(Corrects math in 12th paragraph. For more Bloomberg View, click on VIEW <GO>.)
Feb. 13 (Bloomberg) -- Warren Buffett’s suggestion that the rich should pay more in taxes was greeted in some quarters with the response that he was free to do so at any time. This piqued my curiosity to find out if anyone had done so.
It’s not such an outlandish suggestion.
Since 1843, the U.S. government has accepted donations. All that anyone wishing to engage in such charity has to do is send a check to a special Treasury Department address in Hyattsville, Maryland. For the past few years, you could even use an online form to pay down the federal debt with your credit card.
So how much money has been voluntarily given to the government? To find out, I filed a Freedom of Information Act request with the Treasury, and have received the results. Although the government wouldn’t provide information about names or even the number of donors, it does have a spreadsheet of how much was donated in total on a monthly basis for the past five years.
Just what conclusion can we draw about how the wealthy or civic-minded view the federal government based on their donations? There are two possible hypotheses, and this data can help us determine which is closer to the truth.
It is possible that wealthy people view their taxes as too low, and to offset that, they donate generously and frequently. Let’s call this the Buffett hypothesis. The Obama administration, channeling this idea, has proposed a budget that includes the so-called Buffett rule, which would require Americans who earn more than $1 million a year to pay tax at a minimum rate of 30 percent.
Some rich people seem to agree and are stumping for the plan. For example, a group calling itself the Patriotic Millionaires for Fiscal Strength, made up of about 200 people each with annual incomes in excess of $1 million, state: “We should pay a higher tax rate. We want to pay a higher tax rate.”
Alternatively, some people may view the federal government as too large and too inefficient to be worthy of donations. Let’s call this the libertarian hypothesis.
So which more closely reflects how people behave? People may say one thing, but based on the Treasury Department’s data we can see what they actually do with their money.
The annual gift receipts of the U.S. government over the past five years have ranged from a low of $698,708 in the fiscal year ended Sept. 30, 2010, to a high of $3.74 million in fiscal 2008. July 2008 was the most generous month of the past five years, when the government received gifts totaling $1.37 million. The total donated over the five years is almost $10 million.
Ten million dollars is more than zero, so the libertarian hypothesis isn’t airtight. On the other hand, the Buffett hypothesis looks unsupportable.
Let’s add some context. Ten million dollars represents about a fiftieth of 1 percent of Buffett’s personal wealth, which is in the ballpark of $47 billion. To put that into perspective, $10 million is to Buffett what about $20 is for a family with a net worth of about $100,000 -- more or less the median for American households.
As for how much this generosity helps the government, the answer is: not very much. Ten million dollars would have paid for about an hour of the war in Iraq, or a little more than 10 minutes’ worth of interest payments on the federal debt.
In other words, the amount of money that wealthy people have donated to the U.S. government over the past half-decade has been a rounding error, both for the government receiving the funds and for the pool of people who profess to want to give their money.
It’s not as if all those millionaires supposedly clamoring to pay more in taxes couldn’t spare it. Sales of new yachts alone -- a discretionary item if ever there was one -- tally a few hundred million dollars a month, on average. You would think, given their concern for helping out the government, some of this could be channeled to the Treasury.
In the end, the libertarian hypothesis has a lot more credibility than the Buffett hypothesis: Almost nobody seems to want to voluntarily give money to the U.S. government, not even those who call for more forced contributions.
Unfortunately, there is no special address for sending requests to get money back.
(Philip Maymin, who ran in 2006 as a Libertarian Party candidate for Congress in Connecticut, is an assistant professor of finance and risk engineering at Polytechnic Institute of New York University. The opinions expressed are his own.)
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