Henderson Suggests a "Voluntary Buffett Rule"

A Voluntary Buffett Rule
M. Todd Henderson
Huffington Post
June 8, 2012

We can now add actor Will Smith to the growing list of celebrities, business leaders, and politicians who have recently come forward to complain that they don't pay enough in taxes. Bill Gates has volunteered to pay more. So too has Warren Buffett. Most colorfully, the author Steven King recently penned a piece for the Daily Beast, "Tax Me, for F@%&'s Sake!"

We should take them up on their offer. But this does not necessarily mean raising everyone's taxes. If we can figure out a way to get the rich who want to contribute more to the government to pay voluntarily, then everyone will be better off.

Nothing prevents taxpayers from paying voluntary taxes. The federal government has accepted voluntary donations to the Treasury since the 1960s, and receives about $3 million per year against a deficit now exceeding $1.3 trillion. Many states also allow individuals to pay more taxes voluntarily. Few do. Case in point: Virginia's "Tax Me More Fund," which was implemented in 2002 to close a budget shortfall. Over the past decade, the fund has taken in a total of about $12,000.

These numbers are striking because of the size of voluntary contributions to charities each year. Individual taxpayers voluntarily gave $212 billion to charity in 2010, according to Giving USA Foundation.

So what explains the gap between the rhetoric of voluntary tax and the reality? One possibility is a view that real progress can be made on solving government problems if many people pay. While true, the same can be said of charitable giving. The Red Cross can't really do much good if only one person gives a little bit, but it can do enormous good if thousands do.

Faculty: 
M. Todd Henderson