Warren Buffett: Tax the Rich

southsiderosie

Warren Buffett wrote an op-ed in today's New York Times that basically called on Congress to raise taxes on the rich in order to help with the nation's budget woes. One point he made really stood out.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Therefore, my question to the forum is, given both the maths and the broader issues of social fairness, why are so many politicians afraid to tax the very wealthy? Certainly in the US, a large number of politicians are slaves to Anti-Tax pledges and the like, but that is a self-inflicted problem. And I can certainly see how small countries may be more afraid of capital flight because they do not have the large internal markets to make it worthwhile. But if there were such a close relationship between taxation and investment, one might expect to see very little economic activity in the Nordic countries, yet they seem to be able to make up the difference there with excellent educational systems and infrastructure, and transparent, stable governance (much in the same way that the productive, well-educated German workers makeup for their tax and regulatory structures).

Ultimately, I think that many countries have more enticing factors to offer investors than a low tax base, but by destroying the tax base and increasing economic and social inequality, anti-tax zealots kill those other x-factors, and put countries (and states) in a position where they enter a wage and regulatory race to the bottom. At the end of the day, regions and states can compete on more than taxation (or being generally low-cost), and it is about time that policymakers took that into account.

Permabear

This post has been deleted.

beeftotheheels

southsiderosie wrote: »

Therefore, my question to the forum is, given both the maths and the broader issues of social fairness, why are so many politicians afraid to tax the very wealthy? Certainly in the US, a large number of politicians are slaves to Anti-Tax pledges and the like, but that is a self-inflicted problem. And I can certainly see how small countries may be more afraid of capital flight because they do not have the large internal markets to make it worthwhile. But if there were such a close relationship between taxation and investment, one might expect to see very little economic activity in the Nordic countries, yet they seem to be able to make up the difference there with excellent educational systems and infrastructure, and transparent, stable governance (much in the same way that the productive, well-educated German workers makeup for their tax and regulatory structures).

Ultimately, I think that many countries have more enticing factors to offer investors than a low tax base, but by destroying the tax base and increasing economic and social inequality, anti-tax zealots kill those other x-factors, and put countries (and states) in a position where they enter a wage and regulatory race to the bottom. At the end of the day, regions and states can compete on more than taxation (or being generally low-cost), and it is about time that policymakers took that into account.

A couple of points spring to mind here.

The first is a distinction between individuals and corporates, the second is a distinction between doing something and how you do it.

In relation to the first corporation tax is a charge on profits, just like any other business expense. So, unless and until it is clear that paying tax to a particular government is in the best interests of the shareholders, either because of the financial risks associated with tax planning, or an ethical drive from shareholders, companies will continue to seek to mitigate their tax leakage.

On to point two. If tomorrow the Irish Government decided to levy an 80% tax on the purchase of lollipops and I thought lollipops were a great investment opportunity I might still buy lollipops as Buffest says. However, I might also look to see given the size of the tax (I chose 80% to be huge to illustrate this) whether buying the lollipop manufacturer might be more efficient since I could avoid the lollipop tax on lollipops I manufactured. I might look at importing lollipops if imports weren't caught by the tax. So, once tax rates become very high they might not alter whether investments are made, they might very well alter how those investments are structured.

That said, I think that the threshold for altering behavior can be quite high, but is dependent on your starting point. If your starting point is Nordic tax rates, then to my mind you will tend to see lower tax rates overseas as being a bit of a naughty bonus. If your starting point is Irish CT rates, then you will see a 30%+ rate abroad as being excessive and try to mitigate that any way that you can.

My final point is that while I agree with southsiderosie that tax is just one of many costs of doing business and ought to be treated as such, it is a cost which the business has limited control over so to some extent that will result in it being treated differently to those costs which can be controlled. Lest we forget a business's approach to taxation will reflect the views of some of the key individuals involved. So a group with an aggressive tax director who has the ear of the FD might have a very different approach to tax rate management than a group without such a director. The aggressive tax director might even help the tax tail wag the commercial dog because his bonus is likely to be, to some extent dependent, on the tax costs of the business.

For individuals the matter is different and we do need to distinguish between the US and everyone else here. If an Irish person thinks that their rate is too high then they can move to Malta and pay less tax because we tax on residence. If a US person thinks that their rate is too high moving to Malta won't help a great deal because so long as they remain a US citizen they will be subject to US tax.

So, I welcome Buffet wading in, I think some tax rises are necessary and while increasing tax rates can alter behavior, I think the threshold is a lot higher than most people think. The argument that reductions in tax promote growth should be met with a mention of the American Jobs Creation Act 2004, yes the MNCs brought back dividends but they didn't reinvest them to create jobs, they paid them out to their shareholders for the most part. Tax breaks can promote reinvestment, but they need to be a lot more targeted than President Bush's attempt. Tax is, after all, just a cost of doing business with no particular moral connotations imho, don't offer a tax break in the vague hope that it will be reinvested (it would be wrong of companies to reinvest on that basis alone, imagine a company investing $2bn they weren't otherwise interested in investing to get a tax break of $xxxm?), if you want reinvestment make the tax break completely dependent on reinvestment and companies can then determine whether to avail of the break or not, which they will only do if reinvestment belongs on the commercial agenda.

View

Permabear wrote: »

This post had been deleted.

Fair enough but that doesn't stop our resident Libertarians for assuming we can transplant their model from the US into Ireland, does it?

You can't copy-paste any model in full but it is foolish to assume you can't copy the (better) parts of any, and all, models out there.

Permabear wrote: »

This post had been deleted.

A good point but the US, I believe, now levies the highest rate of corporate tax in the OECD (now that Japan has cut their rate). Yet if anyone even suggested raising corporate tax in Ireland to 15% - a level charged by recognised tax havens - people would have a melt-down here.

Permabear

This post has been deleted.

Manach

I am a tad ill-informed about economics, though trying to remedy it.
My issue I'd have about Mr. Buffett is that it fails to distingush, the undeserving/deserving rich i.e. that there would be a difference between generation money held in statis in trust funds which accurre interest in a safe marginal rate. Compare that to first generation investors/entrepenuers who have earned their money by taking chances and creating jobs.

beeftotheheels

Manach wrote: »

I am a tad ill-informed about economics, though trying to remedy it.
My issue I'd have about Mr. Buffett is that it fails to distingush, the undeserving/deserving rich i.e. that there would be a difference between generation money held in statis in trust funds which accurre interest in a safe marginal rate. Compare that to first generation investors/entrepenuers who have earned their money by taking chances and creating jobs.

Mr. Buffett, the Omaha investor who ranks fourth on the Forbes magazine list of the richest Americans, said in an interview that he had not signed the petition itself because he thought it did not go far enough in defending "the critical role" that he said the estate tax played in promoting economic growth, by helping create a society in which success is based on merit rather than inheritance.

Mr. Buffett said repealing the estate tax "would be a terrible mistake," the equivalent of "choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."

"We would regard that as absolute folly in terms of athletic competition," he said.

"We have come closer to a true meritocracy than anywhere else around the world," he said. "You have mobility so people with talents can be put to the best use. Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit."

Kev_ps3

Thats a stupid idea, lets take more off the poor and they them scrape by. The rich need their luxuries!!

beeftotheheels

An old post from TED, but still an interesting one

http://epicureandealmaker.blogspot.com/2009/12/we-didnt-start-fire.html

I don't think that Private Equity are necessarily parasites, I wouldn't read anything about PE in the guardian for example as it would make my blood boil. But I continue to struggle to see why carry should be subject to capital gains treatment rather than income treatment, especially in the current market when

1. 2008 flashback - the FT is reporting that the banks are struggling to get buy-out debt off their balance sheets http://www.ft.com/cms/s/0/d0b5d522-c755-11e0-9cac-00144feabdc0.html#axzz1V67glZ8C, and if it stays on the bank's balance sheet it is essentially being underwritten by the taxpayer, and
2. We're seeing more and more portfolio companies going under with the weight of their debt (as, it must be said, we did back in the late '80s, they work well in a buoyant market but struggle in a downturn).

So I agree with TED. Very small bunch of pretty rich guys ( a bit more sympathy for the newer guys who have their borrowings to co-invest and haven't seen any profitable exits from funds in carry) who, from a US perspective, can't really go elsewhere without relinquishing their citizenship yet are paying tax at around half the rate your average wall street lawyer is paying (not in the mood for comparing them to cleaners).

I can't really see them shutting up shop if they get subject to income tax treatment (in either the US or UK) and I struggle to see why the average US voter gives a damn about Henry Kravis' and Steve Schwarzman's effective tax rate.

Any thoughts on this OP?

DeVore

http://twitter.com/#!/DeVore/status/103186755083190272

I am not rich but I am well off compared to many on basic wages or the dole.

I would prefer to be taxed more rather than protected by a human shield of suffering of others.

My only requirement is that you spend the money wisely on improving Ireland for everyone.

kthxbye.

DeV.

beeftotheheels

DeVore wrote: »

http://twitter.com/#!/DeVore/status/103186755083190272

I am not rich but I am well off compared to many on basic wages or the dole.

I would prefer to be taxed more rather than protected by a human shield of suffering of others.

My only requirement is that you spend the money wisely on improving Ireland for everyone.

kthxbye.

DeV.

+1

southsiderosie

Permabear wrote: »

This post had been deleted.

In your very specific view of progressive leftists, who you seem to see as wild-eyed spendthrifts who never saw a government program they didn't like, perhaps that is the case. Given the op-ed cited in the OP, would you lump Buffett in with this lot as well?

The vast majority of GOP representatives have signed Grover Norquist's no-tax pledge, making eroding the tax base - or 'starving the beast' as Norquist puts it - a distinct policy objective of one of the two major parties in the US. So let's not try to deflect away from reality here: it is a stated specific goal among the majority of Republicans to shrink the tax base. That they have chosen to pursue this goal while 1) engaging in two wars, and 2) approving tax cuts for the wealthiest Americans whose incomes have increased exponentially over the last two decades, only adds to the lunacy of the situation.

Permabear wrote: »

I find these encomiums to the high-tax, big-government Nordic model to be simplistic and unpersuasive...

I'll get to this in a minute...

Permabear wrote: »

This post had been deleted.

But the problem is, the government is dealing with the fact that the previous administration adopted a spend now, ask questions later approach to starting two wars at the same time that it cut taxes. And it would be much easier to get concessions on cuts to programs that benefit the non-wealthy if the ultra-wealthy were paying more taxes - both in terms of income tax and social security contributions. If the real goal is to erode the deficit, then there has to be both cuts and an increase in revenue, i.e. shoring up the tax base.

Permabear wrote: »

From a historical perspective, the United States in 1913 had a top rate of income tax of just 7 percent, which applied only to incomes above $500,000 (the equivalent of $10 million today). Few imagined that just 32 years later, driven by two world wars and the economic turmoil of a Fed-created depression, the top tax rate would reach 94 percent for incomes over $200,000. But it did — and taxes never retreated to their pre-WWI levels. Americans have since had to become accustomed to their government becoming an enormously expensive behemoth that consumes unimaginable resources each year. But it simply doesn't have to be this way, no matter what the Nordic model might suggest.

This again? Pretty much every Western democracy, once they universalized voting, ended up developing a modern welfare state. The US's is small by comparison. You may not like it, and many conservatives claim not to like it, but at the end of the day, voters like government safety net programs. Clearly there need to be some reforms to the system, Medicare in particular, but they are undeniably popular. However, we need to get real about how much they actually cost and stop kicking the can down the road.

And in the US, again, there is a question of why the very wealthy contribute less as a percentage of their incomes to these programs than everyone else. Social security deductions are only based on the first $110,000 of income; we would not be having a debate about its viability if people who made $1 million a year contributed to social security at the same rate as people who make $100,000 a year.

I am not saying we need to be more like the Nordic countries. As you have noted, and as I have said in other threads on the matter, you cannot just plunk down one nation's institutions on another political culture. All I am saying is that there is not clear historical evidence that taxing wealthy people at rates that are roughly in line with the rest of the population, or even at a somewhat higher rate, will have a serious negative impact on investment or consumption. The insistence that the wealthy need tax cuts in order to spur job creation is nonsense, and the recent data highlighting just how far away the wealthiest Americans are pulling away from the rest of the country with no concurrent rise in income or living standards in the middle or the bottom highlight this dynamic quite clearly.

I am not anti-growth, I don't think the government needs to do everything, and I don't think that the uber rich should be taxed at a 95% rate or anything like that. But I do not think that they should be paying a lower effective rate than most other taxpayers and I do think it is problematic that clearly there is only one set of boats (or perhaps in this case, mega-yachts) that has risen with the tide over the last twenty-some odd years - and especially over the last ten.

Black Swan

Permabear wrote: »

This post had been deleted.

The following case is only anecdotal, and the appropriate limitations and cautions that apply to case studies should apply here. Given these cautions:

I have a "wealthy" cousin, who was a sales executive of software, residing in a US state noted for their concentration of software and hardware corporations (and related well funded political lobbies). Although now retired at 50, when he visited me earlier this year, during our lunch he proclaimed that he had made well into the high 6-figure range in income, had been in the high income tax bracket, but "for all practical purposes," realised more return on his gross income in terms of his high lifestyle, than the average US citizen.

When I inquired what he meant by this, he told me that it was a complex combination of factors, handled by his tax attorney, but everything he had realised to optimize his high lifestyle was allowed by the IRS and state income tax codes.

"Write-offs," he offered, were just one of many. There were so many ways to make things business-related in terms of the tax codes, and then you can deduct all (or a large portion) from your business expenses (i.e., cost of doing business). For example, he loves golf, and had found that many of his executive customers also liked the game, so to increase the likelihood of making a sale, he invited them to play golf, and after a few holes, met with them in the golf club for lunch to close the deal, frequently returning to the office with a completed sales contract for the purchase of his software. What a job he says, getting to play for pay, with huge tax deductions for playing the game he loves, and having a 5-star lunch on top of it.

The average US citizen "Joe the Plumber" may also love to play golf, and would really love to play the exclusive links hosted by expensive posh golf clubs and resorts, but Joe's customers want their drain cleaned or replaced immediately for a small service charge (relative to the high commissions my cousin gets while "working;" e.g., playing golf or eating lunch), before he runs to the next customer with their sink or toilet overflowing.

You wouldn't believe the numerous tax write-offs that fall within the IRS and state tax codes as business-related expenses, my cousin claimed. For example, he loves world travel, and many of the top executives that he catered to were headquartered in the cities of the world he wanted to visit. My executive ranked cousin would slip into his Savile Row suit and write-off this world travel as a business expense, while "Joe the Plumber" could hardly justify to the IRS or state tax auditors that a person in Singapore, or Hong Kong, or Dubai, or Paris needed their drain unplugged, much less come up with the cash flow from his plumbing business to pay for the trip (or my cousin's tax attorney, who was also a write-off).

Why the anecdotal case study? I read about Steve Forbes, who once ran for the Republican party nomination for president, but lost (2000 US president?). Although I'm an Independent, and not a fan of Forbes or the Republicans (or the Republican Tea Party), as a part of his platform, Forbes was pushing for a "Flat Income Tax," along with ways to cut all these wealthfare tax deductions that the "wealthy" enjoy, and the average Joe the Plumber doesn't. Might be something to consider in our discussions on this "Tax the Rich" thread?

nesf

Permabear wrote: »

This post had been deleted.

Yet the experience in some of the most progressively left countries like the Nordic countries or Germany is (to the best of my knowledge) that all pay tax. They do not exempt low earners from the tax net. That seems to be a problem in the centrist and right leaning nations rather than the left leaning ones.

Personally my issue is with the ability of very high earners to avoid tax legally to a much greater degree than mere well paid earners that can't afford expensive tax advice. The problem is the effective tax rate rather than the headline rate. Though I would strongly disagree with wealth taxes, I think they are unnecessary.

Lockstep

DeVore wrote: »

http://twitter.com/#!/DeVore/status/103186755083190272

I am not rich but I am well off compared to many on basic wages or the dole.

I would prefer to be taxed more rather than protected by a human shield of suffering of others.

My only requirement is that you spend the money wisely on improving Ireland for everyone.

kthxbye.

DeV.

+1

I'm a slightly-above-minimum wage worker (€9 an hour) and I have zero problems in paying taxes provided a return is seen on them. While living in Belgium I was quite heavily taxed but saw excellent return for this, with fantastic education, healthcare and public transport.
Ireland is a different kettle of fish. Investments on infrastructure and education seem like good areas to focus on, useless quangos and paying private-school teachers is not something that seems a good idea to use money on.


As for the whole 'Many people pay little to no income tax" in mind that pretty much every wage-earner in Ireland pays income tax in the Universal Social Charge. Feel free to scoff at it, but a few % isn't small when you're at that end of the income bracket.

Overheal

The counter argument in conservative media today has been "Ok [Warren], cut them a cheque."

nesf

Lockstep wrote: »

paying private-school teachers is not something that seems a good idea to use money on.

It makes logical sense for the State to subsidise private tuition since it saves the State money versus the State educating these kids in public schools.

View

Permabear wrote: »

This post had been deleted.

Agreed.

Permabear wrote: »

This post had been deleted.

In the short-term, yes, although as we have seen here such short-term thinking tends to have a very nasty habit of boomeranging back on you.

I would personally rate this issue as being by far and away our biggest political problem. And to clarify "this issue", I mean that the electorate tend to view central government as a giant cash machine to dispense "goodies" to them - there is no immediate linkage in many peoples minds between the bill for those "goodies" dispensed and the actual "goodies" received.

To take an obvious current example - Roscommon A&E. Right now, the locals are out protesting - if they succeed, the ensuing bill gets sent to every tax-payer in the state, whereas the benefit is primarily felt in Roscommon. The only way to change that is to give the people of Roscommon the power to AND responsibility for funding (most of) the cost of their A&E unit through local taxes - that way, the people of Roscommon get to decide if they really want to have an A&E AND are prepared to pay to have one (And, lest anyone think I am being unfair to Roscommon, the same applies to most other services in every other county/city in the state).

Lockstep

nesf wrote: »

It makes logical sense for the State to subsidise private tuition since it saves the State money versus the State educating these kids in public schools.

It really doesn't.

If a person wants to educate their child privately then they can go nuts. Just don't expect the state to help out.
Why should someone who can't afford private school for their child help subsidise the education of someone who can?

nesf

Lockstep wrote: »

It really doesn't.

If a person wants to educate their child privately then they can go nuts. Just don't expect the state to help out.
Why should someone who can't afford private school for their child help subsidise the education of someone who can?

The total cost of educating a child in the public system is far greater than the subsidy given towards educating a child privately. The State saves money with private schooling and should be encouraging it through subsidies to make it cheaper so more people can avail of it. And if someone can afford private school then they pay far more in tax each year than what the State gives to the school to educate their child.

View

Lockstep wrote: »

As for the whole 'Many people pay little to no income tax" in mind that pretty much every wage-earner in Ireland pays income tax in the Universal Social Charge. Feel free to scoff at it, but a few % isn't small when you're at that end of the income bracket.

That's a fair point but if I remember correctly it doesn't go anywhere near covering the cost of the services it goes toward. Really, there needs to be a more direct link, so the question stops being "How much extra can we spend?" and starts being "How much extra are we willing to pay for better service?"

Lockstep

nesf wrote: »

The total cost of educating a child in the public system is far greater than the subsidy given towards educating a child privately.
The State saves money with private schooling and should be encouraging it through subsidies to make it cheaper so more people can avail of it. And if someone can afford private school then they pay far more in tax each year than what the State gives to the school to educate their child.

If they can afford private school then they're clearly well enough off than to need to receive subsidies from other taxpayers.

If you want to receive services beyond that which is typically offered to the taxpayer (education, healthcare, security) then that's sound but it's not something the government should be involved in. If private education can be made available to everyone then that's one thing, but it's not. It's being made available to those with the extra cash.

beeftotheheels

View wrote: »

That's a fair point but if I remember correctly it doesn't go anywhere near covering the cost of the services it goes toward. Really, there needs to be a more direct link, so the question stops being "How much extra can we spend?" and starts being "How much extra are we willing to pay for better service?"

I'd agree and disagree. USC is a good first step on weaning ourselves off those daft transactional taxes and broadening back out the tax base. I think it could afford to increase a very little bit maybe next year but bearing in mind that 2% on an income under €10k is a hell of a lot harder in real terms than 2% on income over €80k.

The very little bit will comes through the bands adjustments we've already heard about which will also increase the effective rate on the average family. Personally I think an extra couple of percentage points at the upper end of the scale should also be included, one or two percent will not cause intellectual capital to flee our shores (unless Eddie Hobbs starts getting involved, actually no, intellectual capital should know better than to listen to Eddie)

Nice to see CGT and CAT are also on the agenda...

http://www.finance.gov.ie/documents/publications/other/2011/EU%20imf/EUimfJul2011.pdf

It strikes me that there was never a logical reason for aligning CAT rate with CGT rather than income tax (UK didn't), and suspect that CGT now needs to realign itself with income tax (maybe without the levies) not that I suspect there are all that many latent capital gains out there at the moment.

But local taxation is just not workable in a place as small as Ireland. If you go by Coco then loads of the people for whom Roscommon was the nearest hospital were not in Roscommon. Far better to just remind people that while "bailing out the banks" hit us all, so too does all inflated public sector expenditure which is intended to appeal to a particular sector of the electorate. There are no victim-less crimes here, be it the Nurse who calls in sick on Wednesday but can work overtime on Sunday, through keeping the local A&E which is not fit for purpose open while there are others within a suitable radius, through painting daft white lines on rural roads to delineate the church car park (a month ago - had been working fine without lines for 150 years) and fitting speed limit reducing lights on rural roads outside schools when those roads are cul-de-sacs leading to that school (I kid you not, such lights went up next parish over a few months back, the only people on the road in cars would be parents as the road ends at the school).

Lockstep

View wrote: »

That's a fair point but if I remember correctly it doesn't go anywhere near covering the cost of the services it goes toward. Really, there needs to be a more direct link, so the question stops being "How much extra can we spend?" and starts being "How much extra are we willing to pay for better service?"

Those on such low incomes are never gonna be be able to pay for the cost of services anyway: that's why the State covers them. They are however, contributing something to Revenue and given how much they're earning, it's not insignificant.

Permabear

This post has been deleted.

nesf

Lockstep wrote: »

If they can afford private school then they're clearly well enough off than to need to receive subsidies from other taxpayers.

If you want to receive services beyond that which is typically offered to the taxpayer (education, healthcare, security) then that's sound but it's not something the government should be involved in. If private education can be made available to everyone then that's one thing, but it's not. It's being made available to those with the extra cash.

You make it sound like everyone who pays for private education is rolling around in cash and would easily be able to pay the subsidy cost if removed (I think it is around 4K per student), this is far from the case and for every student removed from private education and put into public education it increases the cost to the Government over and above 4K meaning a net loss for the Exchequer for that student by removing the subsidy.

For every student that is sent to private school because the subsidy made it affordable saves the Government money which means more money available for services for people who can't afford private school.

Lockstep

nesf wrote: »

You make it sound like everyone who pays for private education is rolling around in cash and would easily be able to pay the subsidy cost if removed (I think it is around 4K per student), this is far from the case and for every student removed from private education and put into public education it increases the cost to the Government over and above 4K meaning a net loss for the Exchequer for that student by removing the subsidy.

For every student that is sent to private school because the subsidy made it affordable saves the Government money which means more money available for services for people who can't afford private school.

One of the big outlays on education is paying wages. I'd be very, very interested to see how much fees would be if the Exchequer wasn't paying the wages for private school teachers. Saying that the private schools only cost €4k is very simplistic.

Permabear

This post has been deleted.

nesf

Lockstep wrote: »

One of the big outlays on education is paying wages. I'd be very, very interested to see how much fees would be if the Exchequer wasn't paying the wages for private school teachers. Saying that the private schools only cost €4k is very simplistic.

As far as I remember (and I could be wrong) there's a flat rate subsidy given to all schools public and private of around 4K per student that's the main funding that goes into private schooling in this country.

Lockstep

nesf wrote: »

As far as I remember (and I could be wrong) there's a flat rate subsidy given to all schools public and private of around 4K per student that's the main funding that goes into private schooling in this country.

Private education could be made available to everyone quite easily. It would be much cheaper for the state to subsidize or fully cover private tuition for lower income students than to run schools directly. There's no particular reason why schools have to be under government control or why teachers have to be public servants.

The State also pays the wages of teachers in private schools. I am not saying that private schools should be discontinued or anything like that. I am questioning why the State pays the wages of teachers in private schools, combined with the subsidies they also give.

Permabear

This post has been deleted.

Lockstep

Permabear wrote: »

This post had been deleted.

Then let them pay their own teachers and work independently from the government.

This isn't a public/private debate. It's a subsidising the private schools debate.

beeftotheheels

Permabear wrote: »

This post had been deleted.

Talk about causing me a Lucinda Creighton moment :mad:

You take a perfectly easy argument and making it difficult.

Business travel. Yes - it is tax deductible. No - it is not always fun. While working an 80 hour week having to squeeze in getting up at 4am to catch a flight to X is a minor inconvenience. Being in X and realizing that things are a lot worse than you thought so you have to stay over an extra couple of days thus missing the plans you had with your mates/ family whatever is more.

On holidays I never stay in "nice" hotels, I'd far rather a woodworm infested family owned business with no internet access. I associate Hilton hotels with work. I don't enjoy the spa, no idea what their leisure centers look like, room service is fine when ordering a tuna sandwich and pot of tea at 3am because I need to get this finished before I go to sleep and they really do wake you up with the combination of wake up call and breakfast delivered to your room at 06.15 plus they generally have fantastic internet access. You know something is wrong when by the age of 28 you know which major hotel chains have the best pillows (which makes all the difference when you're looking at 2-3 hours sleep - Hotel Imperial in Vienna won the vote that evening).

So yes, the system can be abused, but it is not necessarily abusive. My parents have stayed in a Hilton twice and thought it was fantastic, noteworthy even (once was a missed connection in London which they were really thrilled about because AA picked up the tab). I couldn't share with them that I've no idea how many times I've stayed in a Hilton, could be 30, could be 60. I never chose to do so other than the limited choice that is offered by "which hotel is nearer the meeting/ airport?"

Grrr, I'm a liberal having to defend tax deductions because they're actually not always fun.

nesf

Lockstep wrote: »

The State also pays the wages of teachers in private schools. I am not saying that private schools should be discontinued or anything like that. I am questioning why the State pays the wages of teachers in private schools, combined with the subsidies they also give.

From here: http://www.irishtimes.com/newspaper/ireland/2011/0516/1224297038615.html

It looks like removing subsidies would at least double the fees required from parents. Fees amount to around 100 million a year and support from the State to another 100 million.

This would put private education out of the reach of many if not most families currently availing of it given that the bulk of students come from the middle class and most families will have more than one child in the school at any one time. Increasing fees from around the 5K mark to over 10K a year which is a lot of money even for the better off middle class.

This would cost the State more over the longer term if all these kids went into an already overstretched public system and require even further investment into the public system in terms of investment in infrastructure and other needs as well as replacing private sector teachers with public sector teachers which are a far heavier burden on the Exchequer.

Permabear

This post has been deleted.

K-9

nesf wrote: »

From here: http://www.irishtimes.com/newspaper/ireland/2011/0516/1224297038615.html

It looks like removing subsidies would at least double the fees required from parents. Fees amount to around 100 million a year and support from the State to another 100 million.

This would put private education out of the reach of many if not most families currently availing of it given that the bulk of students come from the middle class and most families will have more than one child in the school at any one time. Increasing fees from around the 5K mark to over 10K a year which is a lot of money even for the better off middle class.

This would cost the State more over the longer term if all these kids went into an already overstretched public system and require even further investment into the public system in terms of investment in infrastructure and other needs as well as replacing private sector teachers with public sector teachers which are a far heavier burden on the Exchequer.

I suppose scrapping scrapping "free" 3rd level education is a similar concept?

Permabear

This post has been deleted.

KindOfIrish

southsiderosie wrote: »

Therefore, my question to the forum is, given both the maths and the broader issues of social fairness, why are so many politicians afraid to tax the very wealthy?

In US there is a tendency to shoot those who wants to tax the very wealthy :eek:

nesf

K-9 wrote: »

I suppose scrapping scrapping "free" 3rd level education is a similar concept?

The State could replace free fees with a loan system similar to the UK's without distorting the incentives for parents while allowing Colleges to set fees that actually cover the costs of a course.

Lockstep

nesf wrote: »

From here: http://www.irishtimes.com/newspaper/ireland/2011/0516/1224297038615.html

It looks like removing subsidies would at least double the fees required from parents. Fees amount to around 100 million a year and support from the State to another 100 million.

This would put private education out of the reach of many if not most families currently availing of it given that the bulk of students come from the middle class and most families will have more than one child in the school at any one time. Increasing fees from around the 5K mark to over 10K a year which is a lot of money even for the better off middle class.

This would cost the State more over the longer term if all these kids went into an already overstretched public system and require even further investment into the public system in terms of investment in infrastructure and other needs as well as replacing private sector teachers with public sector teachers which are a far heavier burden on the Exchequer.

That 100m a year would only cover the wages of the teachers involved . The teachers in private schools are still public sector teachers.


Out of interest, do you know how much the cost is for a typical student in a public school compared to that of a private sector school?

Surely a better solution would be to increase education resources (resources, not salaries) than to pay for the middle and upper classes to take their kids out of the public system.

K-9

nesf wrote: »

The State could replace free fees with a loan system similar to the UK's without distorting the incentives for parents while allowing Colleges to set fees that actually cover the costs of a course.

Indeed.

Same system would make private second level systems more accessible.

Replace the subsidy system with loans.

nesf

K-9 wrote: »

Indeed.

Same system would make private second level systems more accessible.

Replace the subsidy system with loans.

60K of debt on top of say 20K of debt from college (assuming a cheap course) would be a pretty nasty burden on earners though. 60K is a lot after all.

southsiderosie

Um, can we get back to whether soaki-...uh, I mean increasing income taxes on the very rich is a good and/or viable idea or not?

beeftotheheels

Permabear wrote: »

This post had been deleted.

I would hazard to add you've been doing business travel for a couple of years given your history in academia. First couple of years I thought it was a joy, especially if it ended on Friday so you could have the weekend where-ever.

The years pass, it gets more tedious, it starts on Tuesday and ends on Friday when it was supposed to end on Thursday/ Monday whatever, but by then you're just desperate to get away from it all, to sleep in your own bed, hell to sleep for more than 3-4 hours max. Because it all kicks off at home on Saturday, because business never sleeps, it is catch up time, not relaxation time.

Lough Derg is an appropriate comparison, I would say that maybe you're just not old enough yet but given your academic career I think you're older than I am so I'll content myself with wondering whether you're perhaps just not jaded enough yet. Having your family along with you is probably a great tonic on this so if I could "short" you once your daughter starts school and you have to do business travel solo while missing her... Not that I wish that on you, I'm sure it must be wonderful to have her with you and have her make normally unbearable things bearable so I really hope you figure out a way to manage being a parent and a travelling business person.

Just business travel really can suck, especially when you're well into your second decade of it.

K-9

nesf wrote: »

60K of debt on top of say 20K of debt from college (assuming a cheap course) would be a pretty nasty burden on earners though. 60K is a lot after all.

It's personal choice though, is private education worth it. If it is, 60k shouldn't matter or indeed the state intervention?

Black Swan

Permabear wrote: »

This post had been deleted.

Agree, provided that:

• subsidies to unhealthful industries (e.g., Big Tobacco) are eliminated
• subsidies to historically high profit industries (e.g., Big Oil) are eliminated
• pork barrel earmarked spending of federal dollars that benefit special interests are eliminated (e.g., Palin's Bridge to Nowhere)
• immediate withdrawal of all military forces from Iraq and Afghanistan (i.e., stop the waste of billions per month on two problematic wars)
• discontinuance of funding, participation, and overseas bases for NATO
• end the Korean War (only an armistice now) and withdraw all US forces from South Korea
• strict competitive evaluation before federal contract award, and tight GAO oversight of spending to eliminate waste (e.g., $1,200 toilet seats for B-1 bombers)
• financial penalties (not increased funding) for contract cost over-runs and failing to meet deadlines (e.g., Boston's "Big Dig")
• if taxpayer bailouts of corporations occur, they are loaned with interest, and with the proviso that former and current executive bonuses (e.g., Bear Stearns Bailout bonuses) and golden parachutes (e.g., $21 million for AIG's CEO who lasted only 3 months and failed) are null and void until 100% of the bailout monies (with interest) have been paid back
• ensuring that all bids for federal contracts go to the lowest qualified bidder (e.g., Halliburton was exclusively awarded a multi-billion dollar rebuild Iraq contract outside of this competitive process by an administration that coincidentally had Halliburton's former CEO Cheney as the US Vice President)

nesf

K-9 wrote: »

It's personal choice though, is private education worth it. If it is, 60k shouldn't matter or indeed the state intervention?

The point was that the State subsidising private education saved the State money, rather whether private education was worth it.

Black Swan

Permabear wrote: »

This post had been deleted.

Social Security is not an entitlement programme. For wage earners (and most salaried) in the US, it is a mandatory retirement programme managed by the federal government. SS is deducted* from their paychecks, in addition to a separate withholding for income tax.

In practice, Social Security has been Congress's piggy bank, where they have dipped overtime into the billions in cashflow deducted* from wage and salary earner's paychecks to fund federal spending that exceeded tax revenues. Should this practice continue? Has it been in the best interests of the wage and salary earners in terms of a minimum retirement held by the federal government? Could such monies been better invested to ensure that the non-wealthy (most citizens in the US) have something to help pay for food, clothing, and shelter in their old age?

Social Security was poorly designed from the start, and should be redesigned. But don't even think about cutting the programme, unless you plan first to reimburse every wage and salary earner that was required to pay into the system from day one, including compounding interest. I would guess that such a payback would be in the trillions. The federal government made a contract with each wage and salary earner, and the contract was sealed when the first SS deduction* was made from their first paycheck.

Cutting Social Security and not (increasing) "Taxing the Rich" is not an answer either; nor is the excuse I often hear over here: Oh, THEY messed up years ago when THEY designed Social Security, and the wage earner and affected salary persons have to bite the bullet to pay for the mistake THEY made way back when, while the unaffected wealthy buy their 7th condo (e.g., John McCain), or a different Humvee for every day of the week (e.g., Arnold Schwarzenegger).

###########

*Edit: "Deduction" is probably not the proper bureaucratic term, rather I think they call it a "contribution" to Social Security. In any case it is different from income tax, and is shown in a separate line on your pay stub in the US. So when posters argue that they can save money by cutting Social Security today, they are acting as if it's an entitlement programme that is funded from income (and capital gains) taxes, which today it is not. So cutting Social Security "contributions" today would only eliminate the additional "piggy bank" non-tax revenues that the Congress borrows from to meet their debts that exceed revenues.

Disclaimer: I am not a tax professional or financial expert, so more precision and expertise could be had by consulting them, along with correcting any errors in my opinion.

ei.sdraob

In the case of US "taxing the rich" corporations would translate to job losses here, if Obama manages somehow to close the Double Irish money laundering operation then bye bye Irish economy
be careful what you wish for here in Ireland in respect to US, your livelihood might depend on it...

southsiderosie

ei.sdraob wrote: »

In the case of US "taxing the rich" corporations would translate to job losses here, if Obama manages somehow to close the Double Irish money laundering operation then bye bye Irish economy
be careful what you wish for here in Ireland in respect to US, your livelihood might depend on it...

But the proposal is specifically referring to personal income, not corporation tax.

ei.sdraob

southsiderosie wrote: »

But the proposal is specifically referring to personal income, not corporation tax.

Increasing income taxes would mean more people pointing at corporations and the various "loopholes" they enjoy, Obama has already made plenty of noise in this area. "Very Rich" not paying much in taxes in US is also a function of various loopholes being available, not sure how increasing the rates would help at all, maybe they should increase it only to illustrate how futile that move would be.

Anyways reading the thread its obvious that some of the posters have never spend any time in US (and not just one location since the country is so polarized) and observed the political debates among normal people. People are trying to relate the US to Ireland which is like comparing Dublin to Ballygobackwards village.