Recently Warren Buffett told news media that he would agree on rich people paying higher taxes. I respect Warren Buffett but I am surprised that he would say that. Well, I am assuming the wealthy people pay taxes the same (or similar way) as every other American. For a regular Joe, it may sound like that they do not pay taxes, because they are using all sort of exceptions, deductions and tax exclusions allowed by the current tax law. True, I am not familiar with the entire US tax system and I, sort of, flow with the stream when claiming taxes every April.

But what I hate, is a scheme, where rich people must pay higher taxes, higher than anyone else in the society, just because they make more money. Like these people already do not pay higher taxes.

Assuming that an average Joe is making some 30,000 dollars a year (after all deductions) and he ends up in 25% tax bracket. That means, he would pay 7,500 dollars in taxes. Period. The same rich Joe, after all deductions ends up with 3,000,000 dollars a year. His tax will be 750,000 dollars (assuming he would be in the same tax bracket, which he most likely will not). Where is the justice in a system which will make the rich Joe paying more than that? Just because of he is rich?

I know, the example above is terribly simplified, but hopefully it illustrates well what I mean. Why the hell the rich guy must pay more? Just because our government is unable to cut its wasting budget habits and needs supporting lazy people who has never and will never work?

 

 

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Once there was a story for those who do not understand the concept of taxing some people more than others. Let me re-tell it.

Once upon a time there were 10 gentlemen living in one City and every day they lunched in one local restaurant. For their lunch they paid altogether $1000 bill every day. They agreed on paying for their lunch according to their tax brackets. Therefore first four gentlemen – the poorest, didn’t have to pay anything. The fifth paid $10, sixth $30, seventh $70, eighth $120, ninth $180 and the tenth, the richest paid $590 for the lunch. And it worked this way for years and everybody was satisfied with it.

One day, however, the restaurant owner decided to provide his regular visitors some discount and instead of $1000 he would ask for $800 only. It was very nice of him, but the gentlemen had a little trouble how to spread saved $200 back to everybody. If they just simply would pay $20 less then originally it would mean that the first five gentlemen would be receiving money just for lunching in the restaurant! So the restaurant owner offered them to divide the savings in the same way as they originally paid for their lunch. He grabbed a piece of paper and a pen and he started counting. This was his result:

The fifth gentleman would pay nothing (a 100% savings) the same way as those first four gentlemen. The sixth gentleman will pay $20 instead of $30 (33% savings), seventh will pay $50 instead of $70 so he will save 28%. Eight gentleman will pay $90 instead of $120 he paid originally and thus he will save 25%. Ninth will pay $140 instead of $180 and will save 22%. The tenth gentleman will pay $490 instead of $590 and he will save 16%. Everybody will have cheaper lunch and those first four will be still lunching for free.

However, soon it was apparent that this proposal wasn’t well-welcome. “So out of those $200 I get back only $10!” was the sixth gentleman shouting and he pointed at the tenth gentleman and added: “And this one gets $100 right away!”. “That’s true,” added fifth man, “I will save only $10 but he will save ten times more?” “Right”, added the seventh man, ” so he gets $100, but I get only $20?!” Also the first four gentlemen shouted: “And what about us? We do not get anything? How come? So again the poorest are beaten here! As always!” And all nine men beat the tenth man.

So the very next day the tenth gentleman didn’t show up at the lunch. The others didn’t care much, they were actually quite happy about it. Who would accept the richest man who is taking advantage over them, right? So they ate without him. When the owner, however, brought the bill to pay, they suddenly found out that all of them together had not enough money to pay the bill and they were surprised.

That’s how socialism works. The rich pay already enough taxes according to their tax brackets and if suddenly we ask them to pay more one day they may disappear – move their funds, companies, trusts, investments, money elsewhere (Caribbean, Switzerland, or elsewhere where they can find a lot of nicer restaurants to have their lunch) and we suddenly find out that we do not have enough money for our own bill.