Wilkinson has an important point, but they are all approaching the debate with the assumption that Warren Buffett wants the government to spend an additional dollar. I don’t see Warren Buffett saying that, and it isn’t even required for him to call for higher taxes on himself and similar earners to make his famous argument. The crucial comparison in Buffett’s discussion isn’t Buffett’s rates now versus the rates he’d pay in a social democratic country, but the rate that he pays versus his secretary. Warren Buffett could want the government cut in half and for his tax rate to go up; Buffet he could want a government so small it drowns in bathtubs yet find it unfair he pays a lower tax rate than his secretary.
Which means the central discussion isn’t one of the government collecting more and providing more, but the two central principles of fairness in taxation: vertical equity – those with more pay more – and horizontal equity, where people who are the same should be taxed the same. (Whether these are necessarily two principles of equity or one is a debate for another day.) It isn’t necessary for Buffett’s argument that the government should do more, or even that it should do what it does now, so the donating to charity example doesn’t carry weight. His argument is that the way taxes are collected now violate general principles of equity and fairness.
Zwolinski argues that since people don’t donate to the government that “(3)Therefore, they don’t believe that giving money to government is a good way to help others…It is therefore (from 3) odd for people to press for increased rates of taxation on the grounds that increased taxes will allow the government to help people.” But even if Warren Buffett didn’t care about helping others and believed that the only purpose of government is to turn his property claims on his vast wealth into property rights, and provide the costly night watchman apparatus required to do so, he could believe that vertical equity in the taxation required to raise those funds is still a requirement of tax fairness.
(Indeed, why does Zwolinski use “charity” as an example? Why not private police? The United States has had more private security guards than public police officers for some time. If someone thinks there should be more police, why not donate that money to the government rather than hire a private guard? Would following his logic provide proof that most people are anarcho-capitalists, who want privatized systems of policing and adjudication? Zwolinski might need to change his webpage if that’s the case. It is likely other factors are in play.)
Unless you believe that United States taxation should be based on a head tax – where everyone pays the same exact dollar amount regardless of wealth or income – you probably believe in vertical equity. (As Jeremy Bentham said, “a capitation tax is bad; because a man has a head, it does not follow that he has anything else.”) That could be proportionate taxation, progressive taxation, a kind of progressive taxation where wages up-to-the-poverty-line are tax free and proportionate taxation on income above that, and more. We don’t even have to assume progressive taxation for Buffett to say he should be taxed more – his objection is that he pays a lower proporationate taxation.
Beyond vertical, if someone made the same amount of money through labor that Buffett and Romney make through capital, the laborer would pay a much higher tax rate, violating our sense of horizontal equity. These are the crucial issues that the Buffett Rule is trying to address, issues that come even before what is the proper scope of government.
Cross-Posted From The Roosevelt Institute’s Next New DealBlog
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