Monday, April 23, 2012

Taxes, Charity, and the Libertarians

The libertarians have been arguing about what I consider a silly claim: if Warren Buffett really believes that taxes should go up, then he should be voluntarily giving more money to government, not to charity. I linked earlier today to what I figured was a definitive case by Will Wilkinson why that argument doesn't hold. But I see via comments to my post that other libertarians are keeping the argument going, so I'll toss my two cents in.

Glen Whitman says, for example, that Wilkinson's argument only holds if public spending is such that it's only effective in large amounts -- if, that is, Buffett's theoretical $1000 is only effective if enough people contribute that it becomes worthwhile. If, on the other hand, each dollar of government spending is worth the same benefit, then Buffett should be giving more to government than to private charity if he really believes that government spending is more effective.

But that's not necessarily true. Suppose that Buffett believes that $1000 it would create $1500 in benefits if it was given to charities he selected; $1200 in benefits if it was given to government; and $800 in benefits if it was given to the charities everyone would actually choose (because in practice a ton of people are going to give to scams, or to charities which he believes do more harm than good). So if it's just his $1000, he'll give it to the charity he supports (over government) -- while still preferring a system in which he's constrained to pay that $1000 in taxes as long as everyone else is. In other words, he'll accept using his own money sub-optimally (in his own view) if it will buy everyone else contributing.

Indeed, that logic applies even if Buffett believes that the actual mix of charities people would give to if they were required to give produced more benefits than government did, if he also believes that forcing people to pay taxes is OK but forcing them to give to charities is improper. Why might someone believe that? Arnold Kling, apparently imagining an improbable world in which voluntary contributions would be sufficient, says:
I think it is worth imagining a world in which government competes on a level playing field with other charities. That is, imagine a world in which government relied on voluntary donations. In such a world, government would be smaller and other providers of public goods would be larger. To me, that sounds like a win-win.
Is it win-win? Only if you assume that "other providers of public goods" are inherently more benign than governments. Is that true? I can understand why someone might believe it, but I certainly don't. Non-governmental organizations such as, say, churches, have a long history of all sorts of nasty things when they are the dominant organizations within a polity, and I can't think of any organization which isn't vulnerable to some sort of pathology when it gets large enough to provide the public goods that a very large nation would benefit from. Which is not to say that governments are necessarily more benign, either; it's just that there's an argument to have here, not the assumption that (some) libertarians buy in to.

45 comments:

  1. I don't know how productive it is to just accept the libertarian premise of assessing all social reality on the basis of pure individualist calculation and cost-benefit analysis.

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  2. Back when conservatives were saying that the War in Iraq was the equivalent of World War III, with the fate of humanity hanging in the balance, liberals liked to ask why none of these conservatives were actually going to fight the war, if it was so important. Conservatives responded with a bunch of rationales as to why they didn't have to fight.

    I don't remember what those reasons were, but they're probably applicable here.

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  4. This line that extreme libertarians take -- that government isn't just suspect, but somehow basically illegitimate -- is just idiotic, in the original, literal Greek sense of the word: a refusal to understand what's involved in living in society. Their model can't begin to account for the provision of most of what a modern society needs. Right, we're supposed to rely on "voluntary donations" to, for example, maintain ports and run the air-traffic control system. Sure. Because everyone is perfectly informed of all the interconnections, so even the person who never flies in a plane understands that air travel and freight hauling make possible the commerce that puts food in the local grocery and thus on their table. So they'll voluntarily give on that basis, and in roughly the needed amounts, so everything will sort itself out with no coordinating agency needed to weigh the tradeoffs between those functions and a thousand others. I mean, you start to think about the endless problems and you want to tell these people to go back to polishing their stupid guns and leave the rest of us alone -- that's what they want anyway, right?

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  5. Buffet is being inconsistent. It seems pretty simple to me… If he wants to be a proportionally equal contributor to the treasury when compared with his secretary, then he is totally free to discharge this moral obligation by voluntarily giving more to the treasury. Since his charitable donations fail to do this, he is inconsistent by his own measure.

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    1. I dont think this reasoning will suffice. It is a stretch to assume his position is that [people at his level of income should be proportionally equal contributors compared with people of his secretary's income level.] I think most honest observers would say his position is more brackets + "under a compulsory system of taxation". If the latter is his actual position, then he seems to be behaving with perfect consistency.

      At the very least Id say we dont know either way and it's just too big a leap to say he's being inconsistent by not backing up the money truck to Uncle Sam.

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    2. Drew,

      Buffet believes he should be contributing more in taxes. He has the opportunity to do this voluntarily, yet he has chosen not to. He has not fulfilled what he feels is his social obligation, that is the point.

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    3. "Buffet believes he should be contributing more in taxes."

      I think this is fundamentally wrong. Buffet believes that it would be a better way to run the country if the very wealthy were taxed such that their minimum tax rates were higher. He is not complaining that is not able to pay enough - he is complaining that the system is not set up to operate in the way that he feels would be most effective.

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    4. Again, I think you're assuming too much about what his position atually is. It is plausible, and in my opinion likely that Buffett distinguishes between the propositions "everyone should pay his fair share" and "the government should institute a compulsory system of taxation that ensures everyone pays his fair share." If his position is the latter, then there is nothing inconsistent about his behavior.

      Now maybe there is some esoteric Nozickian reasoning why there really isn't a distinction and these propositions are theoretically equivalent. But if Buffett is unaware of or unconvinced by those arguments, then I think we can still say his behavior is consistent with his beliefs.

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    5. Drew + Ryan,

      The whole point of Buffet's story about himself and his secretary is that he wasn't paying his fair share of taxes. I assume that he doesn't feel obliged to actually do this until he's legally compelled to. Whether that's a position of philosophical principle or personal convenience is for each of us to decide.

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    6. Couves,

      You said "The whole point of Buffet's story about himself and his secretary is that he wasn't paying his fair share of taxes."

      Let's take this at face value. Is there no distinction between "I am not paying my fair share of taxes" and "I am not contributing a fair proportion of my income to the U.S. Treasury"? If there isn't, why not? I think only the latter gets you to a scenario where he is being inconsistent, and I just see nothing in his beliefs that says people should voluntarily contribute money to the treasury if they dont think they are being taxed enough. If you can point to a quote or something that supports this interpretation of his opinion, I'll be glad change my mind.

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    7. Drew, I don't understand the distinction you're making. If it's his belief that he's not paying his fair share, I think it's natural to ask why he doesn't voluntarily give more. If you don't see this as a clear inconsistency then I'm afraid there's nothing more I can say to convince you.

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    8. Couves,

      You can certainly ask why he doesn't voluntarily give more. But to answer for him and then use that answer to label him inconsistent is a big leap.

      There is obviously a distinction between voluntary donations to the government compulsory universal taxation. Whether that distinction is one that Buffett makes or whether it is one that sufficiently answers the question youre asking of him isn't so obvious. And I think it's a little unfair to make judgments about his behavioral consistency based on things that are obscured from us.

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    9. Drew,

      My question was a rhetorical one.

      Yes, there is a difference between voluntary donations and compulsory taxes. Yet both actions would accomplish the same purpose of allowing Buffet to pay his fair share to the treasury. In the absence of one method, I would expect him to avail himself of the other. What I’m focusing on is Buffet’s point that he has an obligation to pay more. It doesn’t seem to me that the method of discharging that obligation should matter, just that it be satisfied.

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    10. Couves,
      "Yes, there is a difference between voluntary donations and compulsory taxes. Yet both actions would accomplish the same purpose.."

      But that's not Buffett's purpose so why be intellectually dishonest about it for the sake of childish gamesmanship? His purpose is to effect systemic tax system change- because government runs most efficiently on predictable revenue not donations- and he's set himself up as the archetype for why it needs change.
      Buffett's offered, BTW, to match all GOP members of Congress dollar for dollar in donations. That was almost 4 months ago and still no takers.

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    11. Unknown,
      And yet Buffett still isn't paying his fair share, as he's defined it. The way you describe him, it sounds like he's the one playing games here.

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  6. Isn't part of the reason for government (at least for moderates and liberals) provision for the public good? And that part of the benefit is that it is PUBLIC provision? A feeling that publicly providing education for the young and pensions to the elderly is part of what binds us as a society? The fact that we all pay taxes to pay for example, the military, makes the military OURS in a special way? Taxes paid by the national community cannot be wholly replaced by private charity.

    More specifically to Buffet, he notes the injustice that he is taxed at a lower rate than his secretary. He could give 100% of his income and he still would be taxed at a lower rate than his secretary. The tax code offends his sense of economic justice, and the remedy from his perspective is to reform the tax rates.

    Both these points seem so obvious to me that only a Libertarian could fail to understand them. Conservatives understand them full well; they just passionately disagree, hence the anger they have towards Buffet.

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  7. "Arnold Kling, apparently imagining an improbable world in which voluntary contributions would be sufficient, says..."

    Sufficient for what? I'd happily pay my share of the legitimate functions of government. It may be that there wouldn't be enough to pay for Cadillacs for every welfare queen and gold plated pensions for the teachers' unions, but we all have to make sacrifices.

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    1. Nothing convinces me that a system predicated on voluntary participation by a large and diverse group can work like one person saying they're game.

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    2. You are missing the point. You cut your cloth to fit your purse. If that means the federal government has to shrink by 3 orders of magnitude, then that's just an added bonus.

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    3. Well I think you missed my point as well so let's just call it a draw

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  8. I may be a simpleton, but this discussion strikes me as bizarre, particularly the part about Buffett "voluntarily" helping out the Fed Govt by complying with his own proposed rule, and the utility of said compliance vis a vis his donation to the Gates Foundation. I feel almost stupid mentioning this, but these folks do realize the amount in scope for Buffett's taxes ($5 million) is 1/8,000th what he gave to the Gates Foundation? Or 1/200,000th the going annual Federal Deficit?

    This weekend I'm gonna take my toddler to the mall, and she's gonna stand in front of the fountain with some hesitation, wondering whether she wants to throw in a dime for charity. Hopefully a few of the linked commenters to this thread will be nearby to explain to my little one What It All Means.

    Seriously, you know what I'd like? People to put aside the sophistry, and admit that a) they don't like taxes but b) they do like services and c) they don't like cutting services, so d) what are we gonna do about this? That may not produce any benefits, but it would certainly be more productive than the status quo.

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    1. @CSH: what a great comment. Nothing to add except: toddler squee!

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  9. Professor Bernstein,

    It's a category error to refer to governments as benign (kindly or gentle.) Kling is comparing institutions that have to persuade people to donate or pay and persuade recipients to accept to institutions that coerce people to pay and coerce others to act in specific ways 'for their own good' (seat-belt laws and drug wars.)

    You don't get Kling and you will never understand libertarians if you talk about kindly or gentle institutions that have a monopoly on violence and use it to extract resources. He is not advocating here for a world free from gjvernment coercion, but talking about which way it would be better to move at this margin.

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    1. Yet another problem with this extreme libertarianism is its failure to understand what the taxing power achieves. The American government was organized in the first place because the states had no credit and couldn't raise money in the bond markets. Also their currencies were unsound. They decided, through various mechanisms that did mobilize consent (like requiring the Constitution to be ratified by 3/4s of the states in popularly elected conventions), that there needed to be a larger "continental" government that could establish credit, pay off the states' debts and stabilize the currency. What gave that government the power to do these things was its power to tax, as opposed to relying on requisitions from the states (i.e. "voluntary contributions").

      The taxing power has been expanded since then, notably with the introduction of the income tax. This was a constitutional amendment that, again, required supermajorities to pass. And all individual taxing measures have to be voted on in two separately elected houses of Congress (one of which now effectively requires a supermajority) and signed by a separately elected president. The result is a stable system (too stable, if you ask me, but that's a different discussion) that has the best credit record of any entity on the planet, notwithstanding what Standard & Poor's said last summer, as well as the currency that the rest of the world prefers for most of its trade. These are tremendous assets that the American people buy with their taxes, or rather with their willingness to be taxed. A society of 300 million Arnold Klings would not have this, and would live poorer lives as a result.

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    2. "Only if you assume that "other providers of public goods" are inherently more benign than governments. Is that true? I can understand why someone might believe it, but I certainly don't."

      ... inherently more kindly and gentle than government

      There are no NGOs, charities, etc. that have nukes, giant police forces, standing armies, and an IRS. Let's talk about the real world instead of a rival church from centuries ago. If you believe that the US govt. is more kindly and gentle than these other institutions, just ask Eric Holder which med-marijuana facility he's gently visiting (with shotguns) tomorrow. I'll be hanging out at the Gates Foundation.

      Jeff,

      Every currency in the world is backed by the money the issuing govt. coerces from its people. What are you saying is so different about the US system? More importantly, what do you know about Kling and his stances on currency, banking, and taxation?

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    3. The difference is scale. The US has pursued that system longer, on a larger scale and more successfully than other nations, making it more widely trusted. The wealth, size and reach this gives it translate into power -- some persuasive, some coercive -- which has enabled it to establish a world system in which people, goods and capital can move about in relative safety and with relatively little friction (compared, say, to a medieval system of fragmented powers where everyone is charging tolls -- another vision I've heard libertarians speak of longingly). Just about everyone, and certainly every American, is richer for this than s/he would otherwise be.

      What I know about Kling is that what he calls a "win-win" is a system without an entity able to do these things. Also that whatever think-tank employs him is ultimately paying him a salary made possible because of taxes and government expenditures, if we traced it all back upstream.

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    4. Backyardfoundry, It's those who challenge the system with their lifestyles who are most likely to have guns pointed at them by government agents. (Simply enjoying the virtues of unprocessed food can get you targeted: http://youtu.be/9MVwdv5HBVQ)

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    5. Couves,

      404 not found

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    6. http://youtu.be/9MVwdv5HBVQ

      There should be no parentheses at the end.

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    7. Couves,

      From my notes:

      The government workers gently took all of the merchant's clearly described goods and threw them in the sewer. He kindly grabbed the merchant and employees while pointing .40 caliber pistols at them, and in a display so benign as to make an aspie like Bill Gates weep, the govt. workers put the merchant in a concrete room with suspected rapists and gave him a free balogna sandwich!

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    8. Oh, Jeff, that last wasn't fair. In fact it was suspiciously parallel to the argument that WB is a hypocrite for wanting to change the system while existing within the system. You can't make everyone responsible for everything they take advantage of -- not if they would change the system to eliminate it. Just because I drive a car doesn't mean the BP spill was my fault.

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  10. The model of WB displayed here is improbable; a man so wise and benign that he knows the best way to invest his own money in public goods... willing to accept worse outcomes for his own part in order to better the world by convincing others to accept higher taxation... because bigger government will make the world into a better place. Right.

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    1. Libertarians are also improbable: people dedicated to chopping off the limb on which they are sitting. Nonetheless, I am convinced that they do exist.

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    2. http://aretae.blogspot.com/2012/04/libertarian-omnibus-post-long.html?m=1

      There.

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  11. Trying to take silly arguments away from Libertarians is just cruel. It's all they have. Would you kick a puppy?

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    1. http://aretae.blogspot.com/2012/04/libertarian-omnibus-post-long.html?m=1

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    2. You sound super smart, Jim!

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  12. you think government is fucked up? Join a non profit charitable organization and watch your head spin

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  13. "if Warren Buffett really believes that taxes should go up, then he should be voluntarily giving more money to government"

    And therein lies the bait and switch. The libertarians are hiding behind a straw man, even here on this thread. Buffett thinks that people like himself should pay more in taxes because we have a revenue problem. Saying that he himself should volunteer to pay more is a cheap way of changing the subject while pretending to have an argument. Voluntary contributions aren't the same thing as tax policy, in both nature and scale. I assume that libertarians actually know this, but are pretending they don't, which is the kind of infantile fatuousness I've come to associate with libertarians.

    At least one of the libertarians on this thread is using the very anecdote Buffett used to describe the problem as a faux justification for his own dishonesty. Is this just a game to them?

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    1. If WB told us that we should give our money to the Gates Foundation and then handed it to Geithner, we'd doubt the sincerity of his recommendation if not his sanity. To add strength to a claim one makes, it's good to apply it to oneself.

      "I think we should all be forced to do X, but in the absence of force I'm choosing to do Y" is deranged. Do X! Teach by example! Lead the way! This is very basic stuff.

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    2. But see now you making an argument on the grounds of what might be most persuasive, what presents a persuasive superficial perception. And in politics or due to sociological factors, that might make very good sense. But I think it's flat wrong to say that WB's position is logically incoherent or precisely hypocritical. There's a difference between these claims, which I think reasonable people can agree on.

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    3. JaimyMoore,

      I did manage to make an argument without accusing the people I disagree with of "infantile fatuousness" and "dishonesty." I like to think that reasonable people can disagree and let the weight of their arguments speak for themselves without resorting to insults.

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  14. He needs to be taxed, in my opinion. He can always reach out to a tax relief specialist if he having these issues.

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