Economic Freedom vs. Economic Equality

The Buffet rule/tax case study

BLOCK 1 Mark and Ty

Define the following terms and relate to the case study

a. economic freedom: Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please.

b. economic equality: The concept or idea of fairness in economics, particularly in regard to taxation or welfare economics.

c. trickle down theory: The theory that tax breaks and benefits for corporations and the wealthy will trick down to everyone else

d. captains of industry: Incredibly wealthy or successful businesspeople, especially those who own large companies or many factories

e. flat tax: Every taxpayer pays the same rate regardless of their income bracket, allowing for no deductions or exemptions

f. progressive tax: A tax rate that increases as the taxable amount increases (The more money you make the more money you pay)

Summary of Issue/case study: Warren Buffet is a billionaire who is in favour of millionaires paying more taxes than the average person in America. He looks at his own tax and his secretaries tax and realizes that he was paying way more. Mr. Buffet feels that there are too many loopholes that millionaires take advantage of to pay fewer taxes. For example, they can invest their money into stocks and into different investments so that they can classify their interest as “carried interest” so that they can bargain 15% percent of the tax rate while other Americans are struggling to make ends meet. Another example is in 1992, the top 400 largest incomes taxable income combined for $16.9 billion dollars and paid 29.2% of that sum. In 2008, the top 400 largest income combined for $90.9 billion dollars of taxable income and only paid 21.5%. Buffet sees huis as a big issue as millionaires are making more than ever before and still paying less than they were in past years because they are finding loopholes like “carried interest” to get out of paying their expected amount of taxes. He thinks to stop these we need to make an increased tax rate for the millionaires etc.

Group's Opinion on Issue/case study: I agree with Warren Buffet that the loops holes should be closed. I do not feel it is justified that a millionaire is paying fewer taxes than an average American because the average American is making less money than a millionaire and them paying more taxes may make them struggle to make ends meet. I think that millionaires may be individualists causing them to find loopholes so they can keep their money to themselves. The majority of millionaires are self-centered and self-interested. This leads to a decrease in economic equality as millionaires are keeping their money while average Americans are spending it on their taxes. I think we should implement progressive tax which causes you to pay more taxes if your income increases. This would cause millionaires to pay more taxes creating more economic equality.

Did your group reach a consensus? Why or why not?

BLOCK 1 - Des and Dani

Define the following terms and relate to the case study

a. economic freedom: When property people acquire without the use of force, fraud, or theft is protected from physical invasions of others and they are free to use it as long as their expensis do not violate rights of others.

b. economic equality: Where everyone has the same access to the same wealth

c. trickle down theory: The theory that giving benefits to large, powerful companies/people can pass down to smaller buisness and consumers.

d. captains of industry: A phrase used to refer to incredibly wealthy/successful individuals buisness people, especially those who own or manage large buisnessess/companies.

e. flat tax: When all taxable income is subject to the same tax rate, regardless of their income bracket allowing for no deductions or exemptions.

f. progressive tax: Applies a higher tax rate to higher levels of income; the more you make the more you get taxed.

Summary of Issue/case study:

Warren Buffet is a billionaire who wrote an article called, “Stop Coddling the Super-Rich”, in 2011. In his article he states that he believes that people who make a lot of money, should be paying significantly more in taxes than people who make less. The salary made each year by individuals, determines which tax bracket they are put in. For example, if they make a lower income, they might have a 15% tax rate, whereas someone who makes a much higher salary, would have a higher tax rate and percentage, meaning they would pay more in taxes. Warren Buffet thinks that this is how it should be and would even argue that there should be a significantly higher percentage for rich people and those who are making a large amount of money each year. He says that while poor and middle class citizens are suffering while trying to make money and paying it back in taxes, the rich people are “spared”, meaning that they don’t have to sacrifice anything. The government asks and refers to taxes as a ‘shared sacrifice’, and people who are making loads of money are still contributing, but not sacrificing anything, whereas poorer people are. Buffet realized that his tax rate was lower than his secretaries, and believed that it was unfair that she was paying more, when she didn't make nearly as much as he did. Investment managers were finding loopholes such as classifying their gained money as “carried interest” which meant that it would not affect their tax brackets. He believed that loopholes such as these, were helping the rich to get more rich, and the poor to get more poor, which he did not view as fair.

Group's Opinion on Issue/case study:

We agree that there should be a higher tax imposed on rich people, and that the loopholes such as the case with him and his secretary, should be closed and figured out. We agree with the trickle down theory and the idea of the rich people making more jobs and opportunities for the poor, but we think that the rich would still have such a large amount of money (after taxes), that it would still be a possibility to create these jobs and opportunities for others.

Did your group reach a consensus? Why or why not?

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