[Vision2020] WARREN E. BUFFETT: A Minimum Tax for the Wealthy

[Kenneth Marcy]

On 11/26/2012 11:37 AM, Donovan Arnold wrote:
> I don't get it!

That's correct.

> How can you tax the people that control the prices of everything and 
> not expect prices to rise?

First, since very few people operating as sole proprietors have 
monopolist or near-monopolist pricing control, one doesn't tax the 
"people", one taxes the business organizations they control.

Second, not all prices are equally controlled. In markets where there 
are many buyers and sellers meeting regularly, and often electronically, 
such as in the commodities markets, price control by any one individual 
is difficult. (Not impossible, if they have a lot of money, but usually 
difficult.) On the other hand, in markets where there are just a few 
major major suppliers, supplier sensitivity to other suppliers' pricing 
activities may well lead to effective price controls at levels that 
would not occur were there more effective competition in those markets. 
Encouraging competition by various means would have the effect of 
lowering prices.

> If you tax business owners and stock holders, they will simply make up 
> for their loss in revenue by increasing the price of their goods and 
> services.

Businesses engaged in competitive markets will be restrained from 
raising prices too much because they will lose market share to their 
competitors. It matters not whether costs for employees or for raw 
materials or for interest on borrowed money, or taxes increase, the 
effect is the same. In less-competitive, monopolist-controlled, or in 
oligopolist-managed markets, cost increases can be passed on to 
consumers with profit margins maintained. Competition is what keeps 
consumer prices reasonable.

> This means the poor and middle classes absorb the tax increases by 
> rising costs of their goods and services they need and consume.

Poorer classes do have more difficulty avoiding higher prices containing 
higher costs because a larger portion of poorer classes consumption 
consists of required expenditures. They have less disposable income, and 
therefore fewer actual choices concerning on what to spend income. 
Competitive and efficient markets are more important for people of more 
modest means because they have to rely on markets to present them with 
the best products for them, not the products that are most profitable 
for the products' suppliers. Quite obviously, many less-rich people are 
disappointed by that reliance when their choice of suppliers is limited, 
and managed-oligopoly decisions, for all practical purposes, make their 
choices for them.

> Further, it doesn't change the quality of life at all for the poor or 
> middle classes if you tax rich people out of existence.

No one is suggesting taxing anyone out of existence. On the other hand, 
incremental property taxes on very large, and especially on otherwise 
inert and very large capital accumulations, would keep money in 
circulation that could be used, prudently and competitively, for a 
variety of public purposes.

> What matters is the cost of living, the price of goods and services 
> that we need or consume. The price of food, clothing, shelter, health 
> care and medicine, transportation, and education need to be as low as 
> possible.

Yes, costs of living are important considerations. However, income 
statements and balance sheets are two different, and interacting, points 
of view. Each needs to be considered with both economic as well as 
ethical lenses.

> We should reduce taxes on the wealthy if the price of these needed 
> goods and services is less than 60% of family income, and raise their 
> taxes for entitlement programs when it goes above 75%  to subsidize 
> the loss in quality of life. There would be a strong motive for 
> businesses to keep the cost of living affordable while getting rich.

Your economics is confused. Businesses have some, but not overwhelmingly 
controlling, incentives to "keep the cost of living affordable" in the 
face of market competition. Generally, it is the business of business to 
earn money, to satisfy stockholders and other stakeholders. Businesses 
don't control the macro-economy, they are only the formative basis of it.

It is the business of consumers, of citizens, and of governments to 
provide assistance and guidance to businesses for their benefit, and for 
the benefit of the societies that allow the businesses to exist and to 
operate. Society generally should not concede control over our economic 
lives to unelected, and often unaccountable, in the markets or 
otherwise, managers, officers, and directors of private capitalist 
corporations.

Governments have many uses, and they are even more useful if they are 
controlled by the people whose sovereignty created them and allows them 
to exist. When Benjamin Franklin told a woman at the Constitutional 
Convention that they had given "a Republic, if you can keep it," that 
idea certainly encompasses keeping control of its commerce and fiscal 
affairs in the interests of all of the parties involved.


Ken
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