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Herbert Grubel says that Warren Buffett’s plan to raise taxes on the wealthy wouldn’t do much good:

Recently, he used his formidable reputation to suggest in the New York Times, Financial Post and an interview with Charlie Rose on PBS that the U.S. government should raise taxes on the 400 super-rich, who in 2008 together earned $90.9 billion and paid only on average 21.5 percent of it in taxes. That is lower than the average percentage paid by most middle-income Americans.

….[If taxes on the super-rich went up to 50%] revenues from the top 400 earners would go up by $26 billion….Since this year alone, the U.S. federal deficit will be around $1.4 trillion, or $3.8 billion a day, the new revenue would cover less than seven days of deficits. The numbers are even worse for total federal spending. In 2010, that amounted to $3.6 trillion or $9.7 billion a day. Buffett’s new taxes up against that would be gone in just 2.7 days.

But these numbers are excessively optimistic because the amount raised by higher taxes is likely to be much smaller than $26 billion discussed above. That is because, as he notes, a large proportion of the total income of the super-rich comes from capital gains and financial trading, which is at the discretion of taxpayers.

Grubel is right. Raising taxes on 400 people won’t do much good. But he seems unaware that this argument points directly to a simple solution: instead of raising taxes on 400 rich people, raise them on 4 million rich people. That would cover a lot more than seven days of the deficit. And that top 4 million has done mighty well for itself over the past three decades.1

The rest of Grubel’s piece is a tired repetition of the usual talking points about how returning taxes to their Clinton-era levels would devastate the morale of entrepreneurs everywhere, all of whom are hoping to become the next Warren Buffett. These entrepreneurs, of course, did just fine in the 60s, when tax rates were considerably higher than they are today, and they did just fine in the 90s, when top rates were a crushing 4.6 percentage points higher than they are now. Buffett is right and Grubel is wrong: entrepreneurs can get discouraged, but not by the difference of a few points in their tax rates 20 years in the future. For most of these guys, a difference of five points in their tax rate is simply dwarfed by the key factor in their success: whether their company does well. That’s it. If your company does well you’ll be rich regardless of whether capital gains rates are 15% or 30%. If it doesn’t, you won’t. End of story.

It’s a different story for corporate CEOs, Wall Street traders, and the idle rich. For them, this stuff really matters. But entrepreneurs? They just want you to buy their stuff. Don’t believe the snake-oil salesmen who tell you otherwise.

1A reader reminds me that Buffett is well aware of his. His recent NYT op-ed, after calling for spending cuts, specifically endorsed higher taxes on a wide range of the wealthy:

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

That’s not 4 million, but it’s a lot more than 400.

WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

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