A Buffet Tax: Does It Matter?

Warren Buffet started the discussion thread, and a lot of “rich” people argued against his idea, presenting unbelievably thoughtless arguments like “if you want to pay more, you do it alone.” Frankly, the rather fierce response from the conservative side of American society surprised me a little. Though different in the severity of the fervor, about the same sentiment prevails in South Korea all the time, as far as I can remember in its short history of democracy. One of the core promises by the current president during his election campaign period was reducing taxes for the rich, which has been carried out incredibly well, compared with other promises he made, for example, lowering the tuition fee for college students, for which nothing has been done.

For sure, taxing the rich has one very loud and clear impact: it shows that the government is at least thinking about economic inequality, and perhaps is trying to do something as well. But what about its actual impact on the fiscal balance for the government? Think about this: in China, 0.4% of people is said to have 70% of wealth. To do a back-of-an-envelope math, I will assume that all the wealth are taxable like income. (Oh, I hear some rich people throwing rotten tomatoes and stuffs.) If you levy one percent of tax from all (OK, let us simply think of a tax on net wealth) you end up with 1% of the nation’s wealth as tax revenue. On the other hand, if you levy two percent of tax only from the ultra-wealthy 0.4%, you get 1.4% of the whole nation’s wealth as the tax revenue. Let us suppose that the bottom 50% of Chinese population hold 5% of the nation’s wealth, which would not be even close to the truth, since even in Canada, the bottom half only has 3.2% of the total wealth of the nation. Anyway, suppose that for argument’s sake. If you impose 1% of tax on the wealth of the bottom half, you end up with 0.05% of the total wealth as tax revenue. But, if you impose the same rate of tax on the 0.4% of the population who literally pwns the economy, you end up with 0.7% of the total wealth, which is 14 times larger than the revenue you get from the bottom half.

In the recent Canadian Business Magazine, Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, actually did the long math with the case of Canada. The result is surprising. Taxing the ultra-high-income earners ($250,000+) at 3% more than the current highest tax rate, effectively creating a new tax bracket at the upper end, ends up $2 billion for the government to spend, in such crucial sectors as dental care for the children. By contrast, taxing the majority (54%) of income-earning population who earns $30,000 or less gathers meager $154 million. The revenue from the rich is 13 times the size of the revenue from the poor. Even in Canada, the wealth gap is this horrendous. And bear in mind: this is only about income, not about the difference in accumulated wealth. Doing the same math for countries such as Mexico or Turkey gives me a chill. (These two countries are at the top of the OECD economic inequality ranking.)

In conclusion, taxing the rich at a slightly higher rate is not simply a rhetoric, but brings sizable tax revenue for the government, for all the people. And for you messrs rich in the states, Mr. Warren Buffet is not saying that he wants to pay more taxes. He is proposing a change in the strange tax system.

References:
Lars Osberg, A Quarter Century of Economic Inequality in Canada: 1981-2006 (Canadian Centre for Policy Alternatives, April 2008)
Armine Yalnizyan, A “Buffet Tax” for Canada? (Canadian Business Magazine, Oct. 24, 2011)

12 Ways to Do Things Differently

I am a subscriber to BNet, a site that barrages you with nice advices not only about your business but about your life as well. Jeff Haden, a blogger for business owners, published this wonderful posting, for which I could not help the urge to share with others. Sometimes you want to do things in different ways, out of frustration coming from a deadlock, or just for the sake of a change. Here are 12 tips on how to do it effectively: 5 aspects, 12 actions plans.

Analysis
1. Switch measurement. Measure your success with different criteria, and you will look at things from a different perspective.
2. Shift benchmarks. Aiming high is good but can discourage you if you fail the mark. Try to emulate someone with your size.

Acceptance
3. Be yourself. Do not try to be like Steve Jobs. Pick a few traits of theirs and try to emulate them.
4. Let others be who they are. Accept others as they are. Don’t try to change them. Look at their good parts.

Assistance
5. Help a co-worker. Be specific in your offer. It is more likely to be accepted, and it also shows that you are a caring person.
6. Help a superstar. Because people think they can do it all alone, they lack help when they need it.
7. Help anyone. Help those less fortunate than yourself. You will feel great.

Approach
8. Go opposite. When in deadlock, instead of minor adjustment, try something totally different.
9. Drop one thing. Drop your 10th priority task and use the time for your top priority task. You can pick it up later.
10. Change your workday. Break your routine and schedule differently, to kill complacency.

Adoption
11. Pick a habit. Watch your role model, and pick one habit of his/hers, and make it yours. “Never reinvent a wheel when a perfect wheel already exists.” (Gee, I like this line.)
12. Pick someone to mentor. You learn more when you teach.

My final words are, I suggest you to try one at a time, unless you want to see your willpower deplete really fast.

Willpower - A Mind Game Against Yourself

A few weeks ago, somebody said that procrastination is his worst habit that he wants to fix, and almost everybody in the gathering showed some sign of consent. I believe I have much more self control than I had when I worked in the bureaucracy, but I still yearn for more control. When I get up at six in the morning and start stretching to get myself prepared for the morning yoga, oh man, I feel like I am dying! It is always a mind game against yourself, like the cartoon cliche of an angel and a demon whispering in your ears. But think about it: the resourceful, creative, and persuasive one is the demon. He comes up with all kinds of highly plausible excuses to make you bail yourself out of the temporary toil. By contrast, the angel is totally simplistic and blunt. Most of the time, at least for me, the angel’s winning argument is that you will regret if you skip it.

In Willpower: Rediscovering the Greatest Human Strength, a so-called “What the Hell” phenomenon is introduced. Deiters who already went over their daily calorie limit simply do not care any more for the rest of the day, because, what the hell, they are already foiled for the day. It is a very simple, but very powerful, excuse presented by the demon, to which our angel buddy does not have an effective couter-argument. Regardless you eat more or not, you will regret the same, because you already went over the line.

Here’s another interesting experiment. Two groups of students were kept hungry before coming to the experiment. One group of students were allowed to eat the chocolate cookies as much as they wanted. The other group was allowed only to eat raw, uncooked radishes, from a tray that contained both chocolate cookies and raw radishes. Many of the students in the latter group agonized over the presence of the cookies. Some looked at the cookies for a long time, before eating the radish. Some smelled at the cookies. Then, the two groups of students were tested to see how long they persist trying to solve an insolvable puzzle. The radish students, who already exhausted their willpower over the temptation of chocolate cookies, gave up the puzzle much sooner than the other group. Indeed, willpower is depleted as we use it. And I believe that this is the single biggest take-away from this book. We all know by our own experiences that we are most productive in the morning. Also, we often run really low on our tolerance level when we come home after a long tough day at the office.

However, this great learning is quite disappointing. We use limited amount of willpower throughout the day, slowly being depleted till we become helpless. Does this mean that I must not exercise in the morning, if I face a big, willpower-draining task during the day? Not surprisingly, the authors say that willpower muscle can be enhanced through exercise like any other muscle. However, what they suggest do not sound too much convincing. (The arguments were so weak that I do not remember any exercise they recommended!)

I should say, however, that this book is a kind of sensation because I have seen so many articles and postings about this book. Furthermore, if we ever forget about everything this book tells us, perhaps we can remember one thing, which will help us in many different situations:

Do not test yourself to the extreme. You will ruin everything and regret.