The Four Different Ways To Spend Money By Milton Friedman

Back in 2010, I first addressed the four different ways to spend money by Milton Friedman because I was frustrated by how much I was paying in taxes. I was regularly working ~70-hour weeks and faced an ever-higher marginal income tax rate. I was burning out and needed a change.

Who knew that two years later I would negotiate a severance and permanently leave the well-paying finance world behind.

In 2021+, I'm much happier because I no longer have to work or work nearly as much, don't make as much, and don't pay as much in taxes. I was able to successfully quit my maximum money potential to live free!

With likely higher taxes and higher spending on the horizon with Joe Biden and Kamala Harris in power, it's worth revisiting the four different ways to spend money by Nobel prize-winning economist, Milton Friedman.

The Four Different Ways To Spend Money

As a Financial Samurai, I believe in fiscal responsibility. Therefore, I have long been bothered by the government's general lack of fiscal discipline. Instead of trying to spend within the government's means, like most of us seeking financial independence try to do, the government tends to just borrow and spend more.

To get us thinking about our future government, it's worth watching this short clip from Professor Friedman on how to spend money.

1) You can spend your own money on yourself.

If you spend your own money on yourself, you're very careful on what you spend it on. You make sure you get the most for your dollar.

2) You can spend your own money on someone else.

When you spend your own money on someone else, you're careful on not spending too much. You don't worry as much about the gifts you buy for other people as the things you buy for yourself.

3) You can spend somebody else's money on yourself.

You're careful to get good things for the money. But you're not very worried about getting the best bang for your buck. You're happier to spend more of somebody else's money within reason.

4) You can spend somebody else's money on somebody else.

You become a “distributor of welfare funds.” You're interested in making your own life as good as you can. But you're not going to be anywhere near as careful as spending this money on other people.

In an environment where we are accustomed to spending other people's money on someone else, we end up not maximizing the value of the dollar. We also don't end up appreciating money as much either.

Economic Waste Is A Shame

We can agree that spending somebody else's money on somebody else usually doesn't result in the most efficient use of funds. There's just too much economic waste because people don't have as much or any vested interest.

However, I do recall that when I used the company's corporate card to entertain clients over a lavish meal or a show, I wanted to maximize the expense because my boss ultimately had to sign off on the bill. If I spent too much, my judgement would come into question. If it did, my year-end bonus would be in jeopardy.

The four ways to spend money by Milton Friedman

Government Spending Is A Different Matter

As an individual, spending someone else's money on someone else is one thing. It's a whole other level of waste when it comes to the government spending the taxpayer's money on someone else. The government doesn't have direct accountability for how they spend our money, so they are OK with being billed $100 for a paper clip.

Yes, politicians are supposed to be good people who have their voters best interests at heart. However, to become a politician, you also need to have a big ego and an unusual amount of narcissism. Being a politician goes completely against my beliefs of stealth wealth and avoiding fame.

If you don't pay a lot of taxes, you probably won't mind as much that the government isn't allocating your tax dollars efficiently. You are probably the largest advocate of tax hikes because you want the government to spend somebody else’s money hopefully on you.

But if you are paying a lot of taxes and you're miserable at work, you're going to want the government to spend more responsibly. You’d much rather keep your own money to spend how you please.

Professor Friedman says that people spending someone else's money on others is a “distributor of welfare funds.” So long as these funds are actually spent on helping those less fortunate, being a distributor of welfare funds is good for society.

People Are Naturally Self-Serving

Unfortunately, there are many instances where the system breaks down. For example, millionaire early retirees receiving health care subsidies shouldn't be happening if welfare funds are being properly distributed.

The thing is, people tend to be more self-serving than genuinely magnanimous. If this wasn't the case, you would see a lot more people willingly donate more money to the IRS. But billionaires like Warren Buffett who thinks he’s getting taxed too little still isn’t donating his money to the government to spend on somebody else. He believes Bill and Melinda Gates are a better steward of how to spend his money on others.

I know one millionaire early retiree who wants to vote on legislation to raise taxes on other people. However, to no surprise, she won't have to pay more income taxes herself if such legislation passes. Further, she and her husband happily receive $1,400/month in health care subsidies, which takes away money from people who really need financial help.

The reality is we can't change human nature. The majority of people are going to rationally do things in their best interest. It's why we have politicians who sing the virtue of public schools, but send their kids to private school.

Virtue signaling has become somewhat of a sport in today's society. It's up to us to see through the inconsistencies. Investor virtue signaling in a capitalistic country is even more bizarre! But it's growing!

Be Consistent With Thought And Action

When it comes to your money, you should spend it however you see fit. Hopefully, many of you have saved a tremendous amount of money to spend during times like these. If you can spend money to counteract the negatives of a bad situation, you should.

Although I'm no longer in the firing zone where my income taxes could be raised, I still hope there is more congruency in beliefs and action.

In other words, if you believe we should raise taxes instead of cut costs, then you should be willing to pay more taxes as well. After all, the goal is for all of us to help other people. Let's not just tell other people to help other people.

If you believe in equality between men and women, you should fight to abolish the marriage penalty tax. Don't do nothing because your household income isn't negatively affected. Just because you are not being discriminated against doesn't mean discrimination is OK.

Spending other people's money on someone else is fun to do. I get it. But if we can all be more consistent with our beliefs and actions, I'm sure our nation would be much better off as a result.

Related post about spending money and taxes:

The Best Time To Retire May Be Under A Democratic President Like Joe Biden

How To Pay Little Or No Taxes For The Rest Of Your Life

Readers, do you agree or disagree with Professor Friedman's thesis? Is the 4th way of spending is the worst way of spending? If you do agree, why do you think people feel it's OK to spend other people's money as they wish?

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56 thoughts on “The Four Different Ways To Spend Money By Milton Friedman”

  1. What’s the value of setting the question up this way? Why are we asked to choose which of these is the worst? All of them can lead to bad outcomes if basic guardrails don’t exist or get ignored. There are important things that cost money and that only government can do, and that doesn’t make them bad. Operating embassies and consulates for example costs money but is that “the worst” compared to every private transaction on earth? Who would even have the moral authority to judge? I just don’t see the value in looking at economic activity this way.

      1. I was referring to your italicized rhetorical questions at the end of the post, and also to Friedman’s framework, which leads him to conclude that the kinds of spending that the government does is by nature “the worst.” This is a kind of blanket analysis that, for all of Friedman’s accomplishments, seems lazy to me. How do you judge government spending? You don’t just look at where the money comes from and then label it bad because it comes from tax revenue. You look at what that government program accomplishes and what it costs, and you measure efficiency by comparing the two.

  2. Even with the inefficiencies of welfare and social programs, they still do good. Plenty of kids whose lives would be much worse off without programs like utility help, food stamps, section 8 housing, etc. Finding a solution to address the inefficiencies is the hard part.

  3. The Social Capitalist

    Wow! Bash the government post- especially the comments. The same government that gives us capitalism and the laws to allow it to thrive?!

    Milton Friedman’s points aren’t wrong but don’t always apply to government. The biggest reason for waste- is our lack of involvement- not someone else’s inefficiencies. That could easily be incentivized to be more effective. But again we now would treat our govt. like a business which has its own inherent issues.

    No, the sad truth is that we don’t watch our own money (taxes) that closely nor often vote based on how they are spent. Don’t believe me? Then how about the usual 20-30% turnout in local elections. This is simply laziness- Americans want efficient govt. with no work and when they don’t get it they opine about politicians but won’t get their fat asses off the couch long enough to look on the mirror.

    The long and short of it is blaming a govt. of the people, by the people and for the people is pretty weak ass if you’re the people.

    1. In case you’ve been living under a rock, the elections and polls are rigged. Do a search for AZ Canvasing Report. No one with a brain is partaking in voting anymore until a full investigation is done. Wake up.

  4. I live in Illinois and we just voted against our governor’s ‘fair tax’ proposal. Just barely.

    I’m not sure if we’re the most corrupt state in the union, but we make a good showing. A long time joke is that in IL, our governors make our license plates.

    This fair tax was anything but. The proponents used class envy (hate?) to say that only those making more than 250K (or maybe 400K… I can’t recall) would end up paying more. But the big thing is that we would move to a progressive tax rate. This of course is a good way to divide and conquer. At least with a flat tax we all suffer. And we can all fight the Springfield Republicrats to stop them from raising taxes to waste and steal even more money.

    I’m against any federal bailout of my state. I was in favor of capping the SALT deduction even though my taxes increased. (I’m about as red as they come, but I prefer fairness.) And unlike many on this blog, I’m WAY below 250K!

    The threatened (and I believed them) that they would need to increase everyone’s taxes if the fair tax failed. But I still voted against it even though my tax would increase by voting no.

    The Buffets, Sanders, Warrens, Gates, etc of the world make me sick. If you think you don’t pay enough in taxes, then send your accountants and attorneys home and sit down with Turbotax. I won’t hold my breath. They’re all too busy lecturing everyone else and lobbying to get special tax breaks for their personal and business interests.

  5. I love Milton Friedman and his books! Free to Choose helped change me from a Neo-Marxist, to a fiscal conservative. Thank you for keeping his ideas alive for future generations. I think he would be horrified to see the US now.

  6. You nailed it when you said that there is no congruency between belief and action. People are inherently selfish and look for ways to rationalize everything and anything to make themselves feel better. It’s just how people cope. I’m guilty of it. Everyone is guilty of it to a certain extent.

    For example, one of my close friend’s wife is all about reducing waste in the world. Over dinner one night she harped about the terror of the number of plastic floating in the ocean, how people are negatively affecting the environment by not being conscientious about their habits, how people carelessly consume without thinking about the impact on landfill. The thing is I 100% agree with her. But when I was sitting in her second new home, by their new dining set and other new furniture, with their house filled with just…new stuff…I couldn’t help but think of the inconsistency between her belief and action.

    It’s exactly like the politicians you mention in this blog post that talk about how they’ll make positive change in public school but send their kids to private school. Or how they talk about the caring for the working middle class while they live in their grand multi million dollar homes. I’m sure there is some truth behind what they’re saying, but their words and actions are disconnected.

    The only politicians that I can think of (at the moment) that backs up their talk with their walk is Elizabeth Warren and Bernie Sanders. I would never vote for those two because I don’t agree with their vision, however when you view their tax returns and see their homes, their vision aligns with their lifestyle. The same can not be said for MOST politicians.

    1. I actually did a fun exercise trying to calculate the net worths of Elizabeth Warren and Bernie Sanders. Both are very wealthy. And I guess they should be multi-millionaires given their age, income, and pensions.

      The big problem I have with Warren is that she said she was Native American for so many years (Texas State Bar Registration card is one example of proof). Minorities already face more barriers and have less opportunity than the majority. To then choose the most minority of minorities to be different and probably try and help yourself get ahead is shameful.

      I was actually invited to a dinner w/ Warren at my friend’s house last year when she was campaigning. It was $5,000 per head. I respectfully declined.

      1. Ouch. Warren putting down Native American is so unfortunate, but I guess it goes in line with what we’ve been discussing. And thanks for sharing those two links. Those two are definitely rich, but it still appears to be relatively modest.

        A lot of middle class earners (especially dual income household) can achieve what Bernie has achieved by the time they hit their 60s/70s.

    2. Jeff VA – I don’t want to get political but I am not sure I see Bernie Sanders as a walk the talk kind of guy. He has three homes. Look at his tax returns. He pays more in mortgage interest than he donates by a multiple of many X. Some years close to $50 K in mortgage interest and $5 k in donations. I don’t agree with his vision and his vision is not aligned with his lifestyle. This is a guy that has worked for government/politician basically his whole life. No real understanding how the economy works.

  7. Michael J Weinstein

    I am so sick of the hypocrisy of the Gates / Buffett’s complaining about not paying enough taxes while both of them have an army of tax attorneys combing through every detail of the tax code to exploit every possible loophole, including these very self serving “foundations”. And when they don’t find a stipulation to satisfy their need they have their attorneys draft a “red letter” request which once approved by the IRS becomes a new loophole. Additionally, the politicians are unindicted co-conspirators as most of the legislation required to create these loopholes is voted on and approved by the very spineless buffoons’ complaining about income inequality. There are a couple of simple fixes but doubt they would ever get enacted as the incumbents would have to vote against their own selfish interest. One, term limits 10 years of public office and you’re done. Period no exceptions, back to the real world after 10 years. Two, outlaw PACs and confiscate all existing PAC funds to be applied to the government debt. Eliminate all pensions for any public office holder. Three, force public office holders to avail themselves to the same health care options available to John Q. Public. Four, age limits I for one am sick of the public embarrassment our elected officials make of themselves in these committee hearings, clearly 90% of the Senators over 80 years of age have no idea what goes on in Silicon Valley, time to hit the beach. Five, no more fund raising of any kind of elections, since the airwaves are public assets every election should afford each candidate a set number of public broadcasts for them to present their policies and then there should be mandatory publicly broadcast debates. Zero commercials, zero fund raising of any sort. This should put an end to the Mike Bloomberg’s of the world attempting to buy a position or a candidate. He is living proof that just because your extraordinarily gifted in one area that doesn’t insure you’re the smartest guy in the room regarding other issues. This jackass blew $1B on his own pathetic Presidential bid and then threw another $100M at Biden…..should never be allowed. Fortunately, we all found out in prime time what an empty suit he is even if it happen to be a very expensive suit!

    1. Gates/Buffet want every rich person to pay more. Why shouldn’t they take advantage of the loop holes while they still exist? No one as smart as they are leave money on the table. Not taking advantage of the loopholes puts you in a disadvantage against the rest of the rich that do use them.

    2. If Gates and Buffet believe they are not paying enough taxes, there is nothing to stop them from simply sending a check to the IRS. Of course, they will never do that. They much prefer to make charitable deductions to their foundations and reduce the amount of tax they pay. In essence that reduction results in additional funding for their foundations at the expense of the rest of us. Charitable deductions should be prohibited; if you want to donate, feel free, but do expect the rest of the taxpayers to make up the difference.

  8. This. “In other words, if you believe we should raise taxes instead of cut costs, then you should be willing to pay more taxes as well. After all, the goal is for all of us to help other people, not just tell other people to help other people.”

  9. Simple Money Man

    It all comes down to Accountability (big brother watching). If you’re your own big brother good for you; you’ll be responsible. But if no one is watching, you’ll spend yours and others like there’s no tomorrow.

  10. First, I agree the 4th type of spending is the worst type of spending. Second, I think politicians feel it is their ‘civic duty’ to use the 4th type of spending mentioned by Professor Friedman’s theory. Unfortunately, over the years lobbying has changed and influenced the politicians.

    I think if we go back to a time when politicians were not actually paid by government and were there on their own dime they would make better decisions about what to fund. As right now politicians have an incentive, their paycheck and stipends, to want to be and stay a politician for life. This means they need help from who is lobbying to get re-elected. However, earlier in the 1900’s politicians were not paid by the government.

    As the politicians would be at the government in the first quadrant. While right now they basically have everything from the 4th quadrant. As their plane tickets, rental where the government centre is, office, etc. are all funded by government. They basically only need to pay for their primary residence.

    Your point about Warren Buffett who thinks he’s getting taxed too little still isn’t donating his money to the government to spend on somebody else. He believes Bill and Melinda Gates are a better steward of how to spend his money on others. Is very valid I don’t think anybody believes the government is doing a good job spending the money anymore.

    Thanks for the article, Sam.

    1. Great point about a time when politicians weren’t actually paid by the government. Surely, back then these politicians made better decisions about how to spend other people’s money on someone else.

      I really want to encourage all FS readers NOT to rely on the government for anything. The government consistently disappoints as they consistently like to pick and choose winners and losers, depending on which political party is in power.

      Focus on helping yourself. And if the gov’t does end up helping you, then wonderful! What a nice bonus. If not.. then it’s OK. You never counted on it in the first place.

      Related: The New Three-Legged Stool In Retirement: You, You, and You

  11. Governor Newsom is one of the worst. Keeping Sacramento public schools closed from in-person learning while he sends his kids to a private school with in-person learning.

    The hypocrisy enabled Trump to win in 2016 and there is still huge annoyance against rich democrats.

    I would include early retirees who accept healthcare subsidies in the same boat. I can’t stand hypocrites.

  12. I totally agree that the government doesn’t care when it spends other people’s money on someone else. You see corruption in politics all over the world.

    The people who want to raise taxes and don’t pay more themselves are the worst. Let’s be honest, they are hypocrites.

    America is becoming a nation of moochers versus producers. We’ll eventually turn into Europe, which is OK actually.

  13. Xerographica

    Taxpayers should be allowed to directly allocate their taxes! Forcing taxpayers to consider the opportunity costs of their tax allocation decisions is the only way to guarantee the best possible use of public funds.

    People usually respond to this idea with concern that some “important” government organization would be underfunded. They don’t understand that their concerns just indicate how they themselves would allocate their own taxes if given the opportunity. I’m sure if more people actually understood how the invisible hand works that this idea would have already been implemented.

  14. Premium Finance

    Amazing tips. This is a must-read for everyone. Indeed, every single cent is important so we have to spend it wisely.

  15. Greg McFarlane

    I’m fairly certain that Dr. Friedman would have argued that providing defense and roads are two of the few legitimate functions of government: a private road system (or defense force) has too much potential for free riders who’d benefit from the product without ever paying for it.

    But health care? That’s the ultimate personal service. The only one who benefits from my fixed broken ankle is me. Same deal with buying a vehicle from GM or Chrysler. When our politicians decide that almost any personal economic benefit constitutes a “right”, there’s no limit to what they’ll judge appropriate for the greater good.

  16. Money Reasons

    why do you think people feel it’s OK to spend other people’s money as they wish?

    In the government’s case, I believe that they think it’s their job to spend the money… and in may ways they are right. The problem is they aren’t spending it trying to get the best value as Milton Friedman explains in the video.

    I think we need to get our fiscal programs back in the black, however, that would take years… And if an official is voted in office and does nothing except try to get finances in order, some news station, newspaper, or whatever will identify that government official (or president) as a lame duck…

    Kind of sad really… We are our own worse enemy when it comes to finances.

  17. Hi Sam, As a former econ major in college I love anything by Miilton Friedman. I loved the formulation of the clip. IT IS SO TRUE. To be able to harness those concepts into practice in our government would be monumental. Thank you for an excellent post.

  18. Roshawn @ Watson Inc

    It is unjust to tell someone else how to spend their money. Although I seriously wonder how many of the 47% who don’t pay taxes can really afford taxes, at least with what the tax rates are.

  19. Agree it’s sad that the schools get screwed even though they are so important. I like how he makes things so simple. I hope someday we can be proud of how our tax dollars are going towards a strong public school system instead of disappearing in the middle east.

  20. Hum, that’s a tricky one. I’ve heard his argument before, and I do understand his point (when we’re spending money on ourselves, we try to maximize what we get from the spending, when we spend our own money, we try to minimize our spending). I think that the worst type of spending, though, would be spending someone else’s money on ourselves; if we aren’t getting a piece of the pie, we might limit how much we spend on other people (because, as Friedman said, we don’t care very much about how they enjoy the money), whereas we can probably come up with a near endless amount of things we’d like to spend (someone else’s) money on for ourselves. (Plus, spending other people’s money on ourselves fits better with your complaint about non-taxpayers controlling what happens to government funds, anyway; they’re getting the benefits of the spending (having it spent on themselves) without it being their money.)

    1. I think the difference is in the quality of what you buy. You will buy high quality for yourself, but likely not care about the quality for others.

  21. 30th anniversary of “Free to Choose” PBS is supposed to have a new video this fall.

    On a related note a video that makes me cringe every time I see it?

    What happened Arnold?!?!?!?

    1. Free Credit Score

      The Kennedy side won out in Arnold. Really surprised how he’s abandoned any kind of fiscal conservatism since being elected.

      1. He had to. He was elected by my fellow Californians and then promptly sacrificed when he appealed to the people with propositions and we did not support him. After that he had to compromise just to leave his office every day….

  22. Funny you should mention Warren Buffett, as his views play into the previous discussion:

    Buffett Slams Tax System Disparities
    By Tomoeh Murakami Tse
    Washington Post Staff Writer
    Wednesday, June 27, 2007

    “Warren E. Buffett . . . slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

    “Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

    Buffett said that was despite the fact that he was not trying to avoid paying higher taxes. . . . [He] said that he and other privileged Americans must do more to help the less fortunate. . . . Buffett said he thought Democrats would do a better job in evening out the field for those who had drawn the unlucky tickets in life.”

    Yup. The reason why Warren Buffet is so great is because he’s able to distill the most complicated financial topics into very simple terms.

    1. I agree. Buffet makes the majority of income due to dividends. We need to raise the dividend tax from 15% to 20-30% and capture Warren and other folk’s money.

      We might also capture the money of many more retired folks who are living off of dividend income in their portfolios in Florida, Hawaii, and Nebraska, but that’s the collateral damage which Buffet and many are willing to take.

      It’s always awesome to hear billionaires tell the world we need to pay more taxes, when if you take away 99% of their wealth, they are 99% more wealthy than everyone else. Love it!

      1. As much as I like Warren, he speaks from both sides of his mouth. He favored the
        bank bailouts, why though? To aid in his GS investment. If he really wanted to pay more
        taxes he could, but does he? I would be willing to bet he doesn’t pay a dime more
        than he has to.

        1. Michael Harr @ TodayForward

          His being in favor of TARP and related bailouts including extraordinary action by the Fed had more to do with preserving the American economic infrastructure than his small investing in Goldman. Besides he’s already given away virtually his entire fortune so simple, selfish greed is an unlikely motivator.

          To your point that he likely didn’t pay a dime more than he has to…Chief Justice Renquist had been quoted as saying ‘everyone must pay their fair share of taxes, and not a penny more’ or something along those lines. All tolled, I would rather have him giving any ‘extra’ money to the Gates Foundation than to Uncle Sam.

          Both sides of his mouth? I don’t see it.

          1. You keep going round in circles. Afraid to directly attack Buffet. He does not need to pay more taxes out of the goodness of his heart. He focuses on charity out of the goodness of his heart. I don’t know how much of charity you do or influence. But if it’s not close to, match, or more, it might be wise to focus elsewhere. If the taxes are raised and he does not pay the increase, then you comments and sentiments are appropriate and not a second before that. You have my respect and the respect of a lot of you readers. Do not loose it over putting your emotions over intelligent thought and analysis.

      2. I don’t know where you stand here, Sam. Buffett favors wealth distribution by raising taxes on the rich.

        Also in any discussion of tax cheats/dodgers, I think you have to consider the huge corporations like GE, ExxonMobil, etc., who pay no federal income taxes and even get sizable refunds. There’s your real greed right there, not the poor family earning $30K getting a break from the Earned Income Credit.

        Sorry for the double post. I thought my first one didn’t go through.

        1. I stand by the fact that we should always do the right thing, and look out for our fellow brothers and sisters.

          GE, EM pay enormous amounts of tax. Just look at their financial statements. What kind of sensationalist comments are you posting now?

        2. My sensationalist comments come from that left-leaning liberal rag Forbes Magazine, which gives plentiful instances of how the top 25 US corporations manage – through overseas operations, net operating losses, research and investment credits, and the like – to avoid paying federal income tax (remember, that was the subject here) at the same rates as “our fellow brothers and sisters” (remember, the Supreme Court recently decided corporations were people too, just like you or me):

          None of ExxonMobil’s income taxes were paid in the U.S.

          Over the last two years, GE Capital has displayed an uncanny ability to lose lots of money in the U.S. and make lots of money overseas, where tax rates are lower.

          How did Bank of America not pay any taxes on $4.4 billion in income? Because of deductions like $860 million in tax-exempt income, $670 million in low-income housing credits and a $600 million loss on shares of foreign subsidiaries. With a provision for credit losses of $49 billion, Bank of America probably won’t be paying taxes for a long time.

          Ford’s tax rate is so low because of past years’ losses from U.S. operations.

          HP’s low tax rate is due to lower tax rates in foreign countries. The company says in its annual report that President Obama’s proposals to end tax deferrals on international operations would mean a big tax hike.

          Verizon’s low tax rate is due to its $42 billion wireless joint venture with Vodafone, which draws off much of Verizon’s income.

          Big Blue pays 49% of its income taxes overseas. In Japan it is appealing a $330 million tax assessment that followed an investigation into alleged tax evasion.

          With $17.5 billion in future tax deductions and credits on the books, and a $39 billion provision for loan losses, Citi has many tax-free years ahead of it.

          More than half of P&G’s business is overseas.

          Domestic-only retailers like Kroger have some of the highest tax rates among big companies because they have no lower-taxed overseas income to bring rates down.

          Of the companies in this list, Costco can be proud of having the most straightforward (and refreshing) financial statements.

          Boeing’s lower tax rate is mostly the result of big research and development tax credits.

        3. IGotBupkis, Legally Defined Cyberbully in All 57 States

          }}} – through overseas operations, net operating losses, research and investment credits, and the like – to avoid paying federal income tax

          Why in GOD’s name would a corporations’ activities overseas be expected to generate income taxes collected by the US government? What is the US Government doing for them THERE?

          Why do you think a company doesn’t pay sales tax to Florida on a business transaction that takes place in Colorado with a buyer in Indiana? For it to be otherwise is just ludicrously absurd.

          But somehow you figure GE should pay taxes on money made overseas for stuff that never comes into the USA? Ridiculous!

          Talk about mindless greed — pro-government types have it hands down more than anyone else on the planet, just like any other thief in the night. :-S

      3. “I agree. Buffet makes the majority of income due to dividends. We need to raise the dividend tax from 15% to 20-30% and capture Warren and other folk’s money.”

        There’s a reason LT capital gains (LTCG) are taxed at a lower level. Unlike wages which can be spent immediately, LTCG must be held for a minimum of one year, and are often held for several years, subjecting them to the effects of inflation. The lower rate partially makes up for this.

  23. Among other things, Friedman says that the problem is that you are not as careful about how you spend money if you spend somebody else’s money. That is why we have such a bloated government system that keeps tabs on spending other people’s money. In the meantime this bloated system swallows up a lot of money that could be put to much better use. Rose and Milton Friedman think that the private sector would do a much better job. They propose in “Free to Choose” that almost everything should or at least could be privatized. I am not sure (a) that private initiatives can actually perform many of traditional government tasks like defense, roads, etc. and (b) that they can do it much more efficiently, i.e. putting the money to better use while still turning a profit. Another problem is (government) regulation especially of natural monopolies. How private is a heavily regulated business anyway?

  24. As a side note, I also hate how people whine about the President or whoever, and yet they never voted.

    Anyway, I put myself through undergrad/graduate school so I could take care of myself and be a contributor to our families finances. I never even considered to be benefiting from options 3 or 4. Personally, I want the control of my finances which is why the status of social security drives me insane. (I am making a lot of people socially secure, who deserve it because they put into the pot. But who will make me socially secure in 25-30 years? I am guessing nobody.) The fact that it is ok for people to not have their ducks in a row and the ‘rich’ should come in and fix everything is perplexing to me. I don’t want people to suffer, don’t get me wrong, but I want people to be responsible. I am all for programs that help the disabled and the unemployed. But I think we have real flaws in our country when we have systems set up for people to walk away from their mortgages that they can fully afford and such.

    Did my rant even address your question? I don’t know…

  25. Of course I agree with Uncle Milton. His 4 rules of spending while great, isn’t 100% accurate 100% of the time either. That’s why economics shouldn’t be considered a science either no matter how dismal.

  26. Funny you should mention Warren, as he plays directly into the previous discussion:

    Buffett Slams Tax System Disparities
    By Tomoeh Murakami Tse
    Washington Post Staff Writer
    Wednesday, June 27, 2007

    “Warren E. Buffett . . . slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

    “Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

    “Buffett said that was despite the fact that he was not trying to avoid paying higher taxes. ‘I don’t have a tax shelter,’ he said.

    “Buffett said that he and other privileged Americans must do more to help the less fortunate. . . . Buffett said he thought Democrats would do a better job in evening out the field for those who had drawn the unlucky tickets in life.”

    Yep. The reason why Warren Buffet is so great is because he’s able to distill the most complicated financial topics into very simple terms.

    1. IGotBupkis, Legally Defined Cyberbully in All 57 States

      Buffet never notes how it is that he manages to pay so little — and the answer is the scam that was set up as a hiding place for the uber-rich even back BEFORE the income tax became a reality: Tax Free Foundations.

      That’s right, increasing tax rates won’t hurt him one whit.

      The uber-rich put all their money into these Foundations (which are designed so you pretty much MUST be uber-rich to take advantage of) — The Kennedy Foundation, the Rockefeller Foundation, the Bill & Melinda Gates Foundation (Buffet’s own foundation has been mostly melded into B&MGF, and the rest melds into it when he dies).

      The uber-rich like Buffet still control it, they still decide how it’s spent, what it invests in, and so forth — And as directors they take full advantage of assets owned and controlled by it… but it’s not “theirs” and any “income” it creates stays “in the foundation” and generally isn’t paid out to the owner/directors … that would result in an income tax.
      The reason why Warren Buffet is so great is because people are stupid enough to listen to what he says and believe anything he tells them is the full and complete truth.

      Increasing income taxes doesn’t do $^^%$ to the uber rich, THEY DON’T HAVE INCOMES.

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