Warren Buffett Defends His Secretary

[ERICOPOLY]

Sounds administratively difficult.

 

That's what the Australians concluded after they tried it out.  Then they switched to just using 50% of the income tax rate (to acknowledge that some of the gains are just inflation and not really gains).

 

However I think in today's world of computers "web services" it's not really that difficult to administer.  If you E-File you could just submit your numbers for nominal cost basis, and then the IRS's own computer could then adjust the cost basis numbers for you to their real component.  You could then review the numbers and if you agree with them submit your tax return.

 

There is no more room for cheating than there is under today's system.

 

The CPI-U is computed every month.  Your online brokerage for example could easily show you an additional column for "adjusted cost basis".

 

The IRS server just publishes a web service -- you call the web service from your online application passing it three parameters:

1)  nominal cost basis

2)  date of purchase

3)  date of sale

 

The web service then returns a single result (the adjusted cost basis).

 

Your online tax worksheet could be configured to call the web service.

 

Really slick.

 

[Tim Eriksen]

If that is the biggest argument I must be missing something.  I do not see much in the federal government's expenditures that relates directly to corporations. 

 

Here is the biggest one:

 

The entitlement programs take the burden of pension costs away from the corporations. 

 

Also:

 

Unemployment benefits relieve the corporation of the burden of employing workers while demand is slack.

 

If that is the biggest one then I think the argument is in need of improvement.  Corporations pay 7.65% of payroll cost for the first $106,000 of income.  Most corporations also have 401k matching or profit sharing, which I am guessing is probably an average of 3% of payroll.  They have passed the risk off but not the costs.  Besides, the cost is in payroll tax not income tax. 

 

I have never seen a study that details who ends up using unemployment, but I doubt it is dominated by periodic slack demand.  It is not like most go on unemployment and then are hired back to the same job.  That happens but it is rare.  I would be curious to see if most users were working at a corporation or for a small business (LLC or proprietorship).  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.     

[ERICOPOLY]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

[Tim Eriksen]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

I disagree with your analogy.  I think it misrepresents the corporations view and neglects the employee's view.  Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered.  They agree on a price for those services.  Either is open to ending the deal based on the agreement.

 

I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time.  That may not have been your intent but that is how some would interpret the analogy.     

[ERICOPOLY]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

I disagree with your analogy.  I think it misrepresents the corporations view and neglects the employee's view.  Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered.  They agree on a price for those services.  Either is open to ending the deal based on the agreement.

 

I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time.  That may not have been your intent but that is how some would interpret the analogy.   

 

 

The point is that Microsoft hires the people who have graduated with an education.  These are the gold nuggets.

 

There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up.

 

I view the corporation as bearing responsibility for funding the expensive system.  Do you not?

[ERICOPOLY]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

I disagree with your analogy.  I think it misrepresents the corporations view and neglects the employee's view.  Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered.  They agree on a price for those services.  Either is open to ending the deal based on the agreement.

 

I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time.  That may not have been your intent but that is how some would interpret the analogy.   

 

 

The point is that Microsoft hires the people who have graduated with an education.  These are the gold nuggets.

 

There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up.

 

I view the corporation as bearing responsibility for funding the expensive system.  Do you not?

 

 

I believe you could instead advocate for a Soviet style system where the future Olympians are selected at a very young age.

 

Thus Microsoft could test the young children and individually pay for the education (and social safety net) of only those children.  However, those children would then be required to work for Microsoft and have no freedom of choice over their careers.

 

Thus our system may be expensive but it gets the gold nuggets -- and they are probably purer gold given the enormous experiences that shape them along their way (rather than just being farmed under a Soviet style Olympic system).

 

EDIT:  Ironically though, I'm probably the "communist" here  :D

[Rabbitisrich]

Ericopoly, I think the point that you are missing is a critical differentiator between capitalism and other forms of government. Coercion is magic. When a communist government mandates roles via bureaucratic shuffling, coercion spontaneously appears. It evaporates in a free market because a free market is never coercive due to the name by which it is called. So when a young black child grows up in a ghetto and is given certain role models and pushed through certain economies, he is making a choice to develop into whatever he develops into. The same thing happens when a young white child of two PHDs grows up in Los Angeles and attends Harvard Westlake. Choice and free will.

[ERICOPOLY]

Ericopoly, I think the point that you are missing

 

My last post makes it clear that I do not miss that point.

 

 

[ERICOPOLY]

So when a young black child grows up in a ghetto and is given certain role models and pushed through certain economies, he is making a choice to develop into whatever he develops into. The same thing happens when a young white child of two PHDs grows up in Los Angeles and attends Harvard Westlake. Choice and free will.

 

The thing is, I believe that if the person paying the costs of the entire system (not just the gold nuggets) also has the most political influence (as the corporations do), then we are most likely to get social justice.

 

In other words, the person footing the bill may try to get more gold nuggets wrung out of the system -- perhaps some proactive outreach programs to attract some of the capable and bright children from the ghetto that you describe.

 

Alternatively, if we allow the corporations to only pay for the gold and not for the whole system, then we will not get such change.

[Tim Eriksen]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

I disagree with your analogy.  I think it misrepresents the corporations view and neglects the employee's view.  Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered.  They agree on a price for those services.  Either is open to ending the deal based on the agreement.

 

I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time.  That may not have been your intent but that is how some would interpret the analogy.   

 

 

The point is that Microsoft hires the people who have graduated with an education.  These are the gold nuggets.

 

There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up.

 

I view the corporation as bearing responsibility for funding the expensive system.  Do you not?

 

Don't want to shock you but corporations are not responsible for funding education in practice.  Education is largely local/state funded via property, sales and personal/business income taxes.  Thus if the costs of education are your rationale for the existence of federal corporate taxes it fails logically.   

[ERICOPOLY]

  I don't see unemployment benefits as relieving the burden on the employer of employing workers when demand is slack, rather it helps relieve the burden on the employee while he/she transitions to something else.   

 

Then it still benefits the corporation.

 

Society as a whole is a human resources mine from the corporation's perspective. 

 

A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock.

 

You can't pay only for the costs of extracting the nuggets.

 

I disagree with your analogy.  I think it misrepresents the corporations view and neglects the employee's view.  Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered.  They agree on a price for those services.  Either is open to ending the deal based on the agreement.

 

I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time.  That may not have been your intent but that is how some would interpret the analogy.   

 

 

The point is that Microsoft hires the people who have graduated with an education.  These are the gold nuggets.

 

There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up.

 

I view the corporation as bearing responsibility for funding the expensive system.  Do you not?

 

Don't want to shock you but corporations are not responsible for funding education in practice.  Education is largely local/state funded via property, sales and personal/business income taxes.  Thus if the costs of education are your rationale for the existence of federal corporate taxes it fails logically. 

 

I appreciate the need to feed you little tidbits that you can win.

 

It's the entire system cost that matters.  There's a whole support network that the federal government pays for.  Transportation, defense, entitlements... etc...  you can't take them all out and still have a functioning human resources mine.

 

You can't just keep the lights turned on in the mine -- you need to keep the support beams maintained otherwise the mine will collapse.

 

Of course, when the corporation only pays for the nuggets they can always just find their gold in a different mine.  So prevention of collapse is not really the responsibility of the corporation.  Thus, the development centers in India, China, etc...  This happens to some degree regardless, but some of this isn't just a shift to lower cost labor pools -- some of it is rather that they can't find enough of the skilled talent here!  Missing for example is the people from the ghetto who have the talent but will not make it through the system.

 

Bernanke is trying to boost consumption, but we don't have a consumption problem.  We just don't produce many of the goods that we consume.  Bringing income and payroll taxes off of the individual and onto the corporation makes the domestic labor more cost competitive (more domestic production of the goods that we consume).

 

[Tim Eriksen]

 

I appreciate the need to feed you little tidbits that you can win.

 

It's the entire system cost that matters.  There's a whole support network that the federal government pays for.  Transportation, defense, entitlements... etc...  you can't take them all out and still have a functioning human resources mine.

 

You can't just keep the lights turned on in the mine -- you need to keep the support beams maintained otherwise the mine will collapse.

 

Of course, when the corporation only pays for the nuggets they can always just find their gold in a different mine.  So prevention of collapse is not really the responsibility of the corporation.  Thus, the development centers in India, China, etc...  This happens to some degree regardless, but some of this isn't just a shift to lower cost labor pools -- some of it is rather that they can't find enough of the skilled talent here!  Missing for example is the people from the ghetto who have the talent but will not make it through the system.

 

Bernanke is trying to boost consumption, but we don't have a consumption problem.  We just don't produce many of the goods that we consume.  Bringing income and payroll taxes off of the individual and onto the corporation makes the domestic labor more cost competitive (more domestic production of the goods that we consume).

 

You seem to be arguing that corporations are getting more benefits than cost.  For the owners to pay 35% corporate rate plus another 15% on any dividends and half of all payroll taxes, I believe they are already paying plenty.  Transportation is properly funded from excise taxes so that those who use the roads pay for the roads. including corporations.  You are right that national defense is a big help to all taxpayers, including corporations.  As for entitlements, while sure it reduces the potential for unrest, the main beneficiary is the recipient of the funds not corporations.

 

You closed with "Bringing income and payroll taxes off of the individual and onto the corporation makes the domestic labor more cost competitive (more domestic production of the goods that we consume."  Wow.  Totally disagree with you there too. 

[ERICOPOLY]

You seem to be arguing that corporations are getting more benefits than cost.

 

In my own words I feel like corporations should pay for their external costs. 

 

  For the owners to pay 35% corporate rate plus another 15% on any dividends

 

It's wrong to tax the dividends twice.  This is why I support the idea of bringing a dividend franking system to the US.

 

The current tax system encourages the corporation to make uneconomic (on the whole) yet tax-efficient decisions so as to meet the criteria for various corporate tax breaks.  The dividend franking system would discourage some of this as it only pushes up the personal income tax to be paid on the dividend.  They could instead make the best (most economic) decision at the corporate level (thus paying more corporate tax in doing so) and get granted the franking credits when paid out in a dividend (thus a low personal tax rate if any tax due at all).

 

I'm also an advocate on not taxing nominal capital gains, but rather only taxing "real" capital gains.

 

 

and half of all payroll taxes, I believe they are already paying plenty. 

 

Well, I feel that payroll taxes are part of their external costs.  Part of the external costs of being a corporate citizen in a civil society.

 

[RichardGibbons]

The whole idea of taxes are that they redistribute assets for the benefit of society.  For instance, defense and  policing are to the benefit of society, so we redistribute assets to ensure that we can pay for these things and society benefits.  It's not about ensuring that the person or corporation from whom assets were taken receives benefits proportional to the assets that were removed.  I would guess that almost every person and corporation receives benefits disproportionate to what they pay (most more, and some less). 

 

Though the right to live in a relatively free country with laws and low corruption is pretty valuable to me (and presumably to most corporations).