The billionaire vs. free-riding multimillionaires

Love this account of a pissing match between Warren Buffett and Mitch McConnell.  The Senator from Kentucky has been urging the Sage of Omaha to make voluntary contributions to the Treasury if he felt he was undertaxed.  Buffett has now responded that he’ll match any such contributions made by Republican Senators.

This dialogue makes in a different form an argument offered by that raving lefty Milton Friedman.  Voluntary contributions to reduce poverty (or do any of the other things we rely on the government to do) are insufficient, because everyone would be willing to pay his/her share only if s/he could be sure that everyone else would be willing to pay his/her share.  Otherwise, no dice.

Doubtless McConnell will ignore Buffett’s challenge and continue his nonsensical bluster about Buffett’s freedom to pay extra if he feels “guilty” about his low tax rate.  But the point isn’t, of course, how Buffett feels, or even what he does—it’s what everyone else does.  And if McConnell and his buddies don’t donate to the Treasury, then they are poster children for the free-rider problem—thereby proving Buffett right: philanthropy is not sufficient and taxation is necessary.

H/T the indispensable Rick Cohen at The Nonprofit Quarterly.

Comments

  1. NCG says

    Hurrah for Warren!! He is not just a financial genius but also a gifted debater. Better than a lot of the folks we pay to do that full-time.

    However, a small quibble: “because everyone would be willing to pay his/her share only if s/he could be sure that everyone else would be willing to pay his/her share. Otherwise, no dice.” is true but not the whole story.

    I maintain that a big part of people’s reluctance stems from their belief that most poor people they don’t know have done something wrong or they wouldn’t be poor and thus, they do not deserve help. Another perfect circle of neo-economic theory. If they had “merit,” the market would have rewarded them.

    People support church-based help and not government help because they know their church will only attract people just like them.

  2. Ebenezer Scrooge says

    If Friedman’s theory were all that there were to the matter, nobody would give a cent to charity. But a fair number of people give a fair amount of money. (Of course, the targets of their charity are often kind of bizarre–the last thing the world needs is another $100 million going to some business school. And I’ve always been convinced that if rockstars were more heavily involved in charitable giving, the NIH would have a National Institute of Acne.)
    Which just goes to show that Econ 101 relies on a mighty thin theory of human behavior.

  3. Warren Terra says

    It’s probably also relevant that Buffett has contributed something like $30 billion to the Gates Foundation, with the stipulation that it must all be spent on trying to aid the needy within a decade of his death, not hoarded in a self-perpetuating manner. He’s hardly averse to aiding the needy.

    But even if the US weren’t in deficit, Buffett’s criticism of our tax structure would still be important. We currently tax those most able to pay more lightly than we tax those less able to pay, and the proportion of our nation’s wealth controlled by the richest is vastly higher than it was a generation ago. Once the concentration of wealth gets to be too great, it’s hard to imagine how we could have a just society.

    • Warren Terra says

      Oh, and it’s probably relevant that the Republican Presidential nominee (in waiting) makes a lot of money, and to the (unknown) extent that he pays taxes on any of it, it’ll be at 15%, and with no payroll taxes. Meanwhile, almost every working person in the country is paying 16% of every penny they earn in payroll taxes, and most are paying income taxe rates higher than Romney’s capital gains taxes on their incomes to boot. Romney is probably paying half as much in taxes as the average American (per dollar of income), and refuses to release the figures that would allow us to know.

    • Brett Bellmore says

      “We currently tax those most able to pay more lightly than we tax those less able to pay,”

      No, we don’t. Objectively, absolutely, no, we don’t. We currently tax those most able to pay ENORMOUSLY more heavily than we tax those less able to pay. Indeed, I would wager that Warren Buffet pays far more in taxes each year than my entire lifetime earnings, let alone my taxes in any given year.

      • Warren Terra says

        Brett, you’re not really this dumb. Why do you play as if you were? This is about the tax rate, not the tax amount. Sure, Buffett pays more in taxes than you do – but he probably pays far less in taxes-per-income. Quite possibly he pays half what you do, per income. Do you really fail to understand that?

        • Brett Bellmore says

          No, it is about the tax amount. The point here is that whether you think taxes should scale according income, ability to pay, or cost of services provided, (Exactly the point in contention between the parties.) a guy paying 10,000 times the taxes I do is not magically paying “less taxes” than I am, just because you think he should pay even more.

          You may think Warrent Buffet should pay more taxes. HE may think it. Neither of these preferences does anything to change the objective fact that he does already pay more taxes than most people, by a huge margin.

          Use of percentages rather than absolute quantities is just a way of disgusing this, in order to establish a rhetorical bias in favor of leving enormously greater taxes on wealthy people.

          • Mike S says

            Brett, how does your focus on tax amounts deal with rising inequality? We could lower tax rates for the rich but then go through another 4 decades of wealth and income shifting to the top and have the rich paying a larger tax amount than today even with lower rates. Would they still be paying “too much”?

          • navarro says

            brett, if you truly are as igorant as your argument is making you sound and not just making jokes at the expense of everyone elses’ patience, those people with greater wealth depend much more on the services and common goods that governments provides than those in lower income brackets. someone in the 1% depends on the government’s ability to maintain, supervise, and regulate transportation, communication, financial, and energy networks than those in the 99%. as someone who is probably within the top 5% of household income, i know i receive vastly more benefits from public services than friends or relatives who aren’t so well off. even those who might be on food stamps and are receiving direct payments from the government aren’t getting the value i get from what the government does. i personally feel that i am undertaxed as are others in my financial situation.

          • liberal says

            “Use of percentages rather than absolute quantities is just a way of disgusing this, in order to establish a rhetorical bias in favor of leving enormously greater taxes on wealthy people.”

            Yawn. Your entire comment is just a way of attempting to disguise the fact that most of the wealth held by the truly rich was acquired by “legalized theft,” aka collecting economic rents via government-granted privileges, and hence (based on the beneficiary principle of taxation, which you seem to call “cost of services provided”) can be fairly taxed at onerous levels.

        • Tony P. says

          Warren Terra, Brett is obviously not dumb — he merely has a notion of “fairness” that is like Euclid’s 5th Axiom: a postulate you can adopt or NOT adopt. You get a logical, self-consistent geometry either way. Whether your resulting geometry maps the “real” world or not is a different question.

          By Brett’s postulate, a DEAD FLAT income tax rate would still be “unfair” because Warren Buffett would still pay more dollars in taxes than Brett pays. There is no arguing with postulates. All we can do is outvote the Brett Bellmores of the world. There’s not much hope of reforming them.

          –TP

          • Suzii says

            But if Brett thinks that’s unfair, he’s free to write a check to the Treasury for as many dollars as Buffett pays, isn’t he?

  4. Basilisc says

    Nice zinger by Buffett, but it still misses the point.

    The point is that taxes aren’t an “expression” of anything. Government spending is the issue. Once the government, through legitimate (small-d) democratic means, decides that it will spend a certain amount of money on some good, service, transfer, etc, then the money has to come from somewhere. It could come from taxes on the rich, taxes on the poor, or (through borrowing) delayed taxes on the rich or poor, but it will be financed by taxes. The only question is who pays for it. McConnell, by being a legislator in a government that has decided to spend $x, has already implicitly asked the American people (himself included) to spend $x, one way or another, in taxes. If he would like us to have a system where the rich only pay taxes if, and to the extent to which, they feel like it, then he is ipso facto asking the non-rich to pay the rest. And in doing so he is being a dick.

    • liberal says

      “The point is that taxes aren’t an “expression” of anything. Government spending is the issue.”

      Absolutely false. The government hands out many benefits to certain privileged parties, providing them with economic rents. (The prime one is ownership of land.) If the government taxes away those economic rents and disburses the proceeds to the population, then that’s an expression of fairness and justice.

  5. Basilisc says

    Sorry, should clarify that last post. What I meant is that McConnell is implicitly either advocating a system in which the tax obligations of non-rich persons are directly dependent on the willingness or non-willingness of rich persons to be charitable, or advocating a system in which the spending decisions of government are directly dependent on the willingness or non-willingness of rich persons to be charitable. And neither of these is a system I would want to be part of.

  6. MobiusKlein says

    But don’t the (R) set see the poor as freeloaders? That’s the gist of the 47% line, where the 47% are said not to contribute.

    • Brett Bellmore says

      Yes, they do. Because they don’t define “freeloading” as “Paying less than that dude over there thinks you ought to be paying.”, but instead something more like, “Paying less than what you’re getting costs.”

      • Mike S says

        Given that the far-fight is very deeply confused about a great many economic issues why should we believe the (R) set is correct in saying the poor are paying less than the cost of what they are receiving?

      • Bard the Somewhat Grim says

        Brett, I assume you’re trying to say that the poor receive more in “government assistance” than the rich because the former get food stamps or Medicaid or whatever to help them stay alive while the unfairly imposed-upon rich do not. However, you neglect the much larger but less obvious benefits the rich derive from having a (barely) functioning legal system, enforceable property rights, etc. that those odious and horribly unfair taxes (<–that last bit is sarcasm, by the way, Brett) pay for. This has been pointed out many times on this site. I learn things from reading here, even occasionally from you. Please try to make the same effort.

      • MobiusKlein says

        Then the sick, disabled, and elderly are all “freeloaders” since they pay less that what they are receiving costs.

        Folks who receive disaster relief are “freeloaders” too, then.
        A very pinched vision of modern society.

        • Phil says

          Hell, folks who *drive their cars on the roads* are freeloaders, since the gas tax doesn’t even come CLOSE to covering the costs of road maintenance and building. Which makes Brett, of course, a freeloader.

        • Brett Bellmore says

          You may think it pinched, but at least it doesn’t warp the concept of “freeloading” beyond all recognition. The term certainly does not refer to people who aren’t paying for something somebody else gets.

          • MobiusKlein says

            so the lord and the serf should pay equally towards the defense of the kingdom?
            To the contrary, I say the lord should pay quite a bit more, as they have more to benefit, more to lose.

          • Brett Bellmore says

            So, you think there are lords and serfs in the US? Well, I think so, too, and you’re complaining about “freeloading” because some of the serfs aren’t giving their lords, the people running the government, enough money. THEY are the “lords” in this context, and the rest of us are getting sick of them and their apologists.

            But my main point here is one of terminology. We might disagree about a lot, but we can’t even have an intelligible argument if we’re not speaking the same language. And “freeloader” just does not mean somebody who fails to carry 15,000 other people’s weight, instead of just 10,000 other people’s weight. It means somebody who doesn’t carry their own weight.

      • liberal says

        No, they define “freeloading” as “paying less than what you’re getting, unless you’re a rich collector of economic rents, or a farmer or other resident of a rural area.”

  7. bobbyp says

    I shall gladly write that check once some conservative tells me which government services they shall forswear in order to “reduce spending”.

    • Barry says

      “I shall gladly write that check once some conservative tells me which government services they shall forswear in order to “reduce spending”.”

      I’ll write a check when I see the GOP take a financial hit on a cause they like, because ‘we can’t afford it’.

        • Barry says

          Which is pretty f*cking huge, because both the Iraqis and the Afghanis messed with ours.

          OTOH, it looks like Mitt has a few children to spare for a five-year hitch in BackofBeyondistan.

  8. says

    I like Kelly’s argument although I suspect it won’t gain traction with the 40% of the voting population that can’t name the current Vice President. You know, the folks who are actually going to decide who is the next President of the Oligarchy. To move those folks it will take something much more visceral.

    Of course for me (and probably for you) the sordid sight of billionaires trading public challenges to each other over taxation is a measure of just how bone-sick this country is. But unlike many of you, I don’t think of Buffet as *our good billionaire*. True I don’t consider him to be one of the many rogue billionaires (Why hasn’t anybody written a book about them? We live in the “Era of Rogue Billionaires”), but I don’t fawn over Warren. He is no Saint Billionaire. He was against the regulation of Credit Default Swaps, and then there is this:

    http://brucekrasting.blogspot.com/2011/12/another-sweet-deal-for-buffett-who-pays.html

    So I take Warren with a ton of salted suspicion. If anything he is “The Shrewd Billionaire”. That is to suggest, he understands that a stable middle class will help preserve his fortune. In that light his “tax me please” pose is just another hedge against the future. All of which of course, makes him seem utterly virtuous when measured against the Rogue Billionaires who don’t give a damn about anything human.

    Questions for further study:

    How many billionaires are currently working on side projects to give millionaires a suborbital joy ride into space and simultaneously do the work of lifting US astronauts up to the ISS?
    How much *taxpayer money* is subsidizing these billionaire efforts to *privatize the profits* of all future space faring?

  9. says

    @koreyel: I don’t venerate Buffett either; the “Sage of Omaha” reference was just a rhetorical flourish. But as NCG says, his skill in turning the conversation back on the Republicans is a boon to progressive-taxation fans everywhere.

  10. Beth in OR says

    As I live in a group from which I benefit directly and indirectly, I am not opposed to contributing my fair share. Large Group Plans can achieve the best prices with the broadest coverage- Single Payer Health Care is one example.

    My gripe is the capture of our group’s financial investment focus. It is not sane to allow your home to fall into disrepair, use costly old-fashioned appliances,create hazardous conditions which threaten survival, or starve your family, much less force some of them to live in the back yard or the woods beyond town (out of your sight).

    I don’t personally care how the ridiculously wealthy choose to live. I care that they do not proportionately or fairly contribute to the group’s pot, whining that they’re “special”. And of course there is always this kind of their manipulative thing:

    http://www.washingtonmonthly.com/political-animal/2012_01/penny_wise_pound_foolish034749.php?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+washingtonmonthly%2Frss+%28Political+Animal+at+Washington+Monthly%29