Taxes are very complex in that there are many different types of taxes designed to raise revenue and modify behavior that the government wants to incentivize or dis-incentivize. At the highest and most simplified level you have:
Sales Taxes – generally taxes paid by the buyer to the seller at the point of purchase (tax on food at the grocery store)
Income Taxes – taxes on money people earn paid to the Federal, State or Local governments. Often this money is “withheld” from your paycheck. Typically there are myriad deductions applied to determine the amount owed
Property Taxes – taxes levied on property owned based on valuation and paid to the local government annually
Excise or “Sin” Taxes – taxes on specific items that the government wants to dis-incentivize such as cigarettes and alcohol, collected at the point of purchase
Payroll Tax – tax on wages used to “fund” social security and medicare and are levied on the employer and employee alike, to a certain amount, with few or no deductions
Capital Gains Tax – tax on the profits of securities, properties or businesses sold when the amount received is greater than the cost
Estate Tax – tax on the accumulated assets of someone who died, paid to the government.
There has been talk in the media about wealthy individuals who advocate “higher taxes” for various reasons, and they receive disproportionate press coverage for their “selfless” actions. Warren Buffett in particular has called for higher taxes on the rich, specifically INCOME taxes, as you can note below:
As fiscal cliff talk buzzes around Washington and Wall Street, Buffett on Monday published a New York Times editorial calling on Congress to impose a 30% tax on people making $1 million to $10 million a year and 35% percent above that.
However, Warren Buffett is taking significant steps to actually avoid paying the ONE tax specifically designed for him – the estate tax. Here he joins with other billionaires on their “pledge” to give away their fortunes (to trusts that they would designate how the money gets spent).
Warren Buffett got 11 more billionaires to agree to give away half of their wealth to charity.
It is hypocritical for those billionaires like Buffett to set aside their money in charities to be directed for purposes that they “believe in” while everyone else’s money is funneled to Federal, State or Local governments to fund whatever that governmental body decides to do with it. You and I can’t control where our payroll, income, sales or property taxes go – and we have to accept that. Then Buffett, too, should accept that when he calls on higher taxes for everyone (but income taxes hardly dent him since his wealth would be taxed through capital gains if he chooses to sell or most likely the estate tax on all of his unrealized gains through his lifetime) he should dismantle his “estate tax” protections and just show up and give his billions directly into the US Treasury when he dies, to be used for whatever purpose the government chooses, likely to pay interest on debt that we issue to the Chinese or to pay for some sort of poorly run entitlement or wealth transfer scheme.
Warren – if you believe in the call for higher taxes, then just die without an estate plan, and let the Federal government get their 40% of your billions. It is the right thing for you to do, since you believe (apparently) that they will spend this money wisely.
Cross posted at LITGM
