71 comments

World’s richest people are actually in favor of higher taxes

Well, my hero is up to his usual tricks again. Every few years, Warren Buffett makes a statement saying the taxes on rich people in the United States are too low, and he deserves and would be willing to pay more. This time he has backed it up by mentioning that many of his super-rich friends feel the same way (Bill Gates is actually one of them).

Stop Coddling the Super-Rich (NY Times)

Hooray for these guys, for telling it like it is. I actually find it bizarre that any rich person would be against paying at least enough taxes to let the country run in a smooth and deficit-free way with roughly the current level (or slightly higher) of public services. Less war spending and more replace-the-oil spending, of course but overall the level seems fine. Our tax load is so light at this current all-time-low record, it is almost unnoticeable.

After all, once you’ve got enough for yourself, your next goal for your money should be increased welfare of the world around you. This also happens to be the type of spending that gives people the most long-term pleasure so you don’t even have to be particularly self-sacrificing to do it.

If you know anything about Warren Buffett, you know that he’s all about the good of his country and of humanity in general. He has no reason to be selfish, and he has found that the more generous and honest he is, the richer the world makes him. Unfortunately, generosity and honesty alone do not make you a billionaire, but if you’re going to be in business working with other humans, especially on a big scale, you usually get further in the long run by not being a douchebag. Not many people realize this, because news coverage of rich douchebags is very thorough, but overall, having integrity pays.

I would like to speak up, as a member of the Middle Class, and say that I’m willing to pay a bit more in taxes too. We all should be willing. Not a shitload more, so that I can’t even afford a house anymore, but say one or two thousand dollars more per year – a boost of about 25% of what I pay now, would be quite affordable. Most Middle Class folks don’t realize this, because they are currently stuck spending most of their money on interest payments for expensive cars and the like. But once they wise up and realize that they have about 300% more income than they actually need to live, they too might feel a little better about taxes.

The key is having our tax money used efficiently. Being an engineer, I get pissed off when I see wasted resources. And the government, over the years, has certainly wasted plenty of resources. But on the other hand, the competition for the government is pretty easy to beat. Middle-class person buying an SUV and a bunch of fries and high-fructose corn syrup at McDonald’s: 100% waste. Government subsidizing university tuitions: far less than 100% waste. I think that as long as we keep the government out of businesses that the private sector could provide more efficiently (designing products, for example), but use them in places where the private sector has been proven to suck (preserving groundwater quality, or providing national health insurance, for example), we will come out ahead. I think all spending should be published in great detail and easily be auditable by the public, as Obama has been doing if you look into it. And all public sector workers responsible for a budget of more than $100 of the taxpayer’s precious money must first have a mandatory consultation with Mr. Money Mustache himself on the principles of efficient money spending.

Then we’ll truly be a rich country.

 

  • Mr. Frugal Toque August 15, 2011, 5:53 pm

    Wouldn’t it be more efficient for Mr. Buffett to simply bribe those politicians in the super-committee thing? I think it’s basically legal to do so in the United States now, as long as he says “I’m not bribing them! Really!”

    As soon as they vote for the tax-the-rich legislation, he could just drop $10M in each of their election campaign bank accounts via some anonymous numbered company.

    Totally legal, I bet.

    Also, I’m in Canada, and I think I’m pretty much taxed properly. But most of my money is from salary, not investments. I wouldn’t mind a change of taxation rules that taxes options, capital gains and dividends just like money made by working.

    Reply
    • Ginger August 16, 2011, 8:56 am

      No, a single person cannot drop 10 M in anyone’s election campaign bank accounts, that is illegal and they are required to state where the money is coming from.

      Reply
      • Bob August 29, 2011, 7:55 am

        Actually, the super rich can contribute millions to anyone or any politician. Just form a SuperPac and it’s legal. Please see Stephen Colbert’s tv show to find out how easy it is to do.

        If Buffet was serious about his comment and not just making public political hay, he would give the money he is talking about to the gov’t w/o being forced to do so by the IRS. Actions speak louder than words and words w/o action when action is feasible are empty rhetoric. It seems a PR ploy he is playing for some reason known only to him and his accountants.

        Reply
        • MMM August 29, 2011, 8:31 am

          Many people have made this argument against Buffett’s statement, but I believe they are missing the point. The reason he is making the suggestion is to cause social change – encouraging other rich people to be willing to contribute to their own country. Writing an extra check for $10M to the treasury would produce a negligible effect on the deficit (although he could do it a thousand times over without even noticing the money missing from his own wealth). But encouraging a spirit of shared sacrifice and responsibility among the rich, instead of selfishness, will have a much bigger effect.

          Warren knows that actions speak louder than words. And he knows very well that his own behaviors are copied by millions of aspiring capitalists around the world. He has already given away over fifty BILLION dollars to the Gates foundation, and is actively soliciting the rest of the world’s billionaires to donate their own wealth to philanthropy. He is strongly against having the ultra-rich leave vast fortunes to their own children. He does not give a fuck about using publicity for his own profit or ‘political hay’. He is trying to change the world for the better, and so far he has done more than possibly any other human who has walked on the face of our Earth.

          It is true that various rich people have issued misleading political statements in the past, and we should always keep a lookout for that in the future. But that is simply not the case here. Do your research before speaking out against people with a true social conscience.

          I do approve of the mention of Stephen Colbert – there’s another guy trying to create social change, through satire of the same sort of selfish behavior. He’s actually making the exact point as Buffett, except with humor instead of cash.

          Reply
    • Marcia @Frugal Healthy Simple August 16, 2011, 1:14 pm

      Any kind of options, gains that I get are taxed as income. Of course, I’m not super rich!

      Reply
  • Dan August 15, 2011, 7:10 pm

    Buffet is misleading the public with this post. His effective tax rate is much higher than the rest of the people in the office, because the corporations he owns already paid a bunch of tax on their earnings (that he’s inappropriately not including in his calculation).

    See http://www.forbes.com/sites/timworstall/2011/08/15/warren-buffetts-very-strange-tax-argument/

    Reply
    • Mr. Frugal Toque August 16, 2011, 7:03 am

      First of all, I’m going to write an email to the author of that article inviting him to read Stephen King’s “On Writing” so he can learn how to construct sentences.
      Second, taxes are paid every step of the way.
      Why not argue that the company already paid taxes when it purchased its raw materials and therefore shouldn’t have to pay any taxes on its profit at all? And furthermore, no taxes on dividends because that was covered by the company’s purchase of raw materials!
      I shouldn’t have to pay property taxes because my income has already been taxed and I paid taxes when I purchased the house!
      And then I pay sales tax! I’m being TRIPLE TAXED!
      When money transfers from one entity to another, the gov’t takes a cut. We can discuss the fairness of percentages and the use of incentives, but let’s not pretend certain groups are being “double taxed” or some other absurd notion.
      (Also, let’s ask the writers at Forbes to take a moment before posting an article to make sure the article is coherent.)

      Reply
      • MMM August 16, 2011, 8:04 am

        Hey, I enjoyed “On Writing” as well! Although I surely haven’t mastered all of his lessons, I like Stephen King’s philosophy (everything should be written with maximum simplicity and minimum bullshit, to paraphrase). He is quite bossy when making these points – the MMM of writing advice. Interestingly enough, if you copy and paste a big block of my stuff into one of those online writing analyzers, it usually says “you write just like Stephen King”.

        Reply
      • Dan August 16, 2011, 9:39 am

        Mr. Toque, here’s the difference – when you work for a corporation, your wages are taxed once – when you’re paid income. The corporation itself gets a 100% tax deduction for the value of the salary they pay you. However, when the corporation pays out dividends to the shareholders, it does not get that same deduction. Thus if you want to strictly compare how much Mr. Buffett pays in taxes between when the corporation makes money and when an individual receives that money, he should be including the fact that he’s not comparing apples to apples. His comparison is highly misleading.

        Corporate tax rates should be zero so our country doesn’t have to lose hundreds of billions in deadweight loss (seen the size of corporate tax groups, and all the money they spend on structuring profits so they’re in zero tax countries)? If we’re going to tax income, tax it at the individual level only. That way Mr. Buffett actually can do a meaningful comparison, and we can all better see how much tax we actually pay to support govt. After all, we do in fact pay for corporate taxes through more expensive goods and services, but that is little realized to the individual as a “tax”.

        Reply
        • Mr. Frugal Toque August 16, 2011, 11:04 am

          Goodness, then. Let’s look at the numbers.
          First off, the premises are wrong.
          How many U.S. corporations actually pay 35%? Not many. Some are legislated to lower rates. Others find loopholes and credits.
          How many U.S. corporations pay all of their net profit in dividends? I’m going to hazard a guess of “very close to none”.
          But ignore the faulty premises and take $100 and tax it at 35%. That leaves us $65.
          Let’s pay Warren Buffett that $65 and tax him at 15%.
          Does that leave Mr. Buffett with $50 and an effective 50% tax rate? No, it does not, unless we are as incredibly bad at math and arithmetic as the author is.
          The author of the article is taking fake numbers and doing fake calculations with them to satisfy his kneejerk opinion of paying taxes.
          Garbage in. Garbage out.

          Reply
          • Dan August 16, 2011, 3:57 pm

            Mr. Toque, you highlight some of my primary points – given that corporations have all these huge loopholes and spend billions just to minimize their tax, isn’t that proof – scientifically (as MMM likes) – that our tax collection system is horribly inefficient? Money and time spent on tax optimization is about the worst use of resource we can imagine. Artificial destruction of value due to government dictat.
            Further, one of the reasons corporations don’t pay much in dividends (to the detriment of society, I’d argue), is precisely because they are double-taxed when those dividends are distributed. Cut the rate, and dividends will be boosted.
            As for you quibbling that 15% of $65 is not $15 is beside the point. It’s not a math exam here. It’s merely pointing out that Mr. Buffett is not comparing apples to apples. His headline is misleading.

            Reply
        • Bakari August 16, 2011, 3:50 pm

          The whole point of a corporation is that it is an entity separate from any individual. To paraphrase a recent supreme court ruling, it is a “person”, so to speak. It has its own income, its own costs, its own credit rating. It has “rights” and can sue individuals, other corporations, even governments.
          And none of the shareholders who own it are liable for anything it does.

          Why should a corporation get all of those benefits, and yet not have to contribute anything to the very society/government that allows it to exist in the first place?

          If the owners of a business want to avoid having to pay corporate taxes, all they have to do is choose not to incorporate.

          Reply
          • Dan August 16, 2011, 3:54 pm

            Bakari, don’t you think corporations already contribute tremendously to society? I don’t understand why people want to discourage corporations. They do amazing things for our way of life – creating new products and services, giving us jobs, and even paying us (with dividends) when we’re too old to work. Why on earth should we discourage corporations from existing, by taxing them at such high rates? Or rates at all. We want more corporations. We are wasting way way too much human resource having all these complex layers of taxation. We need to greatly simplify. Eliminating the corporate double taxation is critical.

            Reply
        • Concojones February 4, 2012, 1:51 pm

          @Dan: great point about eliminating double taxation. I never looked at it this way!

          Reply
    • Scott August 16, 2011, 7:41 am

      The author posted an update basically saying he completely misunderstood Buffet’s situation and that Berkshire Hathaway doesn’t even pay a dividend.

      Reply
  • Dan August 15, 2011, 7:12 pm

    We should encourage people to make a living off passive savings (i.e. from capital gains and dividends), so they should absolutely be taxed at a lower rate than by working.

    Arguably income shouldn’t be taxed at all – consumption should be. But that’s another post.

    Reply
    • Bakari August 16, 2011, 3:58 pm

      why should “we” encourage “people” to live off of passive income?

      Ok, granted, this is the MMM blog. And yes, we here are all encouraging other readers, and probably all of our friends and family, to live off of passive savings.

      However, if “we” means the US as a whole, and “people” means all citizens… then who exactly is going to do any work? The stock market isn’t just a magical trading game that produces money out of thin air. All of those 3 letter symbols we trade represent actual companies filled with employees, going to work every day and producing real things of tangible value.
      That is what allows you and I to sit at home and watch the stock tickers move and our dividends slowly build up.

      If everyone all tried to just live on investments, the interest rate would very quickly go to 0, as all the companies in the market would stop producing anything.

      We could definitely make a strong case that working hours could/should be reduced substantially (say, overtime begins after 20 hours), but I don’t see any advantage at all to taxing passive income lower than earned income.

      Reply
      • Dan August 16, 2011, 4:06 pm

        Bakari, we need to think on the margin here, not in “what if everyone did something” (which we know is impossible). On the margin, we should absolutely have lower tax rates on passive income – to give a signal to people that is much better for society to have income coming from investments than from the value of your working hands. A person who has savings is far far less of a cost to the rest of society than a person who is 100% dependent on staying healthy and being able to physically work. We have too many citizens too dependent on physical work and that is just too risky for us all. How better to encourage people to save then to tax income for passive earnings less? A lower tax rate recognizes that people with investments are less of a cost to society.

        Reply
  • David August 15, 2011, 8:35 pm

    It’s easy to be in favor of something that you know has a slim chance of happening… The trick is being one of the first ones to say it and let the rest of the rich folks spend their money to make sure it doesn’t happen.

    Reply
    • MMM August 15, 2011, 9:29 pm

      Haha, interesting cynical take on it.. but it’s totally wrong in this case. The man actually DOES want rich people to pay more taxes. He has been saying it for decades and pulling any political string he has access to to support it.

      Reply
      • David August 16, 2011, 7:58 am

        We must be reading different history books…

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        • MMM August 16, 2011, 8:10 am

          Did he have an anti-tax stage of his life that I have forgotten from reading the Snowball? That, and his shareholder reports and opinion pieces are the main sources I was quoting from.. But if you have a different book to suggest, let me know. I don’t mean this in a confontational way, I just actually want to know the truth about things.

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        • Mr. Frugal Toque August 16, 2011, 8:12 am

          Buffett slams dividend tax cut

          http://money.cnn.com/2003/05/20/news/buffett_tax/

          May 20, 2003

          It seem that Mr. Buffett has been pretty consistent. I’m guessing that the history you’re talking about is the behaviour of politicians?

          Reply
  • Chemkrafty August 16, 2011, 6:33 am

    Honestly, I love your blog, but can do without the political commentary. I agree with your takes on personal finance, but disagree 100% with your political views. Its a good way to turn off readers.

    But to get back on topic…if Buffett feels like giving up more money to the gov’t, I’m sure the IRS won’t mind receiving a check from him. Until he ponies up and does that or stops taking advantage of any loopholes to willingly pay more, I feel like he is just blowing smoke to get some attention…and I like the guy’s teachings in general.

    Reply
    • MMM August 16, 2011, 7:43 am

      Ahh, excellent, thanks for the advice on what topics Mr. Money Mustache should avoid writing about on his own blog.
      Just a tip: if you don’t want your web browser to display content that you disagree with, you can type different URLs into the address bar.
      As opposed to trying to control the actual blogger, that is.

      Reply
      • DMac August 16, 2011, 8:40 am

        Hilarious reply! I support you Mr. Money Mustache!

        Reply
      • Chris O August 16, 2011, 9:35 pm

        hahahhahahahahha

        I’m pretty sure I don’t share your political views either but I really enjoy your posts. I find most of this current political talk EXTREMELY annoying. It seems like everyone is trying to blame the government for their problems. Yes, gov’t has some influence. They aren’t 100% the problem though. The lazy, stupid, and/or crazy are the issue. I love your blog because you preach a lot of what should be “common sense”. However, the general public doesn’t have it. I work with the “public” on a daily basis and they never cease to amaze me. I listen to people complain all day about how much they hate Obama, how much they hate Republicans, how much they hate their utility companies, how much they hate their jobs, how much they wish they had a job, or how much they hate _____ (fill in the blank). Everyone is always hating. The only solution to our country’s problems is for it’s people to become responsible again. You had a post about how most people can’t come up with $1000 if needed. This isn’t because their gov’t isn’t working or because gas is too high. It’s because they don’t know how to manage their own lives. America is the collective of it’s citizens. For America to continue it’s greatness, it’s citizens need to be great… not just it’s government.

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      • Novice Mustache February 16, 2012, 6:54 pm

        Bravo, well played.

        Reply
  • Oskar August 16, 2011, 7:23 am

    I live in Sweden with a much higher tax rate but obvioulsly also much better services given by the government. However when I hear the debate from the US (we also lived in the us a couple of years 2005-2007) it does seem like the problem is the same everywere.

    The middleclass pay very high taxes in Sweden, many times the marginal rate is between 50-58% (depending on where you live) however the very rich pay way less than that (30% on capital gains) or even less as they hide their income through trusts and advanced ownership setups of companies.

    The problem from a politican perspective with the super rich is that they can just move or change their ownership setup to be more tax efficient when there is a higher tax put in place. I think the politicians think that if they raise taxes for the rich and super rich they might get less tax as they might move their money elsewere?

    Reply
    • Steve August 16, 2011, 8:38 am

      LOL! Were you aware that the average US citizen pays nearly the same tax rate as the average Swede? Or that your government can somehow manage to provide healthcare at that tax rate and ours can’t? There’s a price to pay for spending more on our military than the rest of the world combined.

      Reply
      • Oskar August 16, 2011, 8:43 am

        The tax rate in Sweden is a lot higher than the US, but even with that said I think that it is odd that you can not provide healtcare for your citizens as you should have significant economies of scale over a 9 Millon people country……..I for one does not mind paying taxes but think that anything over 49% is theft by the government:-)

        Reply
        • MMM August 16, 2011, 9:03 am

          Let’s see some tax tables, Oskar and Steve! This isn’t Fox News, we need actual facts when deciding who is right ;-)

          Reply
          • Oskar August 16, 2011, 9:19 am

            See numbers below…I would love though to be on Fox News it would be so much fun to spend all day making things up!!

            Reply
  • Oskar August 16, 2011, 7:38 am

    I would also like to add that we really have super rich people in Sweden (we are not that small:-) and that some choose to pay taxes like the owner of H&M clothing company (Stefan Persson) who pays billions every year, and others choose not to pay taxes like the owner of IKEA (Ingvar Kamprad) who has set up ownership through trusts and then officially moved away from Sweden in order to save on tax.

    Reply
  • Oskar August 16, 2011, 9:13 am

    This table shows tax revenue as % of GDP. i.e. the overall tax rate of a country including, taxes on salary, sales tax, capital gains tax etc etc. All these are higher in Sweden accounting for the higher overall number.

    Sweden about 47% US about 27%. A large difference.

    http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

    Reply
  • Geek August 16, 2011, 9:17 am

    I would totally agree with Buffett, especially given that the top 1% of earners have something like 43-45% of the wealth. Or, the top 20% have something like 93-95% of all the wealth (and pay ~70% of the taxes). (http://www.outsidethebeltway.com/redistribution-from-the-feds-not-really/)

    It’s very good that people can build wealth and do better than their neighbors – that’s what motivates many after all* – but it gets so easy to build wealth after a certain point that there’s no work/reward association. Buffett seems to believe this starts at an income of about a million dollars. Let me earn a million dollars a year before I agree :).

    I’d totally agree with the higher tax rates to get the taxes proportional to the weath percentage and all that.

    Except then I look at “defense” spending in proposed and actual budgets (http://www.wallstats.com/deathandtaxes/ -the penny in the lower right is a good cheat sheet).
    And I look at Social Security, and how many more adults survive to get payments, and how much longer they’re living past 65. ( http://www.ssa.gov/history/lifeexpect.html – not only do 20% more people live to collect SS, but they collect 25-30% longer!)
    And I think maybe we should stop waging so much war, and raise the retirement age.

    Here’s some fun for all (cnn)
    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

    Reply
    • Dan August 16, 2011, 9:44 am

      If you guys don’t like the megarich’s situation, why don’t you support a tax on net worth instead of a tax on income? After all Mr. Buffett is worth tens of billions yet in his article he’s saying it’s unfair he only paid a few million in tax. If you’re wealthy you can easily just sit on your wealth and never realize any paper gain (“look IRS, no income!”) and thus pay virtually no tax, by the nature of the income tax. So if you really support a higher tax on wealth shouldn’t you do it through, say, a 2% tax on net worth over $100 million each year or something?

      Reply
      • Bakari August 16, 2011, 4:10 pm

        2% tax on wealth of the richest 3 million Americans (combined 20 trillion dollars, 35% of total nations wealth) would cover the entire (pre-deal) deficit.

        A one time 72.5% tax on wealth for the richest 3 million citizens would cover the entire DEBT in full! (And still leave an average of 183k)

        Reply
      • Sharon July 16, 2013, 7:41 am

        A tax on net worth would punish those who save a disproportionate amount of their income compared to their peers. Those who spent every penny would pay nothing, leaving those who save or invest every penny to bear the full weight of a net worth tax.

        Reply
  • Dan August 16, 2011, 9:50 am

    Also, I have to say it’s frustrating to hear a smart, humorous guy (our dear blogger) describe how they believe if a person spends their own money on french fries, that’s terrible (“100% waste”) but if the government confiscates the money from that person and then reallocates it to others for tuition, that’s much better. I understand making a moral judgement, but then backing it up by having no respect for private ownership, and suggesting the government should go even farther in using its power to enforce your moral judgements? That is pretty cold.

    Reply
    • Bakari August 16, 2011, 4:15 pm

      Tuition payments isn’t about giving money to the poor.
      Its about investing in our country’s future.

      Without an educated workforce, we don’t compete in the global marketplace. That means all American’s lose.
      It’s the governments job to take care of the sort of things which benefit everybody, but that the market will not provide.
      Education is one of those things.

      You can blame adults for being lazy or stupid, but a child doesn’t choose what family it is born into. If we provide education for every child from pre-school to bachelors degree, then maybe we can claim every individual had an equal chance to make their own fortune.

      If you think you would have less money confiscated from you in anarchy than with government, you could always try moving to Somalia or anywhere else which effectively has no government.

      Reply
      • Dan August 16, 2011, 4:23 pm

        Bakari, I’m not saying anarchy is preferable; I’m saying that it is debatable how much is enough to transfer from one person to another. Sure, education can be an investment in the future – but it can often be a complete waste, too. For example, right now we are spending more than we have to on instructing kids, because of teacher unions. No unions, lower pay, more teachers, and higher quality standards (because we could actually fire bad teachers). I’m not arguing we should have no govt subsidy of education. I’m arguing that you can’t just say “we need ever more wealth distribution because it’s an investment in the future”. Those transfers need to be held with the utmost of accountability. We’re already spending enough to have a great educational system. The problem isn’t money – it’s managing that money.

        Reply
  • Dan August 16, 2011, 9:54 am

    I mean, I agree that tuition is better than french fries. But that doesn’t mean we should use our government to enforce those beliefs. Govt is way too powerful for us to use willy-nilly; it already is engaged in far too much social engineering, where the majority force the minority to accede to their own moral codes (homeownership subsidized; marriage between a man and a woman subsidized; parents subsidized versus the childless; the list goes on and on). For me, the answer is more leadership and education at the citizenry level (through funny blogs and so much more!) on issues of frugality, responsibility, and equality – and absolutely not through supporting a government that should be even more active in forcing certain behaviors. It already has so much power over us…

    Reply
    • Gerard July 25, 2012, 2:23 pm

      It seems unlikely to me that lowering teacher salaries would lead to better teachers. I have a hard time thinking of other places where that math makes sense.

      Reply
  • Kevin M August 16, 2011, 10:26 am

    Love Buffett’s article, I saw that yesterday as well. I would be for higher taxes only if nationalized health care went into effect. I believe that would spur entrepreneurship and boost the economy. Think about it – almost every personal finance blog that talks about being self-employed or semi-retired, the first question in the comments is always “What do you do about healthcare?” Otherwise, I’m not giving our politicians another cent until they prove they can balance a budget (or a checkbook for that matter).

    The ultra-rich Buffett talks about are comparatively under-taxed as a percentage of income and I would be in favor of raising it. I definitely do not think hedge fund guys and other traders should be paying long-term cap gain rates. That is one ridiculous loophole that I can only imagine is a direct result from wining and dining our elected officials.

    Reply
    • MMM August 16, 2011, 10:42 am

      Good points, Dan and Kevin. I didn’t mean to come off as a blind democratic follower with this article. I actually am quite against government intervention in certain areas of life, and I think regulation should err on the side of “too little” rather than too much.

      In these comments, we’ve been replaying the classic “big vs. small government” debate. In my mind, there are great points on both sides of the debate. With too much government intervention, you get high unemployment and frustrated entrepreneurs. Even now, I have resisted adding employees to my own businesses in the past because I think setting up worker compensation insurance and calculating and submitting payroll taxes are too much of a hassle to add to a small business owner. The government should take care of this shit automatically in the background and let me the entrepreneur focus ONLY on making my product – at least until I have 50 employees or so and can thus afford to hire one of them to handle red tape.

      But on the other hand, if you shrink your government to oblivion, you end up exactly like Pakistan. Rich people do just fine there, by purchasing their own security guards for their barbed-wire-ringed luxury compounds, and bribing the appropriate network of local officials to leave them alone – all with incredibly low taxes and almost no regulation.

      So you gotta find a balance. I’m proposing we do that by using some SCIENCE on the matter – i.e., actual studies on what works, including studying other countries that do things better than us.. instead of just re-stating our own ideological positions over and over in louder voices. I can be convinced to vote Democratic, Republican, Green party or any other party, if people can show me written examples of why their proposed policies will work better in the long run. But the emotion-based arguments used by both parties with their speeches these days mean nothing to me, so I have been forced to dig into the actual economic and social spreadsheets of various countries. Only there can you see which aspects of their policies we should cherry-pick to make our own government run better.

      Reply
      • Dan August 16, 2011, 4:39 pm

        Totally agree on the science, MMM. We should investigate what works first and foremost. I’ll vote for a Democrat if his plan is based on sound logic.
        Unfortunately I don’t agree that things like national healthcare coverage is better for us all. I think quality of care absolutely decreases under a nationalized system, to say nothing of innovation. Even worse, anytime something is “free” to the user (because they don’t really see or feel the cost), they’ll overconsume it. Sure, some of medicine you need no matter what, so you don’t have a choice. But A LOT of healthcare spending is discretionary, where the individual didn’t have any motivation to seek a cheaper or perhaps more appropriate line of care. Nationalize that whole system and it gets even worse. We’ll see vast overconsumption in some areas that sneak by the govt’s ability to move quickly to regulate, and vast underprovision of key care that again govt cannot possibly hope to centrally manage (MRI waiting lines in Canada, anyone?)
        Of course there is a balance of what government should and shouldn’t provide. Healthcare spending though is only going to grow as we get healthier, live longer, and have more advanced technology. Allowing government to essentially take over this entire component of our economy, an area that not only affects our wallets but our very quality and duration of life, is pretty terrifying to me.

        Reply
        • MMM August 16, 2011, 7:19 pm

          This is where I’d say the science is against our way of doing things. Canada’s health care system, which I was raised in and which still cares for all of my family, young and old, is absolutely fantastic. It beats the US system in many ways, at a drastically lower cost per person – even with a smaller and more dispersed population. The same is true with most other rich-world healthcare systems. The rest of the world laughs daily at the portion of the US population who mistakenly believes their own health insurance system is better in private hands rather than public.

          Reply
          • Chrissy August 17, 2011, 8:10 am

            I totally agree, MMM. I grew up in the US system and have lived in the UK ‘socialist’ system for 4 yrs. I *far* prefer the UK system, for both regular care (check-ups, periodic sickness, free birth control, etc) and higher end elective stuff (I opted to use my cheap private insurance for a foot surgery 3 yrs ago to cut down on waiting time and stay in a ‘nicer’ hospital). It’s great knowing all my needs are taken care of, and that I have choice with the more elective stuff.

            Every Brit I know is utterly confused about how the US has gotten its healthcare into such a sad state. I don’t understand where so much of the American public has gotten this notion about things being terrible in Canada, England, etc. My husband and I are considering an eventual move to the US, but it isn’t because we feel we’re paying too much tax or are unhappy with the healthcare system here; in fact, the healthcare system is one of the things holding us back from crossing back over the Atlantic.

            Reply
      • Dan August 16, 2011, 4:42 pm

        PS, re: “The government should take care of this shit automatically in the background…” Have you ever looked closely at how well govt bureaucrats “takes care of shit”? I mean, we all goof around from time to time, regardless of where we work. But holy moly, govt offices are about the absolute worst in terms of productivity and accountability. I agree that ideally govt should take care of a lot of things. But we have to be realistic as to what we can expect of a system that gets all its funding by fiat from elected officials, through programs that once created essentially never die. This isn’t job creation or streamlining for private citizens – its parasitic value destruction, more often than not.

        Reply
        • Uncephalized June 9, 2012, 4:26 pm

          One of the many advantages to the modern world is that you don’t need to rely on a bored, lazy bureaucrat to do math and filing anymore–we can pay a software developer to develop a computerized, automatic system for almost anything that a bureaucrat does. The fact that this is not actually what we do for many government functions is just one of the many ways we don’t use information technology to real potential in this society.

          If the IRS was set up by rational human beings, every person would get a letter or secure email with a computer-generated tax bill and attached itemized calculations each year. There would be an appeals process in case of errors in any of your records. This would be made possible by the government getting its collective head out its collective ass and actually using the reams of redundant data it collects from every citizen every year for a useful purpose. This would be a nice alternative to the current practice of filing it in a bottomless pit somewhere and then requiring us to resubmit whatever it needs at a whim, even if it has already collected the same information a half-dozen times.

          Reply
  • Liz August 16, 2011, 10:54 am

    I was thinking about this the other day. I read somewhere that the $14 trillion debt is the equivalent to $4000 per person. I wouldn’t mind paying the $4000, for example, like $500 per year for the next eight years (wait, so what was the point of the $400 stimulus checks/credits for the last few years. I used that money to pay off my now-gone debts!!!) if I knew it was going towards paying down the outstanding debt. But I don’t think Congress will ever get this done. Too many hands in the cookie jar. In other words, too many thieves stealing from the government coffers like always. And then some of debt is “monetized”… I don’t get it.

    Reply
    • BeyondtheWrap August 16, 2011, 1:52 pm

      Actually, Liz, it’s more like $40,000. http://www.brillig.com/debt_clock/

      Reply
    • Tim August 16, 2011, 6:37 pm

      If you assume all people use, and are entitled to an equal amount of government services, on average, then government spending should not be greater than the value of the cumulative government services, per person, times the population estimate.

      That means $3,552,000,000,000 / 309,050,816 = $11,493 per person / per year, just to keep the lights on in 2010, and not to become debt free.

      http://www.gpoaccess.gov/usbudget/fy10/pdf/fy10-newera.pdf
      http://www.census.gov/popest/states/tables/NST-PEST2010-01.xls

      To become debt free, each person, equally, owes about 14,600,000,000,000 / 309,050,816 = $47,271.

      This assumes people owe equally, but really, only about a third of the population pays taxes.

      MMM, what is the point of taxing the rich? Would it be to perform the equivalent of MMM’s finances, and balance the budget and pay off the debt? If so, then should the government create a Constitutional amendment to do this? What if the government continues borrowing? Are you not effectively supporting consumerism debt-lifestyle by encouraging current fiscal policy?

      I don’t recommend giving the US government any more money than is legally required, until it can control its spending. Even then, I would scrutinize what I give to it.

      Reply
      • MMM August 16, 2011, 7:14 pm

        Yeah, good question.. why would I be in favor of higher taxes? I would say mainly to pay off our debt, and then live within our means from that point forward, just like a Mustachian. The taxpayers who are alive today are the ones who benefited from this extra government spending, so we should pay the bill instead of leaving it to our kids. As a vague future idea that I don’t know would actually work, I would like to see more taxpayer control over future spending – like a “citizen’s veto” system where everyone can vote online for many details of spending, without having to throw out an entire political party to get approximately what they want. So we could shut down earmarks and fat-cat loopholes as soon as they are made public, and decide where to shuffle our collective money, instead of letting lobbyists do it for us.

        Reply
        • Tim August 16, 2011, 7:29 pm

          Interesting. Have you read anything by Alvin Toffler? I vaguely remember him advocating something like this in Third Wave, or another book, where government is 50% representative democracy and 50% direct democracy (what you advocate).

          Reply
        • Peter January 10, 2012, 11:57 am

          Decent ideas, MMM. But I would need to see those implemented before I would be ok with a tax increase. As BNL states below, we have no control of where that money goes. Any time a new tax is put upon us (local, state, federal) it seems to somehow find it’s way to something else other then its intended use. Toll roads come to mind for me.
          I have no faith in our politicians using any increased revenue on paying off the national debt.

          Reply
  • GayleRN August 16, 2011, 3:55 pm

    You can donate as much money to the US Government as you please, there is information on the IRS website I believe. I think the fact that Mr. Buffet is not doing that (or at least not advertising it) speaks for itself. If he was doing that I believe he would be getting all the free publicity he could find.

    Reply
  • Patrick August 16, 2011, 4:20 pm

    TripleM – your post would have been more effective had you now taken the initiative to write the IRS a check for the additional amount you would like to pay.

    Warren Buffet too.

    Per the US Treasury –
    Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below.
    Gifts to the United States
    U.S. Department of the Treasury
    Credit Accounting Branch
    3700 East-West Highway, Room 622D
    Hyattsville, MD 20782

    Reply
    • Dan August 16, 2011, 4:27 pm

      Agreed, Patrick. It’s funny that some of my more liberal friends back in 2003 were saying there were very frustrated that they got those $250 tax refund checks from the initial round of Bush tax cuts. They said they didn’t think they should get the tax refund. I said, no problem, just mail a $250 check to the Dept of the Treasury. Did they? Of course not. And by not doing so, they’re basically saying that, in their best judgement, there are better ways to spend $250 than give it to the US government. As such, they are contradicting themselves six ways to Sunday.

      Reply
    • Kevin M August 16, 2011, 5:14 pm

      The IRS is so screwed up all they would do is credit that to your 2011 estimated income taxes and refund it next April.

      Reply
  • Moxie August 18, 2011, 9:21 pm

    Since it caused a mini-stir, just have to say that I like the “political” commentary. Don’t always agree, but like hearing yours & others’ opinions! Good debate is healthy, and I think also a mustachian-value.

    Reply
  • Brave New Life September 26, 2011, 3:26 pm

    I’m a recovering Randian, so this is hard for me to admit – but I too would be willing to pay more in taxes for the betterment of the world as a whole. (And I used to think I was John Galt…)

    But there’s the rub. I don’t believe paying more taxes betters the world. Unfortunately, right now it pays for more bombs and more pollution (through cheaper and subsidized oil). When that is fixed, I will gladly give more in taxes.

    But for now I choose to give more to the world through charities I believe so I can control where my money goes.

    Reply
  • Yuriy February 17, 2012, 1:28 pm

    “Middle-class person buying an SUV and a bunch of fries and high-fructose corn syrup at McDonald’s: 100% waste. Government subsidizing university tuitions: far less than 100% waste.”

    I really like this line. Some analysis would be interesting. There are costs in road use and health care associated with both the SUV and the McDonalds meal, so the waste is arguably >100%. On the other hand McDonalds is some kind of meal, and a Ford Expedition is some kind of transportation so maybe not quite 100%.

    Although the comments here devolve into most of the usual talking points, I enjoyed reading them because at least they are polite and intelligent. It is amazing how much thoughtless and hateful gibberish is spewed in any thread on this topic on Yahoo and Facebook and the like by people on both sides. Did you have to moderate away much of this?

    Reply
    • Mr. Money Mustache February 17, 2012, 2:30 pm

      I agree that the commenters on this blog are generally excellent. Surprisingly few comments get the ax (maybe one in 200). I generally erase anything that shows a really impolite tone, or was obviously written by someone who did not carefully read the article and the comments that came earlier.

      In the case of Yahoo/MSN/Youtube, that would disqualify about 90% of the comments. But the MMM readers tend to do some thinking before they start typing, which makes me very happy.

      Reply
  • anonymous June 22, 2012, 5:56 am

    If every politician, bureaucrat, lawmaker, and anyone else involved in the spending of *my* money took one of your mandatory classes, complete with several mandatory punch-to-the-face sessions, I might feel comfortable giving money to a government so addicted to debt and spending that they make the average credit-card fueled consumer look Mustachian by comparison.

    Until that happens, I feel comfortable saying that I’d like to pay significantly less taxes, preferably near zero, for much the same reason that I’d like the machines I rely on to have less friction and generate less waste heat.

    On that note, it just occurred to me that you have both the ability and the style to write the single most interesting and worthwhile post on politics ever written: would you consider witing up an Extreme Mustachian Makeover for government spending? I’d love to see some of your advice on avoiding debt, spending drastically less, thinking *hard* about purchases, and exercising frugality muscles, applied to an institution with about a hundred years of horrific anti-Mustachian habits to break.

    Reply
    • Mr. Money Mustache June 22, 2012, 7:02 am

      Thanks Anonymous – it’s already in the Drafts folder, called “What if the Government Grew a Money Mustache?”. Ironically, I believe we need to iron the complainypants tendencies out of the voter pool first, before we can elect such politicians. Hence the blog!

      Reply
  • Travis January 21, 2014, 1:12 pm

    The problem I’ve always had with the tax debate is while I’ve heard plenty of people bemoan the “rich” for not paying their fair share, very few have been able to quantify what is “fair.” It seems like you can either get into a mathematically based economic debate, or get into a class warfare argument where “they should just pay more” goes on without end. When the normal citizen gets emotional about this kind of thing I can understand it a little. When a politician resorts to these unscientific tactics I get pissed. MMM, while I agree there are better ways to spend our tax dollars, your scenario of paying more for everyone’s betterment relies on pandering and often clueless politicians to be responsible with our money.

    As far as corporate and business taxes, that money doesn’t come from thin air. They pay their tax bills by tacking it onto the price of whatever they sell the consumer. Their income taxes, payroll taxes, social security taxes, and whatever other taxes they owe is included in the price. By some estimates up to 23% of the price of a consumer good is that corporation’s tax bill. Increasing corporate taxes generally means increasing what the consumer has to spend.

    Reply
    • bwall February 9, 2014, 12:12 pm

      Travis: One way to quantify “fair” is on a proportion basis. For example, if the top 1% earns 70% of the GDP in a given year, then they should pay 70% of the income taxes collected by the government. If they pay less than 70% of the income tax received, then they have not paid their ‘fair’ share. If, and only if, they pay more than 70% have they been ‘overtaxed’.

      If the lower 30% earns 1% of the national income then they should only pay 1% of the national income taxes. If they pay less than this they are ‘under taxed’. If they pay more than this they are ‘over taxed’.

      Granted, a system set up like this would be impossible to implement on a per person basis.

      However, realizing the proper way to view they situation is a step in the right direction as opposed to making baseless statements like ‘Group X are overtaxed/undertaxed’ and such.

      Reply
  • big zed August 18, 2014, 8:28 pm

    Dear Mr. M. Mustache,
    First let me congratulate you on writing such an excellent blog. I have not commented before. As well, thank you for another, free, and thought provoking blog post.
    The crux of your post is that you’d be willing to pay more taxes, seeing the bounty of services provided by government already. But you have reservations on how well the money is spent, and believe that civil servants could use a lesson in efficiency and thrift. Further, you point out that government provision is more appropriate to certain tasks than others.
    Let me suggest an excellent, paradigm shifting book that investigates these very questions: “Systems Of Survival” by Jane Jacobs. In essence, she argues that there are two fundamentally different ways to make a living: as a guardian or in commerce. Each has a system of morals associated with it, but mixing them between systems leads to problems.
    I suggest that the principles of Mustachianism are primarily commercial in nature (efficiency, thrift, willingness to experiment, etc.). Jacobs points out that trying to apply these principles to government (i.e. guardians) has usually lead to trouble. Just as an example, it is easily understood that remunerating police officers based on the number of crimes investigated would be disastrous.
    Keep up the good work!

    Reply
  • Steve Adcock December 12, 2014, 3:26 pm

    In my view, I believe that our government has shown that it simply cannot be trusted to spend our money wisely, and as such, there is no way that I would support ANYONE, much less me, paying even more in taxes than I already do.

    Mr. Buffet is more than welcome to pay extra if he wants. He is right, however, that rich people actually pay very little in taxes due to all the loop holes that exist in our insanely complex tax system. Simplify the tax code down to what could fit on a single index card and taxes would be much, much more proportional.

    For me, I will continue insisting that people NOT pay more in taxes for the same reason why you probably wouldn’t give your last $100 to a 10 year old and expect it not to be spent the next day.

    I refuse to support more money going to fund waste.

    Reply

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