Some Thoughts on Warren Buffet's "Stop Coddling the Super-Rich"

August 16, 2011 11:23 AM

On Sunday Warren Buffet wrote in the New York Times:

...I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77 -- shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off...

Buffet's observations bring to mind some other interesting observations about taxes and tax policy:
  • Throughout American history, the periods of greatest economic expansion were preceded by expansions of private investment, which were always preceded by public spending in infrastructure and human capacity. Take for example what happened in the decades following World War II. There were two nations that led the world in economic growth. They were the same two nations that, because of limitations of their ability to fund a standing army, were forced to spend the greatest percentage of their national wealth on infrastructure, education, and industrialization. Those nations are Japan and West Germany.
  • The most progressive of the three major taxes is the income tax. There is no good argument to be made that so long as health care, non-prepared food, and shelter are not taxed, that the sales tax is more progressive than the property tax.
  • Wisconsin cities, particularly Madison, have some of the highest property tax rates in the country.
  • The advantage of collecting taxes at the federal, or even state level as opposed to the local level is that it more fairly redistributes the revenues over a larger base. That in turn, results in a more equitable distribution of the cost of services that know no municipal or state boundaries. Examples of those services would be environmental controls, housing programs in a mobile society, and transportation where the benefits accrue to those who benefit from others taking the bus, train, or riding their bicycles.
  • When the higher levels of government cut spending and reduce taxes, local units of government are forced to suffer the consequences of the reduced services and often greater costs in other areas. A perfect example is the federal government ignoring the needs of soldiers with mental health issues, or the closing of facilities that treat substance abusers. An individual in need can run up local police, fire, and health costs of over $100,000 annually.
A final thought from Mr. Buffett:

...And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation...

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