Saturday, April 4, 2009

Even Buffett Isn't Perfect: Chapter 9

The author goes on a full scale attack of Buffett's position on taxes.

To set the background, Buffett believes the rich should pay a higher percentage of their income in taxes. He argues this because they can afford it, while others who are less well off can really make use of the money they pay in taxes. Buffett also believes in high estate taxes. Why tax living people, who could use the money to improve their lives, when you can tax those who can no longer gain from their material wealth?

Janjigian attacks Buffett on the death tax issue by pointing to the fact that Buffett is giving most of his estate away, and therefore will not pay much of a death tax himself. It seems strange to attack Buffett's own activities: even though Buffett is arguing for higher estate taxes, surely he can make his own decisions within the rules that currently exist. The author also quotes a couple of economists that believe a higher estate tax is unfair and would cause wasteful spending.

The chapter is surprisingly lacking a discussion of the standard economic argument for flat taxes (where the rich pay a similar percentage to the poor) which is incentive driven. By allowing workers to keep more of what they earn, the most productive workers are encouraged to work more, which benefits the entire society due to their value add. Of course, this leads to a higher disparity between the rich and the poor which is unpopular politically.

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