WARREN Buffett has famously claimed that he is happy to pay a higher rate of income tax. He figures that, given all he has gained from society, it is only right that he give a lot back. President Obama’s proposed new tax on incomes above $1m has even been dubbed the Buffett tax.
This week I heard an anti-capitalist protester in my former home town of Auckland (which I am visiting for the World Cup) use the same argument. Asked by a television journalist if her protest was nothing more than a display of envy, she replied that, in fact, she earned good money but she was happy to pay higher tax.
It is astonishing how confused people get when it comes to their own virtue. If Buffett wants to give more of his income to the government, nothing stops him. Perhaps this is a virtuous thing for him to do. Though implausible, if the government will spend his money more wisely than he or its alternative recipients would, then this charity makes the world a better place.
But this supposed virtue on Buffett’s part is irrelevant to proper tax rates. I sponsor a child in Kenya. The small sum of money benefits the child much more than it costs me. So I think it is a good thing to do. But I do not conclude, as I would if I followed Buffett’s reasoning, that everyone who earns as much or more than me should be compelled to donate to the same charity on threat of imprisonment.
There is a monstrous moral egotism in Buffett’s argument. He believes that his preferences should be made universal, and not by a process of argument, whereby he convinces everyone else that he is right about who should get how much of their money, but by simple force. Because he is happy to give more of his money to the government, anyone who refuses to do the same should be imprisoned. What a high opinion he must have of himself. Thy will be done on earth as it is in heaven.
Many wealthy and powerful people in America and other Western countries are in receipt of taxpayers’ money. For example, Buffett is a major investor in Bank of America, which survived its poor risk-taking only because government officials gave it money confiscated from taxpayers. Anyone invested in General Motors is also on the take. Wealthy American farmers are among the world’s leading long-term crony capitalists. And politicians, of course, are not only paid from tax receipts but use them to buy votes.
The fantasy that taxes are some kind of voluntary charitable donation is congenial to such people, and they peddle it tirelessly. If you want to see this taken to its absurd limit, watch Jan Helfeld interview Harry Reid, the senate majority leader, on YouTube. The latter claims that tax is voluntary because, in America, you get deductions for interest paid on a mortgage. Never mind that you get put in prison if you refuse to pay.
Taxes are a necessary evil. Without them, public goods – goods that non-payers cannot be excluded from enjoying, such as the rule of law – would be under-supplied. But a necessary evil is still an evil. Start agreeing that taxation is intrinsically good, and you remove all moral restraint from those who would profit by squandering money confiscated from other people.
Jamie Whyte is a senior fellow of the Cobden Centre and author of Crimes Against Logic (McGraw Hill 2004).