying for it.The ones doing the paying,rightfully,feel they are being ripped off.They read all the stories about how govt wastes whatever they receive in taxes.What would be more fair is a flat,same %, tax,with no deductions,paid by all.The same exact % for everyone.Anyone,such as Buffett,could volunteer to pay more and that amount could be used to lower the rate for lower incomes.

  • Report this Comment On October 14, 2010, at 12:44 PM, onefoolbehind wrote:

    A cleverer than thou Fool above opined that "the average uneducated American who does not know enough to value what he or she gets from his or her government(s), let alone how to value those services."

    Rotting infrastructure collapsing in the night. Pork lavished out to Congressional districts for projects that serve no real public good. A war on poverty that actually perpetuates poverty. A public education system that in some areas rivals the third world. Wars galore. Health insurance premiums of $500 or per month. A higher education system funded by indebtedness. An unprotected, wide open border. An expensive, yet utterly ineffectual "war on drugs". The government did have a good track record of keeping foreign enemies from our shores, but even that ended on 9/11.

    That's a lot of value.

    The sentiment among those uneducated Americans like myself who object to paying more than half our incomes to federal, state, and local government in taxes and other revenue raising gimmicks may be basic, but it's not as ignorant as the more tyrannical Fools seem to believe. It's simply a matter of objecting to getting ripped off, not unlike the sentiment of a hapless consumer duped into buying something broken, but is still compelled to make the payments. Sell something that works and the buyer won't bristle so much at making the payments.

    An individual who can look at the growth of our federal government and conclude that we are getting lots of value is the one in need of education. Then again, there are legions of Americans (and others) either working for the government or making a living off its largess, some of whom must surely be Fools.

  • Report this Comment On October 14, 2010, at 1:12 PM, ddepperman wrote:

    Actually, since the planet is hurtling toward great degradation--the major food fish species down to 10% of replaceable stocks and declining rapidly, fresh water disappearing(you can desalinate, but that leaves large oversaline regions of ocean inimical to most sea creatures, coral reefs in decline, soil depleted in all countries, oil possibly already peaked, build up of CO2 and other greeenhouise gases, plastic in oceans causing likely extinction of many critters including wnadering and other albatross, turtles, and even plankton--to act in any manner to mitigate these things, even though your contribution is minute in grand scheme of things, that is reasonable behavior. Perhaps it all depends on how far advance it has gotten. If it doesn't get us it will screw our kids. And it is possible and even likely that the vast majority of humans will suffer and die because of this biocide.

    But go ahead and keep on taking(like there's no tomorrow.)

    Ddepperman

  • Report this Comment On October 14, 2010, at 1:46 PM, RavenManiac1968 wrote:

    "That data comes from the IRS. The taxes are with held, yes. But it ALL comes back in the form of a refund."

    Let's actually fill out a 1040A for a MFJ both 50yrs old with no kids no EIC.

    line 7 - gross wages... 40,000

    line 24a - std ded....... -11,400

    line 26-persl exempt... -7,300

    line 27-taxable inc.......21,300

    line 28/37-tax due...... 2,364 (tax table)

    line 38/44 tax pmts..... 2,107 (Pub 15)

    line 48 amt owed.......... 257

    By actually filling out a form - the MFJ taxpayer earning $40k with no kids and no EIC would owe an additional $257. Since they have no kids and their AGI is more than $18k they aren't eligible for the EIC.

    Where does the IRS really say that it ALL comes back? I'd like to see that citation.

    However, by actually filling out the forms and not just buying into the FoxNews / Rush Limbaugh malarkey - you'll find that poor people really don't have it as great and easy as many rich people purport.

  • Report this Comment On October 14, 2010, at 2:06 PM, nlook wrote:

    Are you mad? You're argument is very short of using the "tragedy of the commons" to justify all our tyranny. People aren't smart enough to think for the common good, so we employ the much more trustworthy government to steal our money and spend it for the common good? Are you nuts? If you've spent any time looking at our history, you'd notice that our government spending is way out of line. It's ruinous. And it shows no signs of improving -- just take a look at the latest health care "reform" BILL (pun intended) ... increased spending during the worst financial crisis in recent history!

    Your argument fails to take into account that the government will not always spend for the common good. Just as the "common" can ruin their own society, so can (and DOES) government. There are numerous examples all throughout history.

    I'm not saying taxing is not good. It is definitely necessary to run a proper society. But why the hell should I support raising taxes when the government does not spend it correctly ... scratch that ... why the hell should I support raising taxes when the government spends it worse than a bunch of school girls with daddy's credit card?

    Give me a break. Lower taxes, rein in the spending, open up the markets, release the stranglehold on business ... we need a freer society, not more taxes.

  • Report this Comment On October 14, 2010, at 2:17 PM, nlook wrote:

    And since when did the family making $250k become at all comparable to someone like Warren Buffet, or any other billionaire, or multi-millionaire, or even millionaire? You think that just because someone hits this magical $250k, all of a sudden they have no financial problems and can afford to foot a greater tax bill than people with lower incomes?

    Come on.

  • Report this Comment On October 14, 2010, at 2:28 PM, RavenManiac1968 wrote:

    Spending needs to be reigned in. Why not remove Congress from the whole budget process. Just let the President (executive branch) prepare and execute the budget. Let Congress (legislative branch) pass laws and use GAO as the "congressional watchdog"? That should would put a cramp in corporate lobbying efforts. It would also make our gov't more accountable, the President would be responsible for the budget and over spending rather than 700+ congressmen.

  • Report this Comment On October 14, 2010, at 2:31 PM, TMFHousel wrote:

    Well, I was hoping this article would cause some controversy and debate, and I haven't been disappointed. Thanks to everyone who has chimed in!

  • Report this Comment On October 14, 2010, at 4:31 PM, DMac304 wrote:

    Cashing Soc Sec Checks debilitating? Where would the economy be today without this monthly infusion of cash that is almost universally spent? A more stable force at supporting the economy than giving the rich a tax break from what is allready the lowest tax rate of their lifetime. Social Security is needed now more than ever for people and a constant cash flow for the economy. We need 21st Century Wellness Health models to cut costs and Military spending lowered and spent efficiently. Foreign aid costs far less and is more productive and predictable than war. Health and Military Spending are what must be addressed. Other Govt programs are small change. Thanks for the Krugman link: http://www.nytimes.com/2010/10/11/opinion/11krugman.html?ref...

  • Report this Comment On October 14, 2010, at 4:50 PM, nlook wrote:

    Oh my god. Are you serious DMac? If you are even attempting to make an argument that Social Security is GOOD for the economy because of the "infusion of cash" into the economy, then how, in the same breathe, can you make an argument that Military spending needs to be reigned in? Military spending itself is a massive "infusion of cash" into the economy -- where do you think the Military spends the money? Into the U.S. Economy! They buy planes, guns, materials, etc. They give soldiers salaries who in turn spend the money in the U.S. Economy. And when they're overseas, they send the money back home, likely into the pockets of their spouses, who in turn spend it in the U.S. Economy. It's not like we just take the money and burn it when we get to a foreign country.

    You also completely ignore the other side of the argument: what would happen with the social security money if it was not taken from the people in the first place? Honestly, who knows -- that's a near impossible question to answer ... but here's a good shot ... people would have more money to spend. And when people have more money to spend, they're likely to actually spend it. And if they end up saving it instead, then the banks now have more money to lend to businesses. Woohoo. Everybody wins. It's not like we're living in the days of people hording cash under their mattresses.

    The negative effects of social security FAR outweigh any positives derived from some "monthly infusion of cash into the economy." Yikes.

    But any arguments about Social Security spending or Military spending are completely moot because we actually don't have the money to either support our current levels of Military spending OR our current levels of Social Security spending. Sadly, your hopeful "monthly infusion of cash" is unsustainable, so it needs to stop.

    But I suppose you'd just ask the government to print more money to save us from this mess?

  • Report this Comment On October 14, 2010, at 4:55 PM, lilywells wrote:

    The 'tragedy' with the article is its defeatist attitude and inability to consider alternatives. Articulating solutions to the tragedy of the commons is one of the main problems of political discourse. It always amazes me that as individuals the far right always insist on their piece of the 'commons' pie, whether it be Social Security, Medicare, yet begrudge paying for it or allowing anyone else having a piece... hypocrites.

    A couple of solutions include:

    1.) governmental regulations can limit the amount of a common good available for use by any individual.

    2.) convert common good into private property, giving the new owner an incentive to enforce its sustainability. Effectively, this is what took place in the English Inclosure Acts.

    3.) In 1940 Ludwig von Mises wrote concerning the problem:

    If land is not owned by anybody, although legal formalism may call it public property, it is used without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns do not bother about the later effects of their mode of exploitation. For them depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output.

    Psychologist Dennis Fox used a number, what is now termed "Dunbar's number", to take a new look at the tragedy of the commons. In a 1985 paper titled "Psychology, Ideology, Utopia, & the Commons", he stated "Edney (1980, 1981a) also argued that long-term solutions will require, among a number of other approaches, breaking down commons into smaller segments. He reviewed experimental data showing that cooperative behavior is indeed more common in smaller groups. After estimating that "the upper limit for a simple, self-contained, sustaining, well-functioning commons [sic] may be as low as 150 people" (1981a, p. 27).

    Again, myself included, we are the ME generation...

  • Report this Comment On October 14, 2010, at 5:00 PM, arturoenduro wrote:

    @xetn re: On October 13, 2010, at 8:50 PM, xetn wrote "The real issue here is the amount and extent of government spending vs the amount of resources to pay for it. Government has no money of its own: only what it is able to steal (tax) from various sources or through borrowing through the issuance of debt" and "Government spending is competing with the private sector and winning. Every dollar spent by government is one less private sector dollar available for investing (capital formation) and less incentive for job creation and expansion plans of business."

    You have it exactly backwards. Under a gold standard, this would normally be true. Today, it's dead wrong, and it's threatening serious economic harm (and has done plenty of harm in the past). Every dollar of sovereign govt deficits is a dollar that becomes available for use in the private sector -- to save, invest, spend, gift, pay taxes, whatever (sovereign govts include the US, Japan, UK, and Europe if/when it wants to be). Govt budget deficits are actually the source of the money that you later use to pay taxes. Money does not appear magically in the private sector, nor do we dig it out of the ground as we once did. So technically, the federal govt isn't "stealing" dollars, it's just taking back dollars that it already spent into existence, then (usually) running them through a shredder.

    I'll grant you that the federal govt can do great harm thru taxation, can create regulatory and other uncertainties that negatively impact private sector economic activity, and can even "steal" real resources. But federal spending and deficits are not the problem. They are as important today as gold production was under the gold standard.

    www.moslereconomics.com

    Counter Insurgency, Deficit Terrorist Unit

  • Report this Comment On October 14, 2010, at 5:03 PM, c5700 wrote:

    The tragedy of the Tragedy of the Commons (tTOC) is on display. People who have yet to grasp the fundamentals a serious problem and the failures of the attempted solution are trying to shame/dupe others into staying the course.

    To wit, a self-described "frustrated independent" objected (to my comments above) that "....merely by looking at jobs today, you can't say the stimulous (sic) has created few, because obviously things could be a lot worse than they are...your comment is bloviatory opinon....not fact based".

    I would point out that the unemployment rate 5/2009 was 9.4%. It has yet to get lower. Right now, underemployment is north of 17%.

    This, well more than a year after Obama had confidentally predicted his stimulus package would keep the rate below 8%.

    If an Obama apologist is going to stipulate that maybe few jobs were actually created, but, many were saved, so be content.........well, I would say we cannot be content with merely saving jobs. We need to grow our economy and create new ones.

    A professed reader of Paul Krugman (supposed economist who attributes Obama's stimulus failure to it not being large enough) writes "this administration simply has NOT "thrown" money at this thing at anywhere near the rate critics are saying".

    Yes, the money has been thrown around......at many things beyond "shovel ready jobs" (turtle tunnels, universitiy research, teachers, police depts, Social Security COLAs to dead people, presidential golf outings) . [Two interesting side notes: 1) once the stimulus money runs out we see beneficiaries such as teachers and police are being laid off again -----because the underlying economy still is not sound. 2) it is being reported that Obama is no longer sure that shovel ready jobs exist]. Anyway, this mentality ignores the trillion dollar defecits that have straddled the citizens of this country. And with few new jobs to show for it, this is a price we cannot afford to pay.

    The tTOC is that one is going to be shamed/duped into giving the stimulus more time and more money to work (maybe 7/1/2011 will start the Summer of Recovery?). One may become willing to pay more taxes --to shoulder his "fair share" of the burden.

    We need to address the fundamental problem: this plan is a failure. The unemployment rate shows the failure. The defecits show the cost of this failure. We do not need to raise taxes on anybody in order to provide more stimulus. We need to end this nonsense now and do things differently.

    c5700

  • Report this Comment On October 14, 2010, at 5:05 PM, nlook wrote:

    And another point for Morgan Housal. The tragedy of the commons piece you quoted says:

    "A player in the human game of life isn't some abstract entity called 'everybody.' We are all separate individuals, each with our own aims and purposes."

    Let me just reword that for you:

    "A player in the political game of government isn't some abstract entity called 'government.' They are all separate individuals, each with their own aims and purposes."

    Case and point: rampant pork spending.

    And then you go on to say:

    "Basically, we sometimes rationally look after our own interests even when doing so ruins society as a whole."

    Here's another rewording:

    "Basically, politicians sometimes rationally look after their own interests even when doing so ruins society as a whole."

    It's not like the "government" is some all mighty entity that looks after the interests of "everybody" without regard to their own selfishness. Where did this blind trust come from?

    In fact, this facet of human behavior was openly and widely known to our founding fathers, which is why they set up the government the way they did: separation of powers and federalism. People, generally, look after their own interests, and power, generally, corrupts. So when you put the two together, you have a giant mess. Thankfully, all the power was divided ... back then. Now, thanks to the savior of modern history FDR, and a bunch of other wonderful individuals (both then and now), this delicate system of power-division has been eroded. We now have the executive government creating regulatory agencies that are effectively passing laws. The Supreme Court is redefining the constitution time and time again. The Federal government is telling States how to run their own societies. The list goes on.

    The tragedy of the commons? How about the tragedy of our country.

  • Report this Comment On October 14, 2010, at 5:10 PM, arturoenduro wrote:

    @ nlook re On October 14, 2010, at 4:50 PM, nlook wrote: "Oh my god. Are you serious DMac?"

    You guys are committing the same error, from different partisan perspectives. Yes, social security benefits and military spending are both "infusions" of money. But govt spending is the one and only source of money in a fiat system; taxes tax back some amount of prior spending; and deficits need to remain large enough to accomodate the private sector's demand for money.

    It is totally appropriate to have political arguments over where govt expenditures should be directed. But whatever your political persuasion, blind allegiance to budget 'discipline' or surpluses is not just foolish, it's downright harmful.

    Re: "But I suppose you'd just ask the government to print more money to save us from this mess?"

    Yes. That's where money comes from. Would you have them not "print" any? If so, you need to realize that in the 19th century, you would have been arguing to shut down gold mine production. And not even the most devout Austerians can make that argument with a straight face.

    www.moslereconomics.com

    Counter Insurgency, Deficit Terrorist Unit

  • Report this Comment On October 14, 2010, at 5:20 PM, nlook wrote:

    Arturoenduro: "But federal spending and deficits are not the problem. They are as important today as gold production was under the gold standard."

    Here's a big difference ... gold is tangible and finite. You can hold it, and there is only so much of it in the world. That's why (among other things) it's so valuable. Do you think gold would be as valuable as it is if we could just print gold? Do gold prices go unchanged when a new massive supply of gold is discovered somewhere in the world?

    The same thing happens with money. When you print money and circulate that in the economy, particularly in excess, you devalue the currency. Maybe it's not a $1 to $1 exact ratio, but there is nonetheless a ratio. So when that magical $1 gets used in the economy, we have ... again ... devaluation.

    Sure leverage can be good. Deficits, debts, federal spending ... they're not always bad. But there is a point when it goes too far. And there will be quite dire consequences when they do.

  • Report this Comment On October 14, 2010, at 5:22 PM, path4865 wrote:

    Most rich people are business owners or run businesses or are professional people such as doctors, lawyers etc. and when they charge for their services or write their contracts they are taking in to account the amount of taxes they are going to pay. So rich people don't actually pay taxes what happens is they become defacto tax collectors and those taxes are trickled down to the comsumer of thos goods and services. So "tax the rich" really means tax everyone.

  • Report this Comment On October 14, 2010, at 5:31 PM, nlook wrote:

    Arturoenduro,

    Again, gold is FINITE, tangible. You cannot have out of control gold mining to a point of no return. Eventually you will hit the end of the gold mines and all of the gold in the world will be on the table. That is not the case with printing money.

    Fiat currency is based upon some arbitrary belief in value of the currency. It is not finite, it fluctuates. And part of that fluctuation comes from how much money is in existence. And if there is too much, the value of the currency decreases. If you don't believe this (which is exactly what you're saying when applaud printing more money), then why doesn't the government just give everybody one trillion dollars? Boom. Solved. All the debts go away. The government can even print enough money to pay off the debt and to make up for their yearly deficits. Yeah. Easy. And the value of our currency? It'll remain the same right?

    Why do you suppose gold is hitting all time highs? Quantitative easing -- printing money and then injecting it into the economy.

    And where is this "you guys" coming from? Don't assume I'm a Democrat or a Republican. They are effectively one in the same and I'm neither.

  • Report this Comment On October 14, 2010, at 5:33 PM, nlook wrote:

    path4865: bravo buddy. One of the most intelligent things said in this comment section.

  • Report this Comment On October 14, 2010, at 6:43 PM, scottr8924 wrote:

    nlook: good post at 5:05 PM. Couldn't have said it better myself!!!

    We can service some national debt, but I think we are really testing the levels right now. Our interest payments are going to get ridiculous if we keep this up. God help us if the rate has to go up because of our inability to pay it back.

    I disagree with some of the posts that seem to say that we can run this debt up without any consequences or that it is actually helpful to go above current levels.

    I can't do that with my business. I can't do that with my personal finances.

    According to the letter I received from the SS system explaining my future benefits, they already recognize the challenge to pay what is promised to me by the time I retire.

    That proves that it is not in control and the SS system is in danger of going insolvent without taxing our next generation at higher levels.

    .

  • Report this Comment On October 14, 2010, at 7:10 PM, KVoce2 wrote:

    You are SO right! I tried to explain this, in so many ways, to a relative who blithely said "Why doesn't he just write a check? No one's stopping him."

    People do SO love a simplistic answer to a complex problem. And although I agree with you, I doubt I'll send back my Social Security check, when I finally start collecting, after I've taken out what I put in, which takes approximately 3 years.

  • Report this Comment On October 14, 2010, at 8:09 PM, johndog19 wrote:

    path4865: It's misleading to say that taxing the rich is the same as taxing everyone. Your theory is akin to saying that rich people charge whatever they want for their services. If that were true, they'd set their rates arbitrarily high. But it's not true; supply and demand dictates the prices people can charge for services, whatever their income level The tax rate figures in, but certainly not in the way you suggest.

    The effect of taxes doesn't trickle down as quickly as the taxes themselves, no more than the profits do (and they certainly don't). If there are price adjustments to be made due to taxation, it's because the market allows it, and you aren't going to see a dollar for dollar inflation across the market just because the tax rate goes up. An increase in tax rate typically means a *decrease* in buyer-side cash, not an increase. So, when rich people have less money left over after taxes, they're more likely to pay *less* for services, not more. People whose taxes haven't changed don't suddenly have more money, so they aren't likely to pay more for services. Neither of these facts will create an environment in which it is easy for a rich professional to raise their rates and still get the same quantity of work.

    So the tax will weigh in on the market forces, and it will likely have an impact on the prices for things, but that impact would be much less than the direct impact of the tax bill. The progressive tax is not merely a myth. If it was, rich people would stop fighting for the tax cuts and just say "Whatever, go ahead and raise my taxes, I'll just raise my rates. Next time spend less money, ok?". But they don't; instead they say "if you're going to raise taxes, raise them for everyone, not just people like me".

  • Report this Comment On October 14, 2010, at 10:13 PM, Ingebrigt wrote:

    Right on! I agree with you totally. When I was in Ireland recently, I was told they get taxed at 40% of their income, and that's probably true for most of the world. Americans who don't want to pay for social services, education, and other things that make our country strong are selfish and making a big mistake for the future.

  • Report this Comment On October 15, 2010, at 8:01 AM, dlomax77 wrote:

    I will earn $18,000 this year and I will pay income taxes on $12,000 of it. It isn't the poor who don't pay taxes, it's the lower and middle class parents. If you really want to lower America's birthrate, be my guest. We've got some neighbors who would love to infuse some youth into our labor force.

  • Report this Comment On October 15, 2010, at 1:46 PM, belate wrote:

    I firmly believe there is only one sure-fire way out

    of this mess and that is to tax our way out and be

    the wiser for it. And the sooner, the better.

  • Report this Comment On October 15, 2010, at 4:06 PM, scottr8924 wrote:

    I am very sad when I read some of the comments. I am very discouraged by some of them. I personally am not very optimistic about the future of the US.

    There's too much class envy, jealousy, and selfishness.

    We ultimately will not survive it.

    It is very, very sad................

  • Report this Comment On October 15, 2010, at 5:55 PM, etdiii wrote:

    It seems to me the argument falls into the trap of believing there is only one way to address the problem. Raise taxes! Perhaps higher taxes would be more acceptable to a broader population if there were some iron clad way to address the spending side of the deficit. Talk about your commons tragedy out of the other side of your mouth!

    As to Mr Buffett's position I find it contains elements of hypocrisy. He would be more believable if he pushed for a tax on his capital, which is far, far in excess of his income. Second, since he has put his surplus wealth in a charitable trust, it is clear he does not trust the government officials to spend his money in a manner consistent with his own views of what is important. Third, it's a bit like the owner of the pacific ocean saying, yes the government can pull up a tank wagon and fill it up with my water but if you wealth is a more like a swimming pool, that tank wagon full will mean no more swimming. Its all about proportion. Mr. Buffett could give up 90% of his wealth and still be filthy rich. No so 90+% of the top 3% of income earners in the USA.

    I personally think Mr Buffett is more about personal publicity than he is about solving a problem.

  • Report this Comment On October 15, 2010, at 7:23 PM, mjtri wrote:

    It would be fun to rate some of these comments similar to Yahoo!

    People talk about taxes and spending, both of which are very important. I'd also like to suggest that people consider ethics a little more. Lying, self serving career politicians are a big part of the problem. I can see that in my Northern Virginia Congressional race where the incumbent will take phrases absurdly out of context and then claim that is what his opponent wants to do. We need honest politicians who tell us the truth and try to meet their promises.

  • Report this Comment On October 15, 2010, at 7:59 PM, etdiii wrote:

    It seems to me that the practice of listing comments in order received is ineffective because to see a new and perhaps insightful comment one must scroll through endless old and usually out of date comments. Why not list comment with the most recent at the top?

    It's like I have to read page after page of mindless words to find the most recent. Yes some of the earlier words add value but having read them once, twice, thrice, why do I need to review them again. Perhaps you think your subscribers have dementia and can't remember today what they read yesterday or the day before or the day before that?

    Perhaps all you care about is the near term knee-jerk response to some of your less than thoughtful positions?

  • Report this Comment On October 16, 2010, at 11:53 AM, HINTE wrote:

    It's hard to be respectful of someone who thinks that more money will solve the problem. He doesn't run his own business that way why does he think that Congress should be able to spend unrestricted. We need to get back to the Constitution and God. This paying people to do nothing for two years and give them food stamps or rather a charge card so they don't feel like they are on the dole is not helping them, in fact it's making criples of them. And maybe I am reading your position wrong but it sounds like you are also part of the problem.

  • Report this Comment On October 16, 2010, at 7:22 PM, JohnJay60 wrote:

    Decades ago, the biggest political question at each major election was 'do you want a little more governement help (with higher taxes) or less government (with lower taxes)?'

    Sadly, President Reagan, who was a political mastermind - in the worst sense of the word - recognize that the unpleasant choice could be avoided and said "I can give you a bigger government than you're willing to pay for - with deficit spending." GW Bush continued this policy with a vengeance.

    The average voter doesn't understand that the gap between taxes and services was artificially created for political reasons, and voters punish anyone who attempts to close that gap with a combination of tax increases and spending cuts.

    We HAD a balanced budget in 2000. President Bush campaigned on an explicit policy of eliminating the surplus needed to reduce our national debt and returning it to America's wealthiest families. Shame on anyone who supports politicians who would rather borrow money than face up to aligning taxes and income in balance.

  • Report this Comment On October 16, 2010, at 8:48 PM, underdone wrote:

    Did you know that, from a whole economy perpective, you can not make a profit from the exchange rate mechanism. Only individuals and organisations can at the expense of (or in service for) others. Given this constraint on how any financial system works for any economy one would have thought that politicians would be more sensible in the way they manage economies because sentiment and behaviour does contain an element of predictability.

    So from my perspective the tradgedy is that the politians are either influenced by their ego and desire for power or end up having to compromise their values to acheive any progress.

  • Report this Comment On October 17, 2010, at 8:35 AM, teharr wrote:

    The reason Buffet paying more taxes will not help is because we don't have a tax problem, we have a spending problem.

    The reason we can't help global warming is because it is not caused by man. There is no credible science that it is caused by man. So good luck with that.

    The reality is that we need to stop thinking that a bunch of politicians can solve anything. Seriously, even if global warming was caused by man, why would anyone with half a brain look to a politician for guidance?

    The biggest problem we face as a nation is that our government is a criminal mob. You might call it the tragedy of the elitists. Are you looking to these criminals to solve our problems? Shame on you.

  • Report this Comment On October 17, 2010, at 9:42 AM, Tygered wrote:

    To me, you sound a little bit like Ayn Rand there with that "tragedy of the commons." I think a lot of people do things for the common good. I in fact, do drive less, and wear sweaters. I take my bags to the grocery store and I buy the CFL light bulbs. I really don't buy the argument that we as individuals should pay the least and grab the most. Although that is probably true of most of the 300 million or so spoiled brats in this country.

    I also disagree with all the people who say social security is driving this country to ruin. I paid money every pay check into social security and now that I'm collecting it, I hope to live long enough to get every single dime back. It was my money in the first place earned by my working for the corporate swine that rule this country. People should read "Animal Farm" and "1984" instead of watching the faux noise on Fox radio. Then perhaps they would know what is really happening in this once great country.

    So I'm not too impressed by your article, but at least you got a lot of people talking about the problems.

  • Report this Comment On October 17, 2010, at 11:32 AM, susan400 wrote:

    to the author, by saying BUFFETT can make a donation, isn't anyone saying he will cover the deficit.

    WB can send in all he wants, we don't need him determining policy.

    the productive already pay a disproportionate amount ,, thy produce and are responsible,

    now WB wants to hose them more ?

    bad policy

  • Report this Comment On October 17, 2010, at 11:34 AM, rmondave2 wrote:

    Hello ALL: nlook has it absolutely correct, he nailed it so well: Worth reading again,

    Are you mad? You're argument is very short of using the "tragedy of the commons" to justify all our tyranny. People aren't smart enough to think for the common good, so we employ the much more trustworthy government to steal our money and spend it for the common good? Are you nuts? If you've spent any time looking at our history, you'd notice that our government spending is way out of line. It's ruinous. And it shows no signs of improving -- just take a look at the latest health care "reform" BILL (pun intended) ... increased spending during the worst financial crisis in recent history!

    Your argument fails to take into account that the government will not always spend for the common good. Just as the "common" can ruin their own society, so can (and DOES) government. There are numerous examples all throughout history.

    I'm not saying taxing is not good. It is definitely necessary to run a proper society. But why the hell should I support raising taxes when the government does not spend it correctly ... scratch that ... why the hell should I support raising taxes when the government spends it worse than a bunch of school girls with daddy's credit card?

    Give me a break. Lower taxes, rein in the spending, open up the markets, release the stranglehold on business ... we need a freer society, not more taxes.

  • Report this Comment On October 18, 2010, at 1:44 AM, MKA1965 wrote:

    Buffet, is looked up on by the media and business media and investors as a god. It has taken him how many years to build his fortune? Gates, did it in half the time and really created something not bought something. Niether, have any business spouting off about taxes, charity or anything that relates to the common citizen of the USA, they have and do take advantage of the tax code and their sway with Washington to get what they want.. So forget them, they are not the real America, we are, the commoner. give me taxation with representation not taxation by Washington and the riches mans choosing. Who died and left Buffet king?

  • Report this Comment On October 18, 2010, at 6:56 PM, FloydsBoys wrote:

    The thing is in the numbers.

    Say we started some time ago when an average

    worker earned $100 per week & top earner made 40 times as much or $4,000 per week.

    Difference $3,900.

    Now say that we have some pay raises & say every one gets 10% more. $10 to $400.00

    Now do this one more time. $11.00 to 440.00

    This has gone on for decades.

    Now go forward to a time when the richer man is making several hundred times as much as the average worker.

    There are people who think that this is good for our country. They think that they will one day be making all of that money. Little do they realize that only a few may ever really join the few at the top. So what do they do but lend their voice & support to the cry of the haves about how unfair it is to pay taxes.

    It is one thing for the average person to spend their money in the market place where most of the money goes to the rich but now the rich control the government & decry having to spend or do any thing that would make life a bit better for the average person.

    Where is that line that says some deserve more because they have more & others don't even

    deserve what little they have. Where is the middle?

  • Report this Comment On October 24, 2010, at 3:58 PM, gman5556 wrote:

    Here is the real issue. After a clever allocation of assets, wealthy people (income over 250K, around a million in assets) end up paying a far less proportion of their income to tax.

    The effective tax rates for the rich and super rich, like Buffett, are far lower than the effective tax rates than the middle class. Thats it right there.

  • Report this Comment On August 17, 2011, at 8:35 AM, speedyo14 wrote:

    By collecting 30 trillion in back taxes from expatriates who have stuffed accounts in offshore banks, The whole deficit of 14 trillion will be paid down. Social security accounts would be reimbursed,

    and universal health care would be free to all people in this country. So, just do it and make America a country of social and economic justice.

    Stop the spin!

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