Libertarian law professor Richard Epstein has a new piece up at the Hoover Institution's Defining Ideas site that takes on both Pope Benedict XVI and Warren Buffett. Professor Epstein writes, "A successful and sustainable political order requires stable legal and economic policies that reward innovation, spur growth, and maximize the ability of rich and poor alike to enter into voluntary arrangements. Limited government, low rates of taxation, and strong property rights are the guiding principles."
He really gets Mr. Buffett with this section:
lower capital gains rates generate more tax revenue for the federal government. Yet Buffett doesn't grasp the point when he writes: "In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent."
I'd take 2008 any day. In 1992, the country's top 400 earners paid a total of $4.9 billion in taxes, which is a nifty sum to come from so few. But 16 years later, that amount rose to about $19.55 billion, leaving those most successful investors with an extra $71 billion in cash to invest in new ventures that could promise greater returns. This is win/win with a vengeance.
Buffett acts like the dual increases in tax revenues and private gains had nothing to do with the reduction in the capital gains rates. It is a sign of his upside-down moral standards to regard a win/win change in the tax laws as a blunder just because the government had a smaller slice of the pie than it had before.