A number of people have directed my attention to Barry Ritholtz’s retort to the op-ed by Arthur Laffer to which I linked the other day. What I would mostly conclude from Mr. Ritholtz’s reply is that he despises Arthur Laffer, presumably as an anti-tax crank, a Johnny one-note. This snippet leapt out at me (in reference to Dr. Laffer’s assertion that Bill Gates and Warren Buffett held the bulk of their wealth as non-taxed unrealized capital gains):
As everyone else in America is well, aware, both Gates and Buffett have committed their vast wealth to charitable foundations. Hence, the issue of “nontaxed unrealized capital gains†is simply irrelevant.
This is exactly the sort of sleight-of-hand of which Mr. Ritholtz accuses Dr. Laffer. To the best of my ability to determine while both Mssrs. Gates and Buffett have pledged the bulk of their wealth to the Gates Foundation, they plan to commit it over time and at the present retain the greater bulk of their enormous fortunes themselves. I don’t know precisely in what form they’re retaining the well over $100 billion between them but I would presume that much of it is in the form of stock in their respective companies. Or, in other words, they’re free to sell at their own discretion subject to their contractual commitments and may elect to do so at any time, strategically if they’d like. It is the gesture to Gates’s and Buffett’s charitable contribution that is “simply irrelevant”.
I would welcome being corrected on this if I am wrong.
I don’t hang from every word that comes from Arthur Laffer’s mouth as from that of a prophet and I don’t believe that tax cuts are the solution to every ill that government is heir to (many of which are the unforeseen secondary effects of prior government actions). I do think that the possibility of taxpayers who are able to do so time-shifting their earning strategically to reduce their tax liabilities is an issue worthy of consideration. After all, there is a multi-billion dollar industry dedicated to helping them do that.
My impression here is that Gates has probably committed to a substantial contribution from his estate when he and his wife dies. (The money in the Foundation is less than Gates’ reported wealth) Legally that means nothing because he can revise his will (or any pledges) at any time.
Charitable gifts (to one’s own charity no less) are classic vehicles for tax avoidance, and implementing them after death is certainly a good way to never realizing capital gains on your wealth. I’ve no idea what Ritholtz’s point is.
That particular point evaded me also. I think that the larger point is largely true. Making rich people richer has not been much of a boon to the economy, while creating political problems. I read through the comments quickly this morning and several people made good points.
Reagan cut top rates when they were 70%. That is a far cry from the current situation. Industry was much more regulated back then. Ma Bell anyone? In that environment, many of the changes made sense.
As Bartlett has pointed out before, Reagan passed a tax increase before the economy took off in 83-84. Tax increases in the 90s did not sink the economy. Deregulation has resulted in the shadow banking system have more money at risk (face value), without any regulation, than is covered by regulation. Hell, we live in a time when regulators dont even believe, at least under the prior administration, that they should be regulating to begin with.
IOW, economists, like generals, are always fighting the last war.
Steve
Maybe so, but given that our politicians are really “fighting” the last depression who is worse?