Legal Analysis and Commentary from Justia

Voluntary Taxes? Why the Attacks on Warren Buffett Betray a Fundamental Misunderstanding of Government’s Role in Society

Two weeks ago, The New York Times published an op-ed by Warren Buffett, the billionaire investment guru and philanthropist.  Under the title “Stop Coddling the Super-Rich,” Buffett argued that the U.S. tax system is dangerously skewed to protect the wealthiest Americans from taxation, allowing them to pay lower rates even than their middle-class employees.

Buffett therefore proposed an increase in taxes on those with incomes over one million dollars per year, with a further increase on those enjoying incomes of over ten million dollars annually.  He noted that his proposal “would leave rates for 99.7 percent of taxpayers unchanged.”

To judge by the response of some on the political right, Buffett is guilty of nothing less than being a “traitor to his class” (a charge that was famously leveled against President Roosevelt during the Great Depression).  And in the days since Buffett’s column was published, he has been accused of everything under the sun, from breaking the law, to fudging facts, to engaging in “guilt therapy”—even to being a “socialist.”

The “socialist” claim against Buffett was rightly mocked by Jon Stewart, who found it remarkable that the most successful financial capitalist in history was being called a socialist.

The overheated charges against Buffett are even more remarkable still, if one is aware that Buffett’s proposal has ample precedents to recommend it under U.S. tax policy throughout our history.  Indeed, nothing that Buffett proposes even comes close to deserving the label “extreme.”  Rather, judged by our own past, his proposal is simply plain-vanilla tax policy.

The Ad Hominem Attacks on Buffett Are Troubling and Deeply Unpersuasive

The most notable aspect of the attacks on Buffett is not the seething anger of his critics, or their lack of perspective, but the degree to which they have focused their attacks on Buffett himself.  It is a measure of the influence of Buffett’s words that his opponents feel the need not merely to disagree with him, but to demonize him.

This response—to attack the messenger, rather than the message—is unfortunate but unsurprising.  What is surprising, however, is the continued rhetorical power of these personal attacks.

In this column, I will discuss the unfortunate role of personal attacks in tax discussions, noting in particular the claim that Buffett should be ignored because he is a hypocrite who could simply pay more money to the government if he so chose.

Turning the response to Buffett’s argument into a ritual of personal demonization, moreover, has exposed the broader ignorance of those who oppose progressive taxation.  They have not focused the argument on the question of what levels of taxation are appropriate, but instead have suggested that the very notion of taxation is itself illegitimate.  It is essential to understand why that argument is so dangerously wrong.

Is Everyone Too Biased to Propose Higher Taxes on the Rich?

Under the rules of logic, it is illegitimate and meaningless to attack an argument by attacking the speaker.  If Mary says that the sun does not revolve around the earth, then John achieves nothing by telling us that Mary is a thief and a liar.  Even John’s proving that Mary has a financial interest in a company that sells maps of the solar system with the sun at the center does not tell us that the sun actually does revolve around the earth.  Thus, “ad hominem attacks”—non-arguments that claim to undermine the truth of someone else’s assertion by pointing to the speaker’s character or circumstances—have no legitimate force in logic.

Even so, it is hardly surprising that people do care about the character and circumstances of those who make arguments.  Even if it is not logically valid to say that a habitual liar is wrong about an assertion, people without access to a source of unbiased truth can at least hope to gain some sense of the believability of arguments by knowing something about the people who are making them.

Thus, courts allow (under strict rules) character evidence to be presented at trial, and newspapers describe the qualifications of the people who write opinion columns.

In sum, while personal information is a highly imperfect proxy for the truth, it can be somewhat useful in certain limited ways.

Taxes and Ad Hominem Attacks

When it comes to discussions about progressive tax increases, however, we can see the true perversity of ad hominem attacks in action.  No one, it seems, is allowed to suggest an increase in taxes on the rich without being pilloried for his or her personal bias in the matter.

For instance, if a non-rich person suggests a progressive tax increase, then he is said to be engaged in Class Warfare, and the Politics of Envy.  The basic idea is that we should not trust the word of someone who suggests taking more from the rich, because that person must simply be angry and jealous that he himself is not rich.

If that is so, can we then trust a rich person who suggests that we increase taxes on the rich?  That person, after all, is not envious of rich people, and she is even suggesting a policy change that would directly worsen her own financial situation.  As we have seen in the Buffett case (and in so many others), however, rich people are quickly labeled hypocrites and worse when they propose tax increases on others like themselves.

This airtight logical loop—neither the rich person nor the non-rich person is qualified to propose higher taxes on the rich—should tell us all we need to know about those who attack Warren Buffett, President Obama, and anyone else who dares suggest a policy that would take more from the rich.  Once we are caught in such a loop, we are no longer arguing about the merits of a proposed policy—or even using information about the speaker in a way that allows us to infer something useful about the merits of the underlying claim.  We are, instead, allowing personal attacks to frame and distort the debate.

Should Do-Gooders Volunteer to Pay Extra?

The attacks on Warren Buffett have prominently included accusations of personal hypocrisy.  Some of those claims, if true, would at least be somewhat troubling.  There has been some commentary suggesting that Buffett actually cheats on his taxes—that is, that he is breaking the law to pay less than he should under the current Internal Revenue Code.  None of those claims are holding up to scrutiny, however.  And even if they did, even his proven perfidy would tell us nothing about the far larger question of whether the rich should pay more in taxes.

Buffett’s critics, however, go beyond falsely claiming that he is a tax cheat who must be silenced or ignored.  The hypocrisy charge also takes the form of faulting Buffett for not “putting his money where his mouth is”—that is, for passing up the always-available choice to give his money away.

This is an old attack, sharing more than a passing resemblance to attacks on “limousine liberals” who are faulted for being unwilling to live the miserable lives of the people whom they claim to want to help.

Specifically, some have suggested that Buffett should simply act on his view that the rich should pay more by taking out his checkbook and sending the government a check, or—what amounts to the same thing—choosing not to take advantage of the tax provisions that Congress has created for the benefit of the super-rich.

No one is forcing Buffett to remain rich or to use the tax advantages that are available to reduce his tax bill, the argument goes, so who is Buffett to tell other rich people that they must pay more?  Until he has given away all of his own personal wealth, these critics imply, he is in no position to propose taking anything away from other wealthy people.

The most obvious problem with this line of logic is that wanting to help the disadvantaged does not in any way equate to wanting to be one of the disadvantaged.  Vows of poverty might be admirable, but it is a ridiculously high standard to expect that anyone who decries the existence of want will agree to give everything he or she owns away.

Moreover, even if a person did give everything away, opponents of progressive taxation would immediately turn around and attack that person for setting an impossibly high standard: “Joe might be willing to live like Mother Teresa, but he shouldn’t impose his saintly standards on everyone else.”

In addition, there is no good reason why we cannot enact tax laws that set a reasonable baseline against which people can determine what their own behavior should be like.  Personal charity above that baseline is, of course, admirable, but the laws should be set to allow a person to say, “I’ve paid my taxes honestly, which means that I have done my part to support the government, under the laws that we the people have enacted.”

Telling people that they should ignore parts of the tax code that benefit them, and that they are fully entitled to invoke, sets an inappropriate standard of self-sacrifice that we would never expect in other areas of the law.

Taxes Have to Be Involuntary to Be Effective

The deeper issue here is that government is—and must be—an entity that sometimes forces people to do things (like pay taxes) that they would otherwise try to avoid.  We do not set taxes as a measure of personal virtue, but as a matter of choices regarding what we want government to do, and how we want people to contribute to the joint enterprise that is America.

Thus, if the argument against Buffett is that no one is forcing him to keep his money, the retort must be that we cannot have a government that is financed by individuals’ choices about how much they would like to pay in taxes.  The argument against Buffett, after all, is not limited to how we tax the wealthy.  If we should set low tax rates for the rich and allow them to pay more, at their discretion, then surely that logic applies to everyone else as well.  Under this line of reasoning, taxes would ultimately become entirely voluntary.

Buffett’s argument, however, was not that he felt the personal need to pay more in taxes.  He argued that, because of the perceived need for deficit reduction and other policy reasons, the government should collect more money, and that money should come from the rich.

Why?  Not only do the rich have a lot of money, but Buffett’s specific argument is also that they are currently benefiting from rules that even allow them to pay a smaller fraction of their incomes in taxes than they would pay if they were middle class—a reality that seems blatantly unfair to most observers.

The rich, therefore, are currently being “coddled”—and even if that were not so, the one group in society that can currently pay more (and do so without harming the economic recovery) is the rich:  the very group that Buffett would target.

Finally, consider the practical aspects of the “Let the rich (and everyone else) pay extra only if they want to do so” argument.  One of the government’s roles in society is to plan for the very long term.  Only the government can credibly plan to put a policy in place that could take decades to carry out—to rebuild our infrastructure, or to fundamentally upgrade the education that we provide for all children, for example—because it is not hostage to quarterly earnings reports, nor is it subject to the loss of donations from its benefactors.  Charities live from pledge drive to pledge drive.  Government cannot do what it does best (and what only it can do) if it faces such uncertainty about future funding.

We cannot allow the country’s finances to become hostage to the vicissitudes of the charitable impulses of the wealthy, or anyone else.  Financing government in a democracy is based on the simple but powerful idea that people cannot opt out of the system.  To allow otherwise would mean nothing less than the end of taxation, which Oliver Wendell Holmes famously observed is the basis of “civilized society.”

Attacking Warren Buffett for not paying more than the law requires, therefore, is a uniquely disingenuous distraction from the real issues.  Buffett’s arguments should, centrally, remind us that the tax system has been increasingly distorted to reduce the amount that the wealthy will pay toward society’s future prosperity.  And Buffett’s willingness to pay higher taxes, but only if all persons with his income pay the same, should be enough. Buffett is entitled to ask for fairness, as well as justice.

Overall, personal attacks on the messenger should not prevent us from making the tax system more progressive, to build a better future for rich and non-rich alike.  Thus, when taxation debates descend to personal attacks, listeners and readers ought to beware, and to focus primarily on the policies at issue, and the consequences they will have.

Neil H. BuchananNeil H. Buchanan, a Justia columnist, is an economist and legal scholar, a Professor of Law at The George Washington University, and a Senior Fellow at the Taxation Law and Policy Research Institute, Monash University (Melbourne, Australia). He blogs at DorfonLaw.org, and he is the author of The Debt Ceiling Disasters: How the Republicans Created an Unnecessary Constitutional Crisis and How the Democrats Can Fight Back.
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  • Scott Wyse

    What he fails to mention, is, that Mr. Buffett owes money and in legal tangle to keep from paying even that which he does owe, let alone his fair share.

  • maggieJ

    I have a suggestion for Buffett. How about willing your entire fortune to the US government for debt reduction? As far as I know, you still can’t take it with you.

  • Karla Lovorn

    Have a good read on me.

  • Geofgiles

    poppycock, balderdash, rampancy and malicious gogglebock
     

  • Ted Harvatin

    Of course Buffet is in favor of rasing everyone’s taxes. He already made his money, he has most of it in tax free charitable foundations and or takes his in a way that he pays cap gains rates. And raising taxes on those aspiring to catch up with him cuts the competiton. This is the same guy who ripped into S&P without bothering to disclose that his company owns a big hunk of Moody’s.  Forgot to report those things PROFESSOR

  • laughingboy

    Only a law professor would fail to see Buffett’s hypocrisy. I see he studiously ignored Berkshire Hathaway’s own failure to pay tax issue. Maybe we don’t need to raise tax rates but instead improve collection of current taxes?

    Buffett thinks the rich should pay more. He’s rich, lead by example and he’s got the moral leverage to back his position. Also, by the author’s logic, someone who favors strict drunk driving laws is okay to drive drunk himself because otherwise we’d be engaging in an “ad hominem attack” and laws have to be “involuntary to be effective”. 

    BTW, isn’t this author the same fellow who said the president did not need congressional approval to raise the debt ceiling? Well, Obama didn’t need congressional approval. When W was president, he was famously silent.

  • Howard Stevens

    Thank for a fair critique. The corrupt filth mongers at Murdoch’s fish wrappers, the New York Post and Wall Street Journal have undertaken a war on Buffett.

    They can’t stand forthright decency!

  • Bob Ritter

    Warren Buffet’s call to change the marginal rates on those earning more than one million a year should only be a starting point. Exemptions, deductions and credits for all taxpayers grossly distort our tax system and should be repealed. Let citizens pay a progressive tax on their gross income, thus giving them the freedom to do with their net-of-taxes income as they please. Now that’s a fair for everybody tax system.

 

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