Right off, I noticed a few things about Warren Buffett’s plea in the NY Times asking the federal government to stop coddling him and his fellow rich people and to please, please, PLEASE raise their taxes on income, capital gains, and dividends.
The first is that Buffett defines “rich” as beginning at an income of $1 million and then stepping up to a second (and even more taxable) category at an income of $10 million. He writes that in 2009 there were 236,883 households of the former type and 8,274 of the latter. Because Buffett is vague about exactly how much he thinks the taxes of the rich should be raised, we have no way of knowing how much this would increase government revenues (even supposing that he is correct about these people not changing their behavior accordingly in order to reduce their taxes). But doing my own admittedly crude math estimates, I can’t see how this would make much of a dent in the debt overall. It may be mostly window-dressing, even in the best-case scenario that Buffett assumes.
This is what Buffett has to say about how the rich will behave when their taxes are raised:
I have worked with investors for 60 years and I have yet to see anyone ”” not even when capital gains rates were 39.9 percent in 1976-77 ”” shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.
I’m sure Buffett knows a lot more rich people than I do. But still, it’s silly to rely on anecdotal evidence, and I would guess that Buffett knows this full well. “Some of my best friends…” has never been the strongest of arguments. What evidence we do have is that tax increases are offset to a certain degree by tax-avoidant behavior of the rich, as least at the state level. On the federal level, it’s less clear what happens, and although I could spend the next twenty hours further researching the two sides of the argument, I’ll just link instead to this article, which gives a fairly even even-handed picture of what each side says about the possible effects of raising taxes on the rich, both pro and con. Short answer: we don’t really know, and experts differ greatly, but it may well be that whatever effect we would get would be relatively small either way.
Another thing that struck me about Buffett’s statement is the obvious: if the rich are so eager to contribute what they think is their fair share towards reducing the debt, what stops them right now from donating more to the government than they are already compelled to fork over? Buffett, like many rich people, does donate a great deal of money voluntarily—but to non-governmental foundations, both his own and others. He writes:
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Then why doesn’t he? Is someone stopping him and the rest? Somehow, I haven’t heard of Buffett or the other mega-rich giving more than what is required in taxes, although I suppose I might have missed something, since these are not the circles in which I run. But the prevalence and popularity of these private foundations seems to indicate the rich would much prefer to control their own money even when they give it away, and that they don’t trust the government to do what’s right by the money. And the existence and vigorous use of tax loopholes by the rich also seem to argue against Buffett’s notion that the rich would dearly love to give the federal government more of their money.
By the way, Buffett’s arguments could just as easily be used to pump for the Ryan plan, although that’s certainly not Buffett’s intent. But here’s how Ryan stated his own point of view back in April of 2011:
We’re saying keep tax rates where they are right now and get rid of all those loopholes and deductions — which, by the way, are mostly enjoyed by wealthy people — so you can lower tax rates. A simpler, flatter, fair tax code more internationally competitive so we can create jobs: That’s what we’re proposing. This isn’t tax cuts.
That’s a Republican talking, by the way.
Buffett also sneaks a little sentence into his op-ed that you might miss if you happen to blink [emphasis mine]:
Job one for the 12 [on the Congressional committee] is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues.
So, just as Republicans say, the first thing to do is cut spending, including (perhaps) entitlements?
[NOTE: I want to point out (hat tip: Althouse) that this is the illustration for Buffett’s op-ed:

Plus, there’s the cover of this week’s New Yorker:

Once again, neo-neocon—right on the cutting edge. It’s Mr. Monopoly all over again!]
[ADDENDUM: for some more technical critiques of Buffet, see this and this (hat tip: Instapundit).]