Warren Buffet’s Secretary Needs a New Accountant

“Asking a billionaire to pay at least as much [tax] as his secretary is plain common sense,” says President Obama. When Warren Buffett announced that his secretary paid a higher rate than he did, some people calculated that he must pay her at least $200,000 a year to put her in an (average) 19 percent tax bracket.

Yet the latest report is that Warren Buffett’s secretary pays 35.8 percent of her income in federal income taxes, and other people in his office pay as high as 41 percent. Buffett himself supposedly pays only 11 percent. As dramatic as this sounds, the problem with this story is that the marginal federal tax rate is 35 percent. In 2010, people only paid that rate on incomes over $373,650; the rate on all income up to that amount is lower. If a married person’s income is $400,000, for example, and they they take only the standard deductions, their tax rate is less than 27 percent.

In other words, you can’t have a tax rate of 35.8 percent, much less 41 percent. If Warren Buffett’s secretary is paying that much, she needs a new accountant.

Or, more likely, Buffett is including social security and medicare deductions in the tax rate. This is a unfair, because the standard social security rate only applies to the first $106,000 of income, after which the rate drops by 80 percent. Yet no one is currently suggesting that social security rates be increased for high-income people.

But even social security isn’t sufficient to explain a 35.8 percent tax rate. At $106,000 of income, the average tax rate is about 22 percent (lower after deductions are considered), and social security & medicare only add about 7.6 percent. At higher incomes, social security & medicare only add about 1.5 percent, so Warren Buffet’s secretary’s income would have to be well over $1 million to pay 35.8 percent in federal income, social security, and medicare taxes. So perhaps Buffett and his secretary were also including state or local taxes in their calculations.

The real focus, of course, is on the capital gains tax, which is currently set at 15 percent, but is set to increase to 25 percent next year. Of course, some want to eliminate the capital gains tax entirely, so those who want the rate to increase are making this an issue now.

This is litmus test on how people view government. If you think government works, then letting the government take more money from people seems like a good idea. If you think government doesn’t work, then raising tax rates on anyone, billionaire or secretary, only feeds the beast.

The Antiplanner is no fan of Newt Gingrich, but his response to Obama’s challenge is sensible: don’t raise the tax rate on billionaires, lower it on secretaries. As half-billionaire Steve Forbes proposed a few elections ago, simplify the tax code by imposing a flat tax on everyone.

As Reason magazine pointed out last year, the debate over marginal tax rates is pointless. Since 1950, marginal tax rates have varied tremendously, but the federal government consistently collects only about 18 or 19 percent of GDP. Raising rates won’t increase the government’s share of GDP because people respond to higher rates by changing their behavior to reduce their taxes.

One lesson from this is that, if we want to reduce the federal debt, federal spending must fall below 18 or 19 percent of GDP so the federal government can run budget surpluses that can be used to pay off the debt. A more subtle lesson is that increasing federal revenues requires an increased GDP, which also suggests lower tax rates so that people will invest or spend money on things that boost GDP.

We’re supposed to be upset that Warren Buffett and Mitt Romney pay such low tax rates. The Antiplanner strongly suspects, however, that Buffett and Romney are doing more to boost GDP than the federal government would do if it had more of their money. Raising taxes will do our economy more harm than good.

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38 thoughts on “Warren Buffet’s Secretary Needs a New Accountant

  1. C. P. Zilliacus

    I offer a modest proposal – how about the federal government spend more tax dollars to go after tax cheats that don’t pay the taxes that they owe under current law?

  2. jwetmore

    I’ve followed Buffet since 1981. He is not your typical taxpayer and using him as an example is highly misleading. Many people know he receives only a nominal salary from Berkshire Hathaway ($110,000) in 2010 if I remember correctly. He also has very high charitable donations which likely reflect his tax rate. Maybe his secretary needs to make larger contributions to decrease her tax rate.

    Throughout Buffet’s investing career he has focused on after-tax returns more zealously than anyone I can think of. I have no doubt that he is an expert on the tax code. It’s no wonder that his tax rate is a marvel.

    My take away from the issue is I am not envious of the rich, I am suspicious of the politicians who created such a system, and the last thing I want to do is give them more encouragement and power.

  3. Sandy Teal

    The Antiplanner totally forgot to report on how the President bragged about his High Speed Rail initiative that will soon fix global warming, create millions of jobs, and end traffic congestion in the US.

    The President said ” “.

  4. Frank

    Search for Peter Schiff’s breakdown on how he pays 50% of his income in taxes. That doesn’t even include the cost to his firm for federal regulatory compliance, which increased drastically post 9/11 especially with the Patriot Act.

    I certainly pay a large percentage of my income in taxes. Fed payroll deductions add up to 30%. Then there’s a 10% sales tax. Add on property tax (which my landlord passes on to me) which is 10% of my post payroll deductions.

  5. Andrew

    If his secretary is relatively well paid, but not so much that her salary is far out of line to the limit on Social Security Taxes, and if she is older and no longer has children (no child tax credits or extra deductions, no high cost family level health insurance plan) and limited mortgage interest deductions, it is relatively easy to see how her tax payments would be quite high.

  6. Dan

    : don’t raise the tax rate on billionaires, lower it on secretaries. As half-billionaire Steve Forbes proposed a few elections ago, simplify the tax code by imposing a flat tax on everyone.

    We all know this is a sham. Try something else. It won’t work any more.

    As Reason magazine pointed out last year, the debate over marginal tax rates is pointless. Since 1950, marginal tax rates have varied tremendously, but the federal government consistently collects only about 18 or 19 percent of GDP. Raising rates won’t increase the government’s share of GDP because people respond to higher rates by changing their behavior to reduce their taxes.

    IIRC the bolded has been slapped down enough times that it is no longer operative in civil society. It won’t work any more. And the issue is that revenue for infra and everything else is inadequate as the population and infra ages. Just because we always collected 18-20% doesn’t mean that things don’t change.

    Look – we all knbow inequality is increasing and income mobility is decreasing. That cat’s out of the bag and you can’t pretend or mendacicize otherwise any more. Sorry.

    DS

  7. LazyReader

    Progressives want to raise taxes on individuals who make more than $200,000 a year because they say it’s wrong for the rich to be “given” more money. If you have a thousand dollars and donated 99 percent of it to charity that’s 990 dollars. If you have 10,000 and you give away 75 percent that’s 7,500 dollars. You gotta million dollars and you give away 50 percent, that’s half a million dollars for the needy. If you have a billion dollars and you only give a measly 1 percent, that’s still ten million dollars. Percentage rates don’t matter much because even if they’re the same for everybody “as an example say 5 percent” The rich will always pay more. The Urban-Brookings Tax Policy Center disclosed that close to half of all households will pay no income tax this year. Some will pay less than zero that is, they’ll get money from those of us who do pay taxes. The top 1 percent of Americans who earn income (those who make 300,000 dollars or more) account for about 36 percent on the income taxes payed. The top 20 percent of earners make about 53 percent of the income in America but account for 91 percent of the income tax collected. The IRS says the bottom half of earners pay less than 3 percent. Yes, working people who pay no income tax still pay taxes: sales tax and payroll (Social Security and Medicare) taxes. But the income tax is big and visible, so it’s a problem that a growing number of people don’t pay but get benefits from those who do. Frédéric Bastiat, the French economist, defined the State as “that great fiction by which everyone tries to live at the expense of everyone else.” I don’t know if he envisioned one half of the population living off the other half. What’s gonna happen when more and more portions of the working half start to retire. However right now we have more pressing matter than tax reform……..spending reform. Taxation is just one way for the government to obtain money; there’s another way to get money that’s much more dangerous……burrowing money.

    Don’t get mad at people just because they’re good at making money. Some states tax the rich exceedingly or simply raise taxes along the board for everyone, other states not so much. Vast wealth or the prospect of wealth far in excess of others, encourages people to work or be innovative. The result….. It’s not difficult to believe that the rich simply move to the states where tax brackets tend to be lower. When they do leave, they take their skills, businesses, capital and potential job creation and employees with them and the states they leave behind get left with an enormous tax burden that the poorer or middle class can’t afford. The problem isn’t we have a tax problem (although it is rather complicated) or a revenue problem. Our problem is we have a spending problem. What do we do with the money? We spend it on laundry folding robots, research understanding why chimps throw their poo, researching the effects of giving cocaine to birds, blowing up Mississippi beaver dams, cowboy poetry festivals, and Blackberries for smokers or cell phones for prostitutes, bike helmets for rich people, farm subsidies for people who don’t grow a thing, sport stadiums, convention centers, performing art centers. Taxes discourage wealth creation. That hurts everyone, the lower end of the income scale most of all. An economy that, through freedom, encourages the production of wealth raises the living standards of lower-income people as well as everyone else so they can privately pay for their own arts center. Maryland created a special tax on rich people that was supposed to bring in $106 million. Instead, the state lost $257 million. Some of Maryland’s richest people have now left the state. New York billionaire Tom Golisano isnt stupid, either. With $3,000 and one employee, he started a business that processes paychecks for companies. He created 13,000 jobs; that was until New York state hiked the income tax on millionaires. Before that he paid the equivalent of 13,000 dollars to New York state daily. Now he’s established residence in Florida, which I think has lower or none’ personal income tax and took his business with him. People don’t work to pay taxes. People work to get what they can after tax. They change where they earn their income. When they earn income or how.

  8. Andrew

    This is a unfair, because the standard social security rate only applies to the first $106,000 of income, after which the rate drops by 80 percent. Yet no one is currently suggesting that social security rates be increased for high-income people.

    It certainly is unfair. First of all, they are taxes, not “deductions”. Second, they are an enormous burden on middle income people, especially the self-employed, but mean almost nothing to millionaire earners, who see 90% of their income exempt from social security – that is if they even have any wage earnings subject to the tax at all! And there are plenty of people who believe they should be extended to all wage levels and not arbitrarily cut off at $106K.

    The real focus, of course, is on the capital gains tax, which is currently set at 15 percent, but is set to increase to 25 percent next year.

    No, it is set to revert to 20% in 2013. And the focus is not so much on capital gains themselves as on carried interest, or the pretend reclassification of salary/wage income of special people in Hedge Funds/Private Equity Finance like Mitt Romney into a very low tax classification that hardly reflects on their exertions. The theory I have always heard of lower capital gains income tax rates is to reflect the risk taken in investing, and also account for the loss of purchasing power from inflation on long term investments. However, the 20% management fees on Private Equity and Hedge Funds are “riskless” to the recipients in the sense that it isn’t their money being invested, and they are not kept from realizing their money for many years while the investment grows because they aren’t investing their money – they are skimming a percentage off the top. Its just your typical special interest sweetheart tax break.

    Of course, some want to eliminate the capital gains tax entirely

    Yes, because poor put upon taxpayers like Mitt Romney deserve a tax system in which they pay 0%.

    so those who want the rate to increase are making this an issue now.

    Oh no! The horror of returning to the 1986 tax code given us by Ronald Reagan with a single rate for all types of income at any income level and no exceptions to the rate! Oh the horror! That was what President Obama was proposing with a uniform 30% rate in the State of the Union, and it also reflects the budget deal the President and Senate struck last year which would have created a uniform 29% top rate.

    As half-billionaire Steve Forbes proposed a few elections ago, simplify the tax code by imposing a flat tax on everyone.

    The Forbes Flat Tax, and its many incarnations since such as 9-9-9 and the like would represent a massive tax increase on the middle class and upper middle class, and a huge tax cut for super high earners. Anyone who can work a calculator can see it for themselves by just running the proposed numbers on their own income.

    Since 1950, marginal tax rates have varied tremendously, but the federal government consistently collects only about 18 or 19 percent of GDP. Raising rates won’t increase the government’s share of GDP because people respond to higher rates by changing their behavior to reduce their taxes.

    Current receipts are less than 15% of GDP. So are you advocating a 20% tax hike?

    One lesson from this is that, if we want to reduce the federal debt, federal spending must fall below 18 or 19 percent of GDP so the federal government can run budget surpluses that can be used to pay off the debt. A more subtle lesson is that increasing federal revenues requires an increased GDP, which also suggests lower tax rates so that people will invest or spend money on things that boost GDP.

    Do you fully understand macroeconomics? Reducing government spending reduces the GDP.

    GDP = Personal Consumption + Investment + Government Spending + Net Foreign Trade

    Pretty obviously, if you cut government spending 20% and it is 25% of the economy, you take a 5% hit to GDP.

    Similarly, GDP = Personal Consumption + Savings + Taxes

    So Savings + Taxes = Investment + Government Spending + Net Foreign Trade

    More taxes and less spending to run a surplus means a reduction in private wealth and capital investment (the economic equation has to balance out), and forced private debt bubbles as the private sector attempts to obtain money to maintain its lifestyle in the face of the government withdrawing financial assets to pay down its debt. We’ve been down that road of “reducing the national debt” in the years leading up to 1837, 1857, 1873, 1893, 1929, and most recently in 2000. Each time resulted in a frantic private sector debt bubble, a massive financial crash, widespread job losses and unemployment, and a resulting depression.

    We’re supposed to be upset that Warren Buffett and Mitt Romney pay such low tax rates. The Antiplanner strongly suspects, however, that Buffett and Romney are doing more to boost GDP than the federal government would do if it had more of their money. Raising taxes will do our economy more harm than good.

    Its not so much a matter of raising taxes as it is reallocating financial resources from private stockpiles to matters of the common good, and providing incentives to the private sector to make the fullest use of the talents of all and creating the greatest amount of income for all to share a portion of. It is difficult to see how my federal tax burden being higher as a percentage of income than Mitt Romney’s is something that promotes the common good or accomplishes those goals. Especially given that Mitt Romney’s company has received tens of millions in tax incentives, FDIC bailouts, and preferential tax rates, while normal people like myself don’t receive any of that.

    And its morally wrong that some people like Mitt Romney have gazillions of dollars and 12 homes and others shiver in the street under dirty blanket without a home or a job or food. To the extent that the current tax code promotes this situation, or prevents the government from remedying it, its an abomination.

    more of their money.

    “The earth is the Lord’s and the fullness thereof.”

    “‘Whose image is on the coin?’ ‘Caesar’s.’”

    Did Buffet or Romney or any of us create the money we hold? Or did the government? I don’t recall there being any Mints or Printing Presses in private hands stamping out coins or printing bills. If they didn’t make it themselves, and it comes from the government spending it into existence by paying it to the citizenry through its multitude of programs (“borrow money on the credit of the United States … coin money, and regulate the value thereof”), it sure as heck seems like it is not fully “their money” to simply do with as they see fit and over which the public has no input or legitimate voice.

    The day the Mitt Romney’s of the world start creating and using their own currency is the day they can decide if they should have no tax liability.

  9. Andrew

    Lazy Reader:

    The Urban-Brookings Tax Policy Center disclosed that close to half of all households will pay no income tax this year.

    Half of all households earn less than $30,000. How much do you expect them to pay in income tax?

    But the income tax is big and visible, so it’s a problem that a growing number of people don’t pay but get benefits from those who do.

    Why is this a problem? The purpose of the income tax when enacted was to tax the wealthy to obtain government revenue from those who had the most money, not the poor or middle class. And just a few years ago, Republicans were busy bragging about how many people had been removed from the rolls of the income tax, and how much more the lower rates were bringing in taxes because high earners were making a lot more money.

    Frédéric Bastiat, the French economist

    Who lived in the time of the Gold Standard and whose basic ideas of political economy are thus completely invalid in the modern world of the past 80 years because we don’t have a fixed money supply based on gold and silver.

    Taxation is just one way for the government to obtain money; there’s another way to get money that’s much more dangerous……borrowing money.

    Why is borrowing so dangerous? You don’t believe new money needs to be created? So are you for continual deflation then (more goods being chased by less money)? Were are Founding Father’s morons who didn’t understand the “dangers” of the national debt, but you’ve got the whole thing corrected for us now?

    Vast wealth or the prospect of wealth far in excess of others, encourages people to work or be innovative.

    Few people have the opportunity to become Mitt Romney or Warren Buffet. Most people know this.

    It’s not difficult to believe that the rich simply move to the states where tax brackets tend to be lower.

    Is that why NYC, NJ, California are bereft of millionaires, while Tennessee is loaded to the gills with entrepreneurs?

    Taxes discourage wealth creation.

    No taxes create a demand for money and provide an opportunity for collective action on things that promote the common good and national wealth, like national defense, inrastructure, and education.

    An economy that, through freedom, encourages the production of wealth raises the living standards of lower-income people as well as everyone else so they can privately pay for their own arts center.

    So why have upper level incomes exploded over the past 30 years, while lower level incomes have actually dropped? Where is the rising living standards for all that you are promising?

    New York billionaire Tom Golisano isnt stupid, either. With $3,000 and one employee, he started a business that processes paychecks for companies. He created 13,000 jobs; that was until New York state hiked the income tax on millionaires. Before that he paid the equivalent of 13,000 dollars to New York state daily. Now he’s established residence in Florida, which I think has lower or none’ personal income tax and took his business with him.

    Actually, NY State just cut the tax rate on high earngins from 8.97% to 8.82%. So did he really retire in 2004 as CEO and move to Naples a few years later because he is 70 and try to make this a political statement? Sounds more likely. Paychex is still headquartered in New York, contrary to what you said. Probably because Florida workers are not exactly at the same educational level as those in NY State thanks to Florida taxes not being quite at the same level as NY taxes when it comes to funding schools and taking education seriously.

  10. LazyReader

    “Give to Caesar what belongs to Caesar but give to God what belongs to God”………….

    Screw Caesar and screw God. Let’s tax the shit outta the church. They got tons of money.

    It’s not morally wrong for Mitt Romney or anyone else to have tons of money if they earned it. Our government has ways of encouraging poverty (or to a lesser degree retain it). The welfare system is made to such an extent it encourages people to work as little as possible to to receive a check. And many of America’s homeless we meet on the street are not really homeless; they’re just freeloaders who’ve found a good racket. Look or dress pathetically and guilty strangers will give you money. That’s whats immoral.

    http://www.youtube.com/watch?v=krg5r6n0kr4

    I don’t care that Romney has 12 houses, if he converts one into a halfway house for the poor, who would criticize.

  11. FrancisKing

    Antiplanner wrote: “The Antiplanner is no fan of Newt Gingrich, but his response to Obama’s challenge is sensible: don’t raise the tax rate on billionaires, lower it on secretaries. ”

    That’s why the USA has a massive debt problem. Far too many people awarding each other tax cuts.

  12. Dan

    That’s why the USA has a massive debt problem. Far too many people awarding each other tax cuts.

    And these same hard-working jaahhhhb creators want to impose austerity on us to “balance the budget”. See what that has done to Francis’ country if you think this is actually a solution for the commonweal.

    DS

  13. the highwayman

    The Autoplanner; This is litmus test on how people view government. If you think government works, then letting the government take more money from people seems like a good idea. If you think government doesn’t work, then raising tax rates on anyone, billionaire or secretary, only feeds the beast.

    THWM: Depends on the context.

    With things such as roads. O’Toole, you’re getting way more largess out of government than I ever will!

  14. Southeasterner

    I think we need to put a bit of historical perspective in all of this. How did the rich earn their wealth and at what cost? Does a billionaire who moves a factory to China to produce iPhones and HTC’s and sells the product back to Americans who are using debt to finance their purchase a good thing for the US economy overall? Is the billionaire who made his money charging the American interest for buying that iPhone a good thing for the US economy? Does the government have the right to take money from the billionaire to give back to the Americans so they can buy more phones? Don’t they depend on each other? Will the billionaire be a billionaire without a market to sell his goods, doesn’t the government create this market by lowering tax rates on lower income households?

    Unfortunately for the billionaires, work ethic or not, history has shown that large discrepancies in wealth are almost always followed by revolutions, civil wars and/or recessions/depressions.

    During the first depression 0.01% of Americans controlled 2.8% of the wealth (a record). Our economy was tanking and nobody was buying anything. As soon as that dropped to 1%, as tax rates went ballistic to finance the wars, the economy rapidly recovered. In Europe during the revolutions, WWI and WWII and the Spanish civil war the top 0.01% of respective populations controlled between 1.3 and 1.7% of the wealth until wars and revolutions occurred with drastic consequences to the rich.

    Today in America the top 0.01% of Americans control 6% of the wealth, something that has never been seen in our history. Like the tax rate or not we are going into unchartered territory that hasn’t led to very positive outcomes in the past (for the rich). I think Buffet senses the masses are getting angry and wants to save his head.

  15. bennett

    This will be the first year where my family is not a part of that 47%+ freeloading working poor cohort that doesn’t pay income taxes. Actually owe this year. I was thinking about becoming a libertarian as a result, but I found out my blood was too warm.

  16. Frank

    Please, Bennett. Libertarians aren’t cold blooded. They just don’t want to force people to do things at the barrel of a gun. I’m more than willing to pay my fair share for the goods and services I require. I already make charitable contributions to many organizations, especially those supporting environmental preservation. If I could keep the 30%-%50 the government extorts from me, I would increase my charitable contributions.

    But by all means, continue to dehumanize libertarians. You’re so good at it.

  17. MJ

    That’s why the USA has a massive debt problem. Far too many people awarding each other tax cuts.

    It’s not the tax rates that are the problem, it is the exemptions to the tax code that are the problem. The tax reforms of 1986 went a long way toward remediating this, but we have spent the last 25 years picking away at it and carving out new exemptions. After hearing Obama’s SOTU address I am not at all hopeful that this will be improved any time soon. In fact, he seemed to be pitching even more exemptions for special friends and favored firms/industries.

    The other problem is that we don’t seem to be very good at saying no to spending on anything. From the Iraq War to prescription drug program add-ons to bank and auto industry bailouts to “stimulus” spending to paying people more for their junky old cars than they are worth, we just can’t seem to turn people away. Oh well, if we can’t make the corrections the bond markets will eventually do it for us.

  18. MJ

    And these same hard-working jaahhhhb creators want to impose austerity on us to “balance the budget”. See what that has done to Francis’ country if you think this is actually a solution for the commonweal.

    What austerity? We’re still running trillion-dollar deficits. Government spending is still as high as it ever was. And the last time I checked, Francis’ country wasn’t the one the EU was looking to bail out.

  19. bennett

    Frank,

    Sorry about the jab. I admit it’s a bit unfair. My comment was meant as a joke, but I can see how a libertarian would take it personally. It’s not that I want to dehumanize libertarians, but that the libertarian philosophy lacks humanity. Make no mistake, Individualism and humanity are very different things. But again, sorry for the mean spirited joke.

  20. Dan

    What austerity? We’re still running trillion-dollar deficits. Government spending is still as high as it ever was.

    Austerity. Spending. So, no.

    And the last time I checked, Francis’ country wasn’t the one the EU was looking to bail out.

    Bailouts have nothing to do with UK austerity and contraction, thanks!

    DS

  21. Sandy Teal

    When Joe the Plummer asks a hard question of candidate Obama, the media immediately digs into his tax history.

    When Obama makes the secretary of Warren Buffett the poster child of his tax policy, the media makes very little investigation into her tax history. We don’t get any investigation into Warren Buffet’s tax returns either.

    Gee, I wonder why a few people think the media are biased.

  22. bennett

    Sandy,

    1. Joe got a lot more run for being a hyperbolic ass-hat than his taxes. 2. Joe is a much easier target than the WB (not fair, but it is what it is). 3. The media is absolutely biased and always has been. It’s the context of certain biases that draw peoples ire. Is there liberal bias in the media? Of course. Is there conservative bias in the media? Absolutely. Do you think the WB is being given a pass in the conservative outlets? Puuhhhh-Leeezzzeee!

    http://nation.foxnews.com/warren-buffett/2012/01/26/warren-buffett-s-secretary-just-bought-second-home
    http://www.theatlantic.com/business/archive/2012/01/how-rich-is-warren-buffetts-secretary/252056/

    etc. etc. etc.

    p.s. Thanks to ABC, we now have a number on the difference between Warren Buffett’s tax rate and his secretary’s. Maybe the bias hurumphing is just a cop out so pointing fingers is made easier?

  23. ws

    It doesn’t matter how much someone earns. We focus a lot on this regarding taxes.

    If you cannot see the vast inequities, especially regarding people who are in the finance industry in how much taxes they pay compared to people who work in “real” jobs; then you’re biased as all hell.

    Fact of the matter is a millionaire doctor pays WAY more than a millionaire hedge fund manager.

    Talk about class warfare — and they Republicans don’t seem to be addressing this issue at all in anyway. Try getting a proposal to level the taxes investors pay in Congress. Good luck.

    We’re trying to give incentives to children to go to school and be a doctor, study science, be an engineer.

    Why bother? Just be an investment banker. That’s what politicos are telling our youth.

  24. MJ

    Austerity. Spending. So, no.

    So Jared Bernstein’s definition of austerity only encompasses state and local governments? Did the social worker-in-chief even consider what the federal government was doing during that time (the original topic of interest, by the way)? It’s quite easy to check this for yourself. In fact, wasn’t he one of the loudest cheerleaders for providing aid to state and local governments as a large component of the “stimulus” program?

    I was, of course, wondering why the focus would shift to the UK on this topic, but I now see that this is the subject of Paul Krugman’s latest crusade, so it all makes sense. Of course, he (or his editor wife) probably should have fact-checked that column before it went to press. Austerity? Not so much.

  25. Dan

    Look, even the Brit government is backtracking on austerity and calling for stimulus now. The local and state governments in the US practicing austerity have dragged down the economy and caused tens of thousands of jobs to be lost.

    Period. There is no way to hand-flap away from it. The ideological policy was a failure. Very easy to comprehend.

    DS

  26. the highwayman

    Frank said:
    Please, Bennett. Libertarians aren’t cold blooded. They just don’t want to force people to do things at the barrel of a gun.

    THWM: Though you’re not interested civil liberties, most so called “libertarians”, are despotic in nature and enjoy pointing guns at people.

  27. Dan

    If a small subset of folks can’t grok that spending cuts [both in UK and here] have had the opposite outcome from public utterances of expectations, one suspects that the reading isn’t wide enough or cognitive dissonance drives the keyboard.

    State and local governments here are slashing spending and this has led to negative growth. As shown above. Very easy to comprehend. In the UK, the public is angry over spending cuts, and coupled with the realization that the country could be slipping back into recession (worse than Great Depression), is leading some to a re-think.

    DS

  28. Andrew

    All:

    Total federal government spending has flatlined since early 2009.

    Trailing 12 months cumulative Federal Government spending:
    9/01 – $1.86 trillion (9/11)
    4/03 – $2.09 trillion (Iraq invasion)
    11/08 – $2.78 trillion (recession starts)
    10/08 – $3.08 trillion (Lehman Brothers blows up)
    3/09 – $3.29 trillion (Stimulus passed)
    7/09 – $3.50 trillion
    9/09 – $3.52 trillion
    2/10 – $3.52 trillion
    7/10 – $3.43 trillion
    9/10 – $3.46 trillion
    3/11 – $3.63 trillion (most Stimulus grants end)
    9/11 – $3.60 trillion
    12/11 – $3.58 trillion

    Note Federal spending went up $690 billion from the start of the Iraq war to the start of the recession and $510 billion from start of recession to start of stimulus, but just $290 billion in the almost three years since. Total Federal spending actually fell in Fiscal Year 2010 for the first time since 1946, despite the “deficit hawk” Republicans not controlling any part of Congress that year. Spending is falling again with Stimulus being over.

    But President Obama is a “Big spender”.

    Local/state spending has been under duress since the end of stimulus pass throughs noted by MJ. The stimulus pass throughs were an attempt to limit state/local tax increases and budget cuts during the recession. I’m sure everyone here has seen the results of this wrapping up of stimulus in spending on public schools be crushed and their property tax and state tax bills spiraling up out of control over the past two years around the country due to balanced budget requirements.

  29. Sandy Teal

    So in 2009 after the Republicans took over the House of Representatives, where all spending bills must originate, spending stopped increasing. Why is that news?

  30. Andrew

    Sandy Teal:

    So in 2009 after the Republicans took over the House of Representatives, where all spending bills must originate, spending stopped increasing. Why is that news?

    Because it never happened? Because the Republicans were out of power until January 2011? Do you live in some sort of alternate reality universe where McCain won and the Republicans swept the House in November 2008?

  31. Scott

    What Buffett said is often misquoted & what he said is inaccurate, using different measurements.

    Could take a page+ to explain, but there is a big difference in “marginal” tax rate & effective tax rate.

    Also, the usage of “paid” is very wrong; nobody pays the marginal tax on their [whole/total] income, regardless of income.

    Mixing payroll tax or other is way off — the issue is Federal income tax; Capital Gains Tax is separate.
    (higher cap gains tax results in less development & returns to investors — ie retirement & pension funds)
    (regarding th4e shortfall in SS: living longer & no money saved by gov is a dif issue)

    What about morality?

    Pay a % or higher than others for retail?

    Why should higher income earners not just pay more, but much more?

    Do you know that the top 1% earners pay about 38% of all Federal income tax?

    Is that fair?

    Why should there be a proportion, much less [reason] a higher proportion?

    BTW, less than 3% of Federal income taxpayers, paid >15%.

    Romney’s not “my guy” (Gary Johnson was), but I support free enterprise, production & limited gov.

  32. Andrew

    Scott:

    Taxes are taxes. And the Payroll tax is an especially regressive tax that heavily hits the self employed while barely touching the Mitt Romney’s of the world, even as they are benefitting from outlandish rates on passive income.

    The top 1% pay most of the income tax burden not because it is such an onerous tax on them, its clearly not with rates the lowest they have been since the 1920′s. They pay the most because American workers have created tremendous gains in productivity since 1980, but aside from the 20% at the top of the earnings pyramid, they have actually lost income in real dollars. Instead, all of that money being made the past 30 years has trickled up to the very top and become a vast concentration of wealth upon which dividends, interest, and capital gains are paid and made in an outlandish fashion in combination with self serving stock options grants enabled by stock buy backs while wage workers are castigated for not accepting another pay cut and not paying income tax on the pittance of their remaining income. Its hard to have an income tax liability on the median income of $32,000 per year or less.

    http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1

    Why should the wealthy pay most of the taxes? Because no one else has the money required and because they have the most at stake in the stability of the system and benefit the most from items like national defense, creating an educated and healthy workforce, and having a stable and reliable legal and penal system. The US tax system has been set up to make the wealthy pay the most since our founding.

  33. Dan

    Indeed, sales and payroll taxes having disproportionate effects on the poor notwithstanding,

    Do you know that the top 1% earners pay about 38% of all Federal income tax?Is that fair?

    Is it fair they control that much of the wealth and therefore taxed according to how much they control?

    Silly talking points were shown to be ridiculous years ago.

    DS

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