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May 21, 2003
Voodoo Dividends
There's nothing intrinsically wrong with being rich. There are good people who are rich and evil people who are poor (and vice versa). Even the Bible talks only about how the love of money is a sin and how that love makes it more difficult to go to Heaven than it is for a camel to go through the eye of a needle.
So it should not come as a surprise when billionaire Warren Buffet comes out against a tax cut that would directly benefit him and others of his economic stratum (see the story here from the Washington Post. Note: requires free registration). Below are a few snippets of his column:
The annual Forbes 400 lists prove that -- with occasional blips -- the rich do indeed get richer. Nonetheless, the Senate voted last week to supply major aid to the rich in their pursuit of even greater wealth.
Administration officials say that the $310 million suddenly added to my wallet would stimulate the economy because I would invest it and thereby create jobs. But they conveniently forget that if Berkshire kept the money, it would invest that same amount, creating jobs as well.
Overall, it's hard to conceive of anything sillier than the schedule the Senate has laid out. Indeed, the first President Bush had a name for such activities: "voodoo economics." The manipulation of enactment and sunset dates of tax changes is Enron-style accounting, and a Congress that has recently demanded honest corporate numbers should now look hard at its own practices.
When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a "break" requires -- now or down the line -- that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch. And last week the Senate handed the bill to the wrong party.
Supporters of making dividends tax-free like to paint critics as promoters of class warfare. The fact is, however, that their proposal promotes class welfare. For my class.
While being rich is a Good Thing, being greedy is something else (contrary to Gordon Gecko's famous "Greed is good." movie speech). The US Senate tax plan would steal, and I don't think that is too harsh a word, hundreds of millions of dollars from the middle class and working poor and give it to the top few percent that are rich. To what public purpose would this be done? How is it that Buffet now pays about the same percentage of his income (30 percent) as does the receptionist at the front door? How would it make things better, under the tax plan, for his tax rate to then drop to three percent while the receptionist continues to pay 30 percent?
As Buffet notes, the money would be invested and jobs would be created whether it was transferred to the rich or not. Hence, it seems, the only plausible explanation is to reward the people who helped the Senators to be where they are. But not only is this wrong-headed, it is poor public policy.
Aloha!
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Dan seto posted an interesting article (here) about US taxation. Feeling the need to comment, having been so amazed, I posted a comment there, which I would repost here, but... [Read More]
Tracked on May 22, 2003 02:32 AM
Comments
Wow, that stunned me. Sounds totally mental. The basic philosphy I've lived by is that everyone needs a certain amount of money to get by. That as you increase that money, you can afford more niceties. That past a certain threshold the differences are small and pretty much irrelevant. It's at that point, I think, that greed becomes a factor. Granted we all dream of owning a nice car, or two... many? Not really needed. That's when people become greedy.
Ok so then you've got a senate that are pitching to those people who are greedy, and figuring that they can give them even more money.
And that'll help people?
Ok, maybe it will. Mr Rich will decide he want's a wizzy new car every other day, and so people get to make them, and deliver them and so on.
But why should Mr Rich get a wizzy new car each day into the bargain.
Surely a more sensible option would be for the money to fund, directly more employment, research or similar.
Take a company, offer to fund 10 employees provided no others are made redundent, and then you boost the companies profitability a little, provide people with jobs, and any extra money is shared a little more evenly around (sure the bosses of the company will still get more than the people being employed, but the one person at the top won't get anywhere near the same amount).
Granted the overall effect is perhaps the same (money gets spread), it just seems to me the way I just described puts the money at the right end of the scale, and lets it percolate and spread the other way... a little more spread, a little more for everyone, and a little more fair.
Posted by: Phil at May 22, 2003 01:32 AM