News Is America Coddling the Super-Rich?

[MarcoD]

Well I think the U.S. government is something like 40% of the U.S. GDP in terms of its spending at least.

Uhm, I don't know spending, I was thinking of the government debt in terms of percentage of GDP. Sweden is about 33%, most of the EU is about 60%, Italy, Spain, Belgium are around 100%, Greece is about 150%. (If memory serves me well.)

I actually don't know the US debt in terms of GDP. Most sources claim it is about a 100% at the moment, but the S&P paper on the downgrade put -I thought- US debt at 57% of GDP (which wouldn't make it any real problem to worry about.)

Anyone on the clear on this and why there are different estimates on US debt in terms of percentage GDP?

 

[edward]

Most US billionaires behave similarly with their fortunes, Gates, Koch, etc. Are you similarly convinced about all their motives?

Although the Koch brothers do give to charity they don't come close to the what Gates and Buffet have pledged. Their Libertarian motives are very apparent. When they pledge half of their fortune to charity let me know. I won't hold my breath.

 

[MarcoD]

Although the Koch brothers do give to charity they don't come close to the what Gates and Buffet have pledged. Their Libertarian motives are very apparent. When they pledge half of their fortune to charity let me know. I won't hold my breath.

Yah, I have seen comments on 'noblesse oblige,' and ethical conduct of the rich. As far as I am concerned, history shows that there is nothing to expect from that. For instance, the Brits massively exported food out of Ireland when the population was starving. I doubt anything changed. Sure some extremely rich people can give away half their fortune, but to put faith in that as a solution to any problem?

 

[EWH]

"Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. "

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

To illustrate: if a policy results in 1 person with an income of $1M losing $100K and 1 person with an income of $10K gaining $1112, then there is a net gain in overall utility even though $98,888K has disappeared. This reduction in income disparity also lowers the Gini coefficient. If person with an income of $1M loses $100K and 1000 $10K earners get $100 each, then the absolute gain in utility would be greater than if the person with $1M income had increased their income to $20B. From a static perspective, the optimal utility would be achieved with equal earnings for all members of the population, and even in a dynamic perspective where rewarding individual productivity increases the overall production, the bulk of the increase in individual utility would come with the first dollars of the reward, the effectiveness of financial incentive would quickly saturate, and the point of negative returns for overall utility would be reached at surprisingly low incentive amounts.

Edit: add reference:
http://www.ssb.no/publikasjoner/DP/pdf/dp_118.pdf"
Abstract
It is shown that if social welfare is the sum of logarithmic utility function, the optimal income distribution and the welfare effect of any income redistribution is independent of the equivalence scales. In optimum all households have the same per capita income. Based on this observation it is discussed to what extent traditional welfare theory can be said to be concerned about fair income distribution.
[The criterion should obviously be equalizing individual income rather than household income, though. This should of course include children.]

 

[WhoWee]

He got his wealth from investing into other companies - companies from whose share price the corporate tax was already deducted when he bought them!

Those who derive their main income from investment can't claim they are being taxed by the corporate tax!

How many years does Buffet typically hold an investment after a Merger or Acquisition? He has built an empire from the ground up with unparalleled success.

Please explain why the $Billions in taxes paid by Berkshire Hathaway (Buffet's company) is not relevant to this discussion.

 

[WhoWee]

Apparently there are a few here who think Buffet must have some sinister ulterior motive. The man has pledged half of his fortune to charity. That is enough to convince me that he is sincere.

Of course he's sincere about putting his wealth into the Gates charitable foundation - he is also getting a very large tax credit for his contribution. I don't recall that he mentioned the large tax credit that will shield him from future tax rate increases though?

 

[turbo]

Is there any metric under which Buffet is not portrayed by the right as a self-serving creep or a Marxist commie? At some point, we have to accept people at face value, absent evidence to the contrary. Maybe Buffet is a wildly successful businessman who wants to use his money to support humanitarian causes... Is that so implausible that people can make up conspiracy theories about him and be believed?

 

[vici10]

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

This would be true, if money would only be means for consumption. Most people think this way, because money for them is buying food, clothes, shelter, entertainment, education and so on. But this would not explain why rich people, millionaires and billionaires do not stop accumulate more and more and are not satisfied with their millions. They can not possibly consume all these money.

The explanation could be that money represents something else. That money is a quantification of power that one has in a society. If one has more money, one can lobby government for example. And since power is relative, it does not matter how much one has, it has to be more than others. If money is quantification of power, increasing income inequality means increasing power inequality. Ending up with small group of very powerful people and majority that does not have a say in how society is governed.

 

[WhoWee]

Is there any metric under which Buffet is not portrayed by the right as a self-serving creep or a Marxist commie? At some point, we have to accept people at face value, absent evidence to the contrary. Maybe Buffet is a wildly successful businessman who wants to use his money to support humanitarian causes... Is that so implausible that people can make up conspiracy theories about him and be believed?

I'm not certain a "Right" label is correct in describing me (REALLY) - more of a center-right surrounded by far-left. Labels aside, I think Buffet is a financial genius. He hasn't just made big deals -he's assembled a collection of small companies in nearly every industry. His organization employs over 250,000 people.

If he wants to give his $Billions away via the Gates charitable trust and receive a huge tax credit that will shield him from future tax rate increases - that's great! Just please don't tell me he's going to pay more in taxes than he does now if the rates increase.

Btw - feel free to support the "self-serving creep or a Marxist commie" crap.

 

[turbo]

If he wants to give his $Billions away via the Gates charitable trust and receive a huge tax credit that will shield him from future tax rate increases - that's great! Just please don't tell me he's going to pay more in taxes than he does now if the rates increase.

Please show us all in detail how his "huge tax credit" is going to work, and how he's going to lock in the credits.

 

[WhoWee]

Please show us all in detail how his "huge tax credit" is going to work, and how he's going to lock in the credits.

See post 39 please.
"Interestingly, given the total is about $30Billion (not counting 2005) for years 2002 - 2010 - I found this article - apparently, he'll receive about $30Billion in tax credits for giving away his shares. my bold
http://www.nytimes.com/2006/06/27/bu...berkshire.html

"Tax experts said the charitable gift essentially provides $30 billion in income tax credits — something that Mr. Buffett is unlikely to use in his lifetime. It will also allow him to avoid about $4.5 billion in capital gains tax. And giving away the shares will also help avoid taxes on his estate. Estate planning experts called it a simple and pragmatic approach, true to form for Mr. Buffett.""

 

[turbo]

"Tax experts said the charitable gift essentially provides $30 billion in income tax credits — something that Mr. Buffett is unlikely to use in his lifetime.

So accumulating tax credits that he will never use is a good reason to slam him? Please present some factual data that supports your position.

 

[WhoWee]

So accumulating tax credits that he will never use is a good reason to slam him? Please present some factual data that supports your position.

A $30Billion tax credit for contributing to a charitable trust doesn't qualify? If they raise his tax rate - as he's requesting - his income will be shielded.

 

[apeiron]

The explanation could be that money represents something else. That money is a quantification of power that one has in a society.

I agree. Which is why conspicuous philanthropy can be more satisfying than conspicuous consumption, as in the case of Buffett, Gates, etc.

So if that is the case, the economic system can be redesigned to serve those status needs. We can have gold and platinum class tax contributors just like any event these days has grades of sponsors.

Again, define the actual desired social outcome. Then worry about the mechanisms that achieve it.

The current mindless growth and consumption economic model does not serve the real needs of humans. Many people are thinking about a better approach. Buffett is just one straw in the wind.

 

[apeiron]

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

Thanks for some excellent data. I am interested in actual models here, even if others aren't.

 

[edward]

Apparently there are a few here who think Buffet must have some sinister ulterior motive. The man has pledged half of his fortune to charity. That is enough to convince me that he is sincere.

I mispoke in the above post. Buffet has pledged to give 99 percent of his Berkshire Hathaway stock to charitable foundations. The lions share so far has gone to the Bill and Melinda Gates foundation.

 

[turbo]

I mispoke in the above post. Buffet has pledged to give 99 percent of his Berkshire Hathaway stock to charitable foundations. The lions share so far has gone to the Bill and Melinda Gates foundation.

And the Gates' have shown a propensity to help the poorest of us (sub-Saharan Africans, specifically) to break free of disease and starvation.

 

[russ_watters]

Is there any metric under which Buffet is not portrayed by the right as a self-serving creep or a Marxist commie? At some point, we have to accept people at face value, absent evidence to the contrary. Maybe Buffet is a wildly successful businessman who wants to use his money to support humanitarian causes... Is that so implausible that people can make up conspiracy theories about him and be believed?

No, it isn't implausible and I believe it is true - but that doesn't mean what he's saying is good advice and isn't misleading (whether intentionally or unintentionally). The two just don't have anything to do with each other.

At the same time, it is illogical to use argument from authority to anoint him The Expert on tax policy just because he's rich and would seem at face value to have an opinion that works against his interests.

So accumulating tax credits that he will never use is a good reason to slam him?

You misunderstood: he won't use all the tax credits because they will more than zero-out his taxable income for the rest of his life. In other words, once he starts giving away his money to charity, he'll never have to pay another dime in federal income taxes.

 

[turbo]

In other words, once he starts giving away his money to charity, he'll never have to pay another dime in federal income taxes.

If that is indeed the case, great! I'd love to see his fortune shielded from taxation as he donates it to charitable causes.

Our government gives money to foreign aid causes. That money is drawn from taxation on us citizens after we have already paid payroll taxes, and innumerable other hidden taxes on the items that we buy. Our tax code is laden with give-aways and "deductions" that exempt whole classes of business from taxation, and we normal wage-earners have to pay for those favors.

I think that is great that Buffet will manage to keep the tax-collectors' hands off his fortune as he gives it away.

 

[russ_watters]

Methinks you're arguing against your point, turbo...

 

[russ_watters]

"Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. "

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

To illustrate: if a policy results in 1 person with an income of $1M losing $100K and 1 person with an income of $10K gaining $1112, then there is a net gain in overall utility even though $98,888K has disappeared. This reduction in income disparity also lowers the Gini coefficient. If person with an income of $1M loses $100K and 1000 $10K earners get $100 each, then the absolute gain in utility would be greater than if the person with $1M income had increased their income to $20B.

"If..." That argument assumes that placing a constraint on one person's income will necessarily raise another's.

 

[WhoWee]

And the Gates' have shown a propensity to help the poorest of us (sub-Saharan Africans, specifically) to break free of disease and starvation.

If this is your point (this thread and the other one about keeping tax collectors away) - I have to agree with you that individuals can prioritize and target specific problems with less waste and greater effectiveness than Government.

 

[mheslep]

Although the Koch brothers do give to charity they don't come close to the what Gates and Buffet have pledged.

Nobody in the US comes close to having the wealth that Gates and Buffet do.

Their Libertarian motives are very apparent.

So its not philanthropy, but expressed political beliefs that convince you about their sincerity? Meanwhile, I doubt MIT attempts to pidgeon hole the Koch brother's political beliefs:
http://www.forbes.com/2008/03/06/bi...ivingitaway_slide_19.html?thisSpeed=undefined

When they pledge half of their fortune to charity let me know. I won't hold my breath.

Buffet has taken awhile to get there; he is 80.

 

[russ_watters]

If he gave away (or had it taxed away) his money before amassing it, he never could have made so much in the first place!

 

[WhoWee]

If he gave away (or had it taxed away) his money before amassing it, he never could have made so much in the first place!

There is no doubt about that point.

Again, look at his list of holdings - Buffet/Berkshire Hathaway is by far the most successful of all M&A/Holding firms. The tax strategies are very complex - but a necessary component of structuring a deal.
http://www.berkshirehathaway.com/subs/sublinks.html

 

[drankin]

Just an opinion piece from fox: http://www.foxnews.com/opinion/2011...buffett-just-write-government-check/?test=lit

 

[Willowz]

At least these people aren't self serving objectivists.
"[URL
France's richest say: Tax us more[/URL]

Some of France's wealthiest people have called on the government to tackle its deficit by raising taxes - on the rich.

Sixteen executives, including Europe's richest woman, the L'Oreal heiress Liliane Bettencourt, offered in an open letter to pay a "special contribution" in a spirit of "solidarity".

The move follows a call by US billionaire investor Warren Buffett for higher taxes on the American ultra-rich.

 

[Willowz]

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.

Ahh yes, whatever would happen if the rich went on strike. Oh ho!