Last Sunday the New York Times published an essay from Warren Buffett in which he explained how unbalanced tax policy has become in United States pointing out that his tax rate is lower than that of people earning far less than he earns each year.
Forbes Magazine answered that essay with one of its own. In essence the author, Tim Worstall, argues that Forbes argument is incomplete because he does not take into account corporate taxes in the United States. When you factor the corporate rate — which may or may not be paid at the often-cited 28% — and the individual rate, the government collects more of the corporate profits than the 17.4% that Buffet says he pays. The real rate is closer to 50%, according to the article.
So is Buffett’s tax argument “strange” as Forbes as it is? First of all, the arguement in Forbes assumes that dividends are paid by the corporation and are the source of income for Buffet and others in similar situations. The fact is not all compensation of the very fortunate is dividend income, not all profits are paid in dividends, and so on.
Secondly, one does not need to garner high incomes in a corporate or dividend market to receive favorable tax rates. Buffet is talking about his personal income tax obligation in his essay and what he says about his rate is true. It is what it is. His average tax rate is lower than the rate of people earning working wages.
But people eager to coddle the fortunate — as Buffett describes it — or people who simple fail to understand basic qualities of fairness like to muddy the waters. That’s exactly what the Forbes article does. This plays well for unreasonable and inexplicable politics of the right, but there’s no reason to be distracted by these efforts to confuse the issue.
Keep things simple. If the overall tax structure needs to be reworked, it needs to be reworked; that’s a subject for another debate, however. Right before us is a easily understood clear and simple example of unbalanced tax policy favoring the most advantaged at the expense of those least able to pay. THAT is the issue that Buffett correctly raises when he talks about his tax situation.
Arguments from the right that argue against Buffett are absurd and misleading because it unnecessarily and incorrectly complicates the tax argument. You couldn’t have a more clear example of this than the muddled reasoning that appears in the Forbes response to Buffett. Keep things simple.