Tax Fairness

Greg Mankiw notes how Warren Buffett

slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

Mankiw points out in response:

You might wonder how Mr Buffett managed such a low tax rate. Most likely, it arose because corporate dividends and capital gains are taxed at only 15 percent. But the corporate income that funded those returns was already taxed at the corporate level, where the tax rate is 35 percent. Mr Buffett seems to be ignoring the first round of taxation.

I think that's a pretty good point. Here's another. Assuming that the receptionist has a very generous salary of 100,000 dollars a year, she would have paid 30K in taxes. By contrast, by my rough calculation Buffett paid 8,142,000 dollars. If that's not clear enough, let me spell it out: The rich pay most of our taxes.

Oh, Baby

From Greg Mankiw, the NY Times report that:

about 5,000 babies, of the 70,000 or so who would otherwise be born during the first week in January, may have their arrival dates accelerated partly for tax reasons.

When your tax regime influences people to induce labor, perhaps it's time re-think things.

Tax Sniping

It's tax day at this blog today, with yet another post on taxes. Wesley Snipes is now being prosecuted for tax fraud. His defense is that he got bad advice from some tax professionals who have made absurd arguments as to why Americans don't owe any taxes for income earned domestically. It will be interesting to see what the evidence shows in terms of how much he knew.

Greg Mankiw on Taxes

Greg Mankiw is quickly becoming one of my favorite bloggers. In addition to the general support for a gas tax I noted earlier, he also writes in the same post:

The Pigou Club wants to move beyond the rhetorical syllogism, all too common in Republican circles, that

1. Taxes are bad.
2. Pigovian taxes are taxes.
3. Pigovian taxes are bad.

Such a simplistic mindset makes it impossible for people to discuss in a responsible way the relative merits of different tax systems. Instead, we Pigovians acknowledge:

1. There will be some government spending.
2. This spending will be funded with taxes.
3. Government should use the least bad taxes it has available.

It's kind of a shame that this even needs to be said, but unfortunately I think it does.

Pigovian Taxes

Greg Mankiw makes what I think is a good case for Pigovian taxes (e.g. a gas tax). I hope he is planning to raise these issues with Governor Romney.

Wesley Snipes' Tax Problems

A few weeks ago, I read about the IRS going after actor Wesley Snipes for tax fraud. Here's the indictment. Briefly, the alleged fraud is based on someone's spurious argument that, in essence, income from domestic activities is not taxable. I've looked into these arguments before. Hey, you never know, I thought -- maybe I don't have to pay taxes after all! After reading over the web materials of some of the advocates, though, it all seemed quite silly.

At the time of the indictment, I thought I read that Snipes was very active in pushing the argument himself, and even trying to convince others. But I can't find any evidence of that now, so maybe i'm wrong about that.

Anway, they couldn't find Snipes for a while, but he is now talking finally (he's in Namibia, fimling a movie), and here's what he had to say:

"I know this has more to do with a few individuals with access to power, making moves (trying to move up!) and less with some alleged crime against the whole population of the United States of America. This reminds me of rape cases where the 'victim' is flipped, turned or converted into the role of victimizer, the 'architect conspirator,' " Snipes writes. "It appears I'm to be the scapegoat, because there's more public interest in 'celebrities gone bad' than 'rich people being taken advantage of.' "

...

"I've injured no one, I've violated no one's rights and (as far as I know) I owe no one," the actor writes. "If I have violated someone, than I'm prepared to seek forgiveness and make amends. One is an artist and scholar seeking truth through diligent study and spiritual practice. Perhaps people like that have now become the enemy of the State."

His defense seems to be that he's being targeted because he's a celebrity. If he wants to stay out of jail, I think he's going to have to do better than that.

UPDATE: This blog post appears to contain the full text of Snipes' email quoted above. He seems to think he has done nothing wrong. It will be interesting to see when both sides tell their stories in full.