Yesterday’s New York Times carries an essay by Warren Buffet proposing that taxes be raised on Americans earning more than $1 million per year. This from the world’s third richest guy, worth approximately $50 billion. He says that it is vitally important that Americans give more money to the wise bureaucrats in Washington, D.C. He himself will be giving away the majority of his fortune. Now that Buffett has identified the federal government as such a worthy organization, is he going to write the IRS a big check? Apparently not. Buffett is going to give his $50 billion to the Gates Foundation, presumably because he thinks that they will make better use of it than Washington (the $50 billion would have covered about half the cost of the Detroit automaker bailouts).
The U.S. government does have an almost unlimited need for money. By contrast, an individual plainly does not need wealth in excess of $50 million. Instead of higher income taxes, why didn’t Buffett propose a 100 percent tax on any personal wealth beyond $50 million? Surely it would be much fairer for those who have such a massive surfeit of cash to give to the needy agencies in Washington.
[Separately, Buffett seems not to take globalization into account when he conjectures that higher tax rates would not reduce U.S. economic growth: “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.” Buffett ignores the fact that the U.S. had a much larger competitive advantage in 1980. China and India were effectively closed to foreign investment, either due to laws or red tape. Communication within the U.S. was vastly cheaper and easier than communication across borders. On August 12, the New York Times carried a story about highly skilled Americans moving down to Brazil for the job opportunities there. Buffett doesn’t explain how the U.S. government can turn the clock back on the whole world and pretend that everything is just like 1980 again.]