The Buffett Rule is all about fairness in tax law. So why do its opponents keep talking about charity?
Adam Ozimek jumps in on the "should Warren Buffett just donate money to the government?" conversation here, with "Should people who want higher taxes donate to the government?" He builds off of Matt Zwolinski, who asks "if Buffett really believes that he ought to be paying more taxes, then what’s stopping him?" Will Wilkinson brings up that this requires us to discuss collective actions and "the rationality of complying with a rule that (1) you support, but (2) will only have its desired effect if general compliance with the rule is high, and (3) you suspect general compliance will not be high." All these discussions pivot off the idea that the government provides charity, and if Warren Buffett wants the government to provide more charity, why does he do his charity through private means?
Wilkinson has an important point, but they are all approaching the debate with the assumption that Warren Buffett wants the government to spend an additional dollar. I don't see Warren Buffett saying that, and it isn't even required for him to call for higher taxes on himself and similar earners to make his famous argument. The crucial comparsion in Buffett's discussion isn't Buffett's rates now versus the rates he'd pay in a social democratic country, but the rate that he pays versus the rate his secretary pays. Warren Buffett could want the government cut in half and for his tax rate to go up. He could want a government so small it could drown in a bathtub yet find it unfair that he pays a lower tax rate than his secretary.
This means the central discussion isn't about the government collecting more and providing more, but the two central principles of fairness in taxation: vertical equity – those with more pay more – and horizontal equity, where people who are the same should be taxed the same. (Whether these are necessarily two principles of equity or one is a debate for another day.) It isn't necessary for Buffett's argument that the government should do more, or even that it should do what it does now, so suggesting he donate to charity doesn't carry weight. His argument is that the way taxes are collected now violates general principles of equity and fairness.
Zwolinski argues that since people don't donate to the government, "(3)Therefore, they don't believe that giving money to government is a good way to help others... It is therefore (from 3) odd for people to press for increased rates of taxation on the grounds that increased taxes will allow the government to help people." But even if Warren Buffett didn't care about helping others and believed that the only purpose of government is to turn his property claims on his vast wealth into property rights, and provide the costly night watchman apparatus required to do so, he could believe that vertical equity in the taxation required to raise those funds is still a requirement of tax fairness.
(Indeed, why does Zwolinski use "charity" as an example? Why not private police? The United States has had more private security guards than public police officers for some time. If someone thinks there should be more police, why not donate that money to the government rather than hire a private guard? Would following his logic provide proof that most people are anarcho-capitalists who want privatized systems of policing and adjudication? Zwolinski might need to change his webpage if that's the case. It is likely other factors are in play.)
Unless you believe that United States taxation should be based on a head tax -- where everyone pays the same exact dollar amount regardless of wealth or income -- you probably believe in vertical equity. (As Jeremy Bentham said, "a capitation tax is bad; because a man has a head, it does not follow that he has anything else.") That could be proportionate taxation, progressive taxation, a kind of progressive taxation where wages up to the poverty line are tax-free with proporationate taxation on income above that, and more. We don't even have to assume progressive taxation for Buffett to say he should be taxed more -- his objection is that he pays a lower proportionate rate.
Beyond vertical equity, if someone made the same amount of money through labor that Buffett and Romney make through capital, the laborer would pay a much higher tax rate, violating our sense of horizontal equity. These are the crucial issues that the Buffett Rule is trying to address, issues that come even before what is the proper scope of government.
Mike Konczal is a Fellow at the Roosevelt Institute.