Bromo Tower: 1912
4 hours ago
“The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business."Key words here: inherently excessive. That's obviously in the eye of the beholder.
“The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mettle and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.”So explain to me and Andy again why we tax capital gains and "carried interest" at 15% while nurses and office managers are taxed at a marginal federal rate of 43% (28% + 15.3% FICA tax)?
I have added a few photos to the Flickr photoset of Gove County, Kansas that I started last summer.
Tom, I've been around rich people all my life. And I have seen capital gains taxes close to 40 percent. No one went home at 3 in the afternoon and said, "I've worked enough, and because tax rates are so high, I think I'll-- I'll go to the movies." ... I've been managing capital for 50 years for other people. No one left and said, you know, "This-- the taxation system's too tough. I-- I think I'll just stick it all under my mattress." They can't stick under their mattress. They're going to invest their money regardless.This sounds good, but I wonder if it is really true. First, Buffett is conflating working and investment a little bit here. Certainly there are investments, especially hot-money financial investments (as opposed to cold-money capital investments like building a factory), that are especially sensitive to the tax rate. While Buffett is right that a financier won't stick her money in a mattress, a given tax rate might induce her to keep it in cash equivalents instead of taking a flyer on a new venture. None of this has anything to do with "working."