Tag Archives: taxes

The Buffet Rule In Ebonics




If this doesn’t make sense, or if it made you want to hear the (awesome) song again:

California Already Has The ‘Buffet Rule’

The LA Times has an article explaining that California has had an extra tax bracket on super-rich for decades. If California were a country, its economy would be the 8th largest in the world: ahead of Brazil, Spain, Canada, India, Russia and Australia, and not far behind Italy and the U.K. So looking at their tax system should be a decent barometer for the federal tax system. The interesting stuff:

  • The top 1% of tax payers pay somewhere in the ballpark of 35-50% of California’s income taxes, as opposed to 38-40% of federal taxes. The reason for the wide range is the volatility of the stock market: since rich people make a lot of their money from investments in the stock market, in 2007 they paid 48% of California’s income taxes, but in 2009 after the recession hit, the figure went down to 37%. California’s tax revenue consequently dipped 25%, and they have been in a financial crisis ever since.
  • The top 10% pay 72% of the California taxes, as opposed to 70% of the federal ones.

California's Flag


So really, the Buffet Rule doesn’t seem like it does much. And California’s rule even counts capital gain as regular income, unlike the federal rule. Also, California’s tax figures don’t include the federal payroll FICA tax for Social Security and Medicare that eats up an additional 5% of not-rich people’s income. So if it wasn’t for those two differences, even more of the federal taxes would come from the rich.

The sad thing is that once non-income taxes are taken into account — sales taxes, vehicle licenses, alcohol — the poor pay a bigger part of their earnings in taxes than the rich. The bottom 20% in California pay 11% of their income in taxes, while the top 1% only pay 8% .

From The LA Times and Tax Foundation

Hungary Introduces Misguided Fat Tax

At the beginning of the month, a new law went into effect in Hungary which adds a 10 Forint tax (about 5 cents) to junk food, “products with high sugar, salt, and/or caffeine”. The stated reason for this tax is their appalling 18.8% obesity rate (which is still lower than the lowest American state), so the extra millions this tax will generate will go to the state health care system, because according to their Prime Minister, “those who live unhealthily have to contribute more”.


Hungarian dobos torte, from the Café Gerbeaud in Budapest


All of which would be well and good, if not for the fact that healthcare for fat people is cheaper. The biggest healthcare costs are associated with old age, when regardless of how healthy you are, you’re on all kinds of pills and in and out of the hospital more than the movie theater. And while fat people do cost more in healthcare up to old age, the fact is they die at a younger age than healthy people. The result is that over their lifetime, healthy people cost about 420k$ while obese people only cost 370k$. So what the Hungarian government is doing via this tax is exactly the opposite of what they want: they’re adding more costs to their healthcare system by creating an incentive to be fit.

Now, is it bad to be healthy and fit? Of course not. It’s just their reasoning that’s backwards. If they were actually being altruistic and said “we don’t want our population being fat because… ewww. And we’re willing to pay higher healthcare costs for it”, that would make perfect sense. But taxing fat people because they cost the healthcare system more is like putting an air travel tax on housewives instead of business men.

Hungarian Parliament Building on the Danube


To be fair to Hungary, it’s not the only country that taxes junk food — it’s just the newest, and their law is the most comprehensive. But Denmark, Finland, Switzerland, Austria and other countries tax things like soda and candy and ban trans fats.

And on a different note, this kind of story is a big part of why many Americans are against a national healthcare system: once the government is responsible for the costs of healthcare, it can also pass laws to lower those costs. At least half of Americans don’t like their government also doubling as their nanny and telling them they can’t eat Pringles because trans fats have (erroneously) been banned to keep their health costs down.

A government big enough to give you everything you want is a government big enough to take from you everything you have. (Gerald Ford)

Not that the lack of a healthcare system is much of a deterrent — New York City, Philadelphia and other places in the US already ban trans fats. And the federal government has been wrongly banning things for a century; for example, absinthe was banned from 1912 to 2007 because it caused epilepsy or hallucinations or madness, depending on who you asked, when in reality it does none of those things, or anything particularly bad.

From Spiegel Online, via Reddit and Neatorama

College Kids Like Wealth Redistribution, Dislike GPA Redistribution

Fox News has a story that for a moment, makes you think you’re reading The Onion: one guy is going around college campuses asking students (and filming them) to support an initiative to redistribute some of the GPA of the top 10% of students to those who aren’t able to get GPAs that meet graduation requirements. This latter group would be made up of students who maybe have to work in addition to being a student, have a learning disability, or a really hard major.

The idea is that most students who have a 4.0 or a 3.9 don’t truly need that high of a GPA to get a job after college: they could get a pretty good job with a 3.5 or a 3.6; but students with a 2.5 could definitely use a boost to a 2.8 or even a 3.0. To the top students, the small drop in GPA won’t affect their lives that much, but to the bottom students, the small increase could mean the difference between working at Walmart or at a bank.

Most students in the video disliked this idea because they worked hard for their grades and don’t think it’s fair for someone else to benefit from their hard work. One student would have been for the proposal, if the program was voluntary and students could donate their GPAs instead of having them automatically redistributed by the college. But the vast majority were against it and at the same time for wealth redistribution, because GPAs are different than money. No word on how one set of made-up numbers is different from the other.

From Exposing Leftists, via Fox News


Response To Warren Buffet’s Calculations

The Cato Institute took exception to Warren Buffett’s editorial in the New York Times on Sunday, where he complained about only paying 17% in federal income tax, and no Social Security or FICA taxes. Their points:

  • The 17% he’s paying on capital gains and dividends is doubly-taxed — both the corporation Buffett invested in and Buffett himself pay taxes on the same money
  • When Warren Buffett dies, the Estate Tax will take 45% of his assets
  • Buffet doesn’t pay Social Security tax, because Social Security is not meant to be a redistribution of wealth, rather it’s supposed to be forced savings for retirement. In other words, what you get back is based on what you paid into it, so you can keep at somewhat of the same lifestyle level during retirement. Based on that philosophy, it’s ludicrous to make the rich pay into Social Security, just to guarantee their rich lifestyle when they’re old. However, that philosophy probably comes as a surprise to a lot of people who do think that Social Security is a redistribution of wealth, like welfare.

In related news, The Onion reports that President Obama is proposing a tax on the meanest 2% of the population.

From The Cato Institute, The Onion and someecards

Warren Buffett Wants Higher Taxes On The Super Rich

In a move that shouldn’t be that surprising from someone who promised to donate 99% of his wealth to charity, Warren Buffett, the third-richest person in the world and staunch Obama supporter, wrote an editorial in The New York Times on Sunday mocking the Tea Party’s refusal to raise taxes on the super-rich. His main point is that their belief in Reaganomics and trickle-down theory is unsubstantiated in fact, because a lot more jobs were added in the 1980s and ’90s when taxes were a lot higher on the rich, than have been in the past decade. And on top of that, he personally has never met the investor that quit investing due to the tax rate.

Warren Buffett and President Obama at the Oval Office in July 2010


Buffett also says the tax rate is unfair to the middle class because a lot of the super-rich either don’t work or just don’t get a paycheck like normal people, so while they get taxed on what income they make from interest, capital gains and what not, they don’t get hit with the Social Security and FICA taxes that everyone else does. What this amounts to is that the super-rich pay around 15% in taxes, while the average American pays around 25%. For example, he only paid 17% in taxes last year (on 40 million$ in earnings), while the other, less wealthy, people in his office averaged twice as much, at 36%. And from 1992 to 2008, the average tax rate on the 400 richest Americans dropped from 29.2% to 21.5%. His suggestion to level the playing field: create two new tax brackets, one starting at a million dollars per year and another one starting at ten. And tax those people a lot.

No word on the reason he doesn’t care if the feds Robin Hood all his money: whether it’s because he’s 80 and not long for this earth, or because he’s already giving all his money away to charity. In either case, it’s going to be hard for the other 399 super-rich people to see this editorial as altruistic rather than self-serving, coming from someone who has nothing to lose and everything to gain by being generous in his old age. And it’s going to be hard for Congress to justify imposing not just an equal effective tax rate on the rich, but a much lower one.

Update: The Cato Institute responded to Buffett’s editorial.

From The New York Times, via NPR