Warren Buffett's Tax Shell Game

So, by now, everyone and their mother has heard about Warren Buffett's request to increase income taxes on those making $1 million or more per year.  Liberals have latched on to it as a form of proof that their desire to raise taxes on higher incomes is a good idea.  Conservatives have dug into economic theory to argue that the effective tax rate Buffet claims is distorted.  What's most curious about this, is that both sides appear to have missed the magic shell game Buffett himself plays on everyone right from the start.

Buffett very clearly explains that his low effective tax rate is largely due to the fact that much of his income is taxed in a different category from wages and payroll taxes.  In particular, he says:

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.


To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

The point here is that most of the wealthiest people make their money through investment, and not through a salary or any other payroll device.  In short, many of them don't have "jobs" in the common sense of the word, but instead make money by owning parts of companies that make money and thereby increase the worth of their investment.  Buffett goes even further in making his case when he says the following:

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.

So, he's arguing for higher Capital Gains taxes, because they won't prevent investment, and they'll make the super-rich pay more of the tax burden, right?  That's the shell game, folks.  His proposal:

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

 That's right.  After telling everyone that he (and those like him, the super-rich) pay a lower effective tax percentage of total income because the money is made through investment, and not as a salary or a wage, he turns around and proposes that they increase the income tax - which he's just told you won't apply to the vast majority of his income, at all.  Isn't that nice of him?

I'm not sure which is more ridiculous, Buffett's magically disappearing tax rate, or the inability of anyone else to spot his verbal sleight of hand.

A New Libertarian Code

For years, the two parties that run our government have been putting a great deal of effort into coming up with various ways to say what they want to do, without using the hot button words that they believe will turn away voters.  They use  witty turns of phrase to draw in support from those who can be swayed by framing the discussion in a totally different way.  For example, nobody talks about banning gay marriage.  Instead, they come up with "Defense of Marriage", implying that it is under attack from the evil people across the aisle, and at the same time positioning themselves as defenders of the good.  Likewise, people who have crossed our borders without going through customs, presenting a passport, and so on, aren't illegal immigrants.  They aren't even criminals.  They are "Undocumented Workers", or according to Massachusetts Governor Deval Patrick, "New Americans".  (I guess us "old Americans" need to just get on off to our rocking chairs!)

Libertarians, generally speaking, don't spend very much time doing this sort of spin.  Perhaps that's why our ideas don't make much headway.  We're too honest. Most people don't really want to know or understand what their senators and congressmen are doing, and the more radical the change someone is looking for, the less likely people will want to take the time to hear about it, let alone accept it.  I think it's time we start redefining how we speak about the different things we want to see change.  I've come up with a short list of possibilities:

• We need to stop bashing the War on Drugs.  Not because it's a good policy, but because complaining about a war is un-Patriotic, and automatically leads people to assume we are the enemy.  (After all, if we were on their side the war wouldn't bother us, right?)  Instead, let's defend the right to grow and smoke cannabis, by decrying the government's "Herbal Profiling"!  How dare they single out one plant among so many, and only subject that one plant to persecution!
• Dismantling Social Security, Welfare, mandatory health care, and other entitlement programs established by Congress drives too many people away.  Not only does it scare people who depend on such programs for their own, or their loved ones' well-being, it's a big, big change, and many folks just don't know how to talk about it.  Instead, let's write up a "Defense of Personal Responsibility" law.  Let's get people angry at the idea that the government is labeling them as too stupid, or lazy or irresponsible to make these decisions, and so is taking away their right to decide.  What decisions will they take next?
• All those government requirements that make it so hard to start a new business when there are already big players there?  W can't talk about removing them as "Deregulation" any longer.  So, how about we declare a "War on Anti-Competition".

Why not give it a try?

The Blind Flaw

On my way home today, I passed a small group of people who were standing on the sidewalk, handing out pamphlets about the supposed rapture event tomorrow.  Now, normally, I'm mostly content to allow anyone their beliefs, as long as they allow me mine.  These people, however, I find offensive.  Not because they believe in their god, nor even because they were out passing around their tracts.  What bothers me about them is that they follow their belief in total blindness, without any ability to recognize or even question what they are told.

Christianity claims the Bible as a source of truth, the infallible word of god, and Christians are supposed to draw their conclusions about morality, theology, and many other things, using the light of this book.  The explanation of why May 21, 2011, is supposed to be the day of the rapture uses a combination of numerological tricks based on various verses in the Bible.  Yet, it ignores the simple fact that the Bible itself says that predicting the day of the rapture is impossible.

In the gospel of Mark, the second book of the new testament, is recounted a series of statements made by Jesus himself about the end days.  After making several points about it, in Mark 13:32, he delivers this punchline, "But of that day or hour no one knows, not even the angels in heaven nor the Son, but the Father alone."  The same words are used in the book of Matthew, as well.  If you accept the Bible as truth, holy words from god, then you must, perforce, reject the statement of any man who claims to know when Jesus is coming back, because the Bible says, "no one knows".

People who believe whatever they are told, without thinking, without taking the time to even resolve discrepancies between things they are told, are dangerous, not just to themselves, but to everyone around them.  They are the worst sort of slaves, those who have surrendered their rational faculties of their own volition.  They are the pillars of tyranny, the power base upon which an oppressor can raise himself up, if only he harnesses enough of them.  They are the flaw in Majority Rule.

Radical Solutions for Health Care

Many people seem to think that our health care system is at or near a state of crisis.  I certainly hope that it is.  Yes, you read that right.  I hope that our health care system is at a state of crisis.  You see, not everyone uses it this way, but if you look up the word crisis, you'll see that it's a turning point, a last point at which change can be effected.  I hope we are at a crisis, because the alternative is that we've already passed it, and there is no way to salvage things.

There are a great many things wrong with health care, as it stands right now.  Most of those things started out with good intentions, but as is often the case, they got out of hand, or had unintended consequences.  Over time, however, these things have added up, and we now have a system which is in many ways collapsing under its own weight.  The government, of course, wants to fix things.  They always want to fix things, and yet, they never actually succeed in those endeavors.  The reason for this, of course, is that government, by it's very nature, always attempts to fix things by asserting greater control, which is a lot like trying to protect fine china by packing it in a box full or rocks.

Now, I could talk about incremental steps, or ways to modify the current system, but I won't.  Instead, I'm going to go ahead and be radical.  America didn't grow from a backwater colony into a world superpower by being timid about new ideas.  And if we truly are in a crisis, then the time is ripe for a radical solution.  So, I'm going to describe a health care system which I believe could work, could service more people than our current system does, offer better health care to nearly everyone than they currently receive, and cost less.  But it does it by getting government and bureaucracy out of the way, and requiring all of us to be more responsible for our own selves.  It is important to understand, too, that many of the items I am about to describe cannot stand on their own.  These items are interwoven into a system together, and shoe-horning them into our current system would likely to more harm, than good.

1. Redefine Malpractice.  Our current laws make it very risky to practice medicine.  Many physicians pay more for malpractice insurance than they do for the payroll of their entire office staff.  As patients, we need to understand, and more importantly, accept that doctors are still human.  They make mistakes.  Malpractice should only apply to a handful or circumstances, specifically:
1. When someone claims greater medical knowledge or training than they actually have.  For example, a nurse claiming to be a doctor, or an eye doctor offering heart surgery.
2. When action is taken without apprising the patient of the potential risks involved in the procedure.
2. Remove medical licensing.  Yes, really.  In many cases, a nurse is just as good as - possibly even better than - a doctor.  When was the last time you saw an MD put stitches into someone?  Especially for common injuries - sprains, lacerations, torn muscles - I'd honestly rather see an experienced nurse than a the resident-level doctor I'm likely to get if I show up in the ER.  Note the strict dependence here on the definition of malpractice, above.  I'm happy to see an experienced nurse.  But a nurse can't claim to be a doctor, and if you want to insist on a doctor, by all means, you have the right to insist.  And likely pay quite a bit more for their time, in the process.
3. Legalize the production, sale, and use of all drugs, subject to tort liability for lack of disclosure about side effects.  This is almost a corollary of removing medical licensing, as it does you no good to see a nurse who can correctly diagnose strep, if you still have to see a doctor to get a prescription for the antibiotics.
4. Eliminate Medicare/Medicaid through a gradual process.  It would be unethical and inappropriate to remove these programs from those who have retired or otherwise planned their living arrangements on the basis of the continuation of necessary medical care from these programs, so simply striking them isn't a realistic option, but stop adding people to the rolls of the eligible, and allow the program to shrivel over time.
5. Establish a tax credit system whereby anyone paying for the medical care of another person, including non-dependent relatives, but excluding legal dependents, may claim such payments against their taxes at an initial rate of one half the amount paid.  If I pay $100 for my neighbor's broken leg to be put in a cast, I can claim a $50 credit towards my taxes.  Doctors and other medical providers may make this claim for any patients they treat who are unable to pay, but only after a 1 year deferment period to allow the patient time to pay (or find a donor willing to pay for them to claim the credit).  The exact rate can later be adjusted to accommodate a greater or lesser number of people unable to afford their own care.  This helps provide a source of funding for medical care for those who cannot provide their own, as well as giving physicians a certain level of comfort that they will be able to cover their expenses even when patients are unable to pay.

Now, I'm obviously over-simplifying the system as a whole.  Nothing like this could be laid out in full detail in a simple blog posting.  And it's undeniably radical.  The conservatives won't like it, because it legalizes drugs, and disenfranchises the medical monopoly of the AMA.  The liberals won't like it because it seeks to end entitlement programs.  To me, that's encouraging, because anything that neither of our current parties in power likes is probably a good thing.  But ultimately, it empowers the individual - to choose the level of expertise they pay for when seeking medical care; to choose the medications they take, with or without the advice of a doctor; to choose the amount they wish to help their neighbors.  I don't see how that's a bad thing, for anyone except those too lazy to think about such important decisions.

Less Art, More Basics

One of the most fascinating things about software development is just how easy it is for people to get away with being called professionals, while producing code with a quality only marginally better than what I could get from a well-trained chimpanzee, and in half the time.  It's true, to an extent, that software development and design is both an art and a science.  There are often several ways to achieve a given goal, and the trade-offs between some of the options can sometimes come down to a matter of personal preference.  On the other hand, unlike expressing oneself through a painting or a poem, there are, in fact, wrong ways to write code.

To extend the art analogy, one cannot write a poem in a language one has not learned.  There is an art to choosing the words you use, but to choose them artistically, you must first possess a certain level of fluency in the language.  Likewise with software, the artistic portion really should only be happening when you are decidedly strong in the basics of the code, and it should mostly be happening at the design level, not by individual implementors.  Producing working, bug-free software in a predictable period of time requires discipline and a methodical effort.  Getting creative with the code nearly always leads to long delays and more bugs.

Back to Greatness

The economy here in the US isn't what it used to be.  Depending on where you are in the great pecking order, you may be out of a job, or you may be earning the same amount as you have been for the last three years, while your expenses have grown, or you may be one of the lucky sorts who are still on the rise.  Regardless of where you fall, though, the signs are there for anyone who wants to see them.  The value of the dollar is falling, the federal deficit is so large, most of us can't truly envision what numbers on that scale even mean, and unemployment is lingering at dangerously high levels.

Everybody knows this, and it seems like everybody even has their own ideas about how to fix it.  "Tax the rich!" some say, "They can afford it!"  Others call for the dismantling of government programs, rallying together with cries of "Smaller Government, Less Taxes!"  Unfortunately, most of these ideas aren't going address the real issues that we face.  America once led the world in industry, technology, and finance.  Now, we struggle to keep pace, clinging to our old position of leadership like a horror movie victim being dragged through a doorway, watching it slip from our grasp.

So, what happened?  What went wrong?  Well, a great many things, over a rather long period of time.  But one big change happened in our society, along the way.  America became great because the people made it great.  The citizens of this country didn't wait for someone to come along and fix things.  If they saw something that needed doing, they did it.  They took pride in their town, their state, their nation, and strove to make it better, as individuals.  They didn't walk by a hungry man on the street, and think "Someone should help him out.", they bought him a meal, or helped him find a job to provide a steady income. 

Today, everyone seems to think the government should be solving these problems.  And, at least in part, it has to be that way.  Nobody but the government can reduce the national debt.  Nobody but the government can bring our brave men and women home from foreign wars.  But the attitudes of the average citizen need to change, as well.  We need to stop asking Washington to fix everything, and just get up and fix it.  We have, as a nation, forgotten how to become great, because we've been there for so long, the journey is forgotten.  Like an apex predator faced with the introduction of a competing predator, we've lost our skills in competing, because we've been devoid of real competition for so long.  We need to stop complaining about our schools, and get involved in making them better ourselves.

That includes the way our government is run, as well.  We need to hold our elected leaders to account for what they have done during their term, whether it's the local town council and their failure to fix the roads, or a member of the Senate who, despite claiming to be opposed to having our troops in Iraq, continues to vote to authorized funding to keep them there.

America can be great again, as it once was, but only if we choose to make it great, each one of us.