Buffett, Taxes and this crazy country of ours...

I happened to have on CNBC this morning as I was getting ready for work and I noticed Warren Buffett was on so I sat down to watch. The short piece was a discussion of Warren's thoughts on taxes. Warren discussed that in the prior year he had paid approximately 17% income tax. The 14 people polled in his office all had higher tax rates. Everyone of them and the average was in the mid 30%'s. One of the richest men in the world pays less relative tax than his damn secretary does. If you are a middle income American and that doesn't piss you off, you need to get your head checked out. People can blab all they want about how increasing taxes on the rich is not in the best interest of the nation because of the economy and jobs and blah blah blah, but he's not even paying the same relative amount. Where oh where is Steve Forbes and his flat tax when you need him. Lets be honest, that is ridiculous no matter how you slice it. But let me argue for my point a bit more...

I believe by my nature in utilitarianism (greatest good for the greatest number) just because I think this world is a mess and I am an idealist. The common arguments against utilitarianism are that it is costly to transfer wealth from the rich to the poor. The extra cost argument is generally two-fold. First, there is the administrative cost of collecting the tax and distributing it through programs and whatever so that it gets to the poor that need it. The other cost is the economic cost. The economic cost includes the productive efficiency of the rich (i.e if they are keeping less of their income due to taxes, they will not work as hard) as well as the job cost (i.e. if the rich aren't making as much money, they will higher fewer, generally poor, workers). The 'big trade off' here is between efficiency and fairness. Agreed? Good. Let's proceed...

So if we say we have 3 main variables to consider efficiency, fairness (duty to the poor in this case) and economic health. Now anyone who knows a lick about finance should remember the Efficient Frontier? The one that maximizes (the definition of efficiency) the risk/reward ratio for investments. Well I would stand to argue that their should then be an 'Efficient Frontier' that balances the economic and 'fairness' variables we discussed. Specifically, there is a point where the greatest good can be served without moving away from the 'Efficient Frontier'. I know the issue then becomes putting numbers on all of this but there are smart people out their with very complex computers that can run simulations of changes in GDP vs. changes in the tax structure (to promote fairness). It can be done.