Warren Buffet vs. Chris Christie

In a recent interview, Warren Buffet responds to a comment from Chris Christie that if he wanted to pay more in taxes he should just write the government a check and shut up.  I think this is a rude comment.  Warren Buffet has taken the time to opine on an important government policy.  We should honor this public spiritedness rather than telling him to shut up.

During the interview, Mr. buffet gives the audience information about how the income and taxes paid by the top 400 earners has changed between 1992 and 2008.  I believe that the information that he is giving can be found here.  While I believe that the information given by the IRS was technically correct, I believe it is somewhat misleading in that it leaves out corporate income tax.  This is why I believe that the figures given by the CBO here give a more complete picture.

Note that in the second table in table 1 of the CBO's letter the effective individual income tax rate for the top hundredth of 1 percent was 17% in 2005.  Table 1 of the IRS publication gives a rate of 18% for the top 400 earners.  Together these would indicate that the top 400 earners actually paid taxes at a higher rate than less fortunate earners in the top hundredth of a percent.  On the other hand this might simply indicate that the IRS and CBO have slightly different definitions of income, so we shouldn't read too much into this.  The data from the CBO show that taxes are somewhat regressive within the top tenth of a percent of income.  The top hundredth of a percent pay a slightly lower rate that less fortunate members of the top tenth of a percent.

The reason why I point this out I haven't seen figures from the CBO for the top 400 earners, nor have I seen comparable information from the IRS that included corporate income tax.  Perhaps an astute reader will be able to bring something on this to my attention.  In any case since the rate for the top 400 earners is comparable to that of the top hundredth of a percent, and this rate is higher in turn than the rates for any of five quintiles of income, this shows that our tax code is progressive, which is in conformity with public expectations.

Mr. Buffet is correct in stating that tax rates for the richest Americans have declined.  However, they declined even more for all the other income groups.  Perhaps the rates should be higher.  The government needs to cover its expenses.  Lucy Barnes points out here that the progressivity of a tax system doesn't tell us quite as much as we would like to know.  In short our tax system is more progressive than that in most other countries, but because our government is collecting less in taxes, it is doing much less to ameliorate overall inequality.  Lower taxes mean less money for social programs.  Of course since she didn't examine the long term impact of redistribution, this doesn't negate the possibility that it is counterproductive in the long term.