The Collective Action Problem And Warren Buffett

Warren Buffett made quite the statement when talking about higher taxes and voluntary payments:

Republicans recently called out multibillionaire Warren Buffett, and requested that he donate money to the United States Treasury in order to help with our current deficit reduction issues, in which Mister Buffett told Time magazine that everyone should join hands in the effort.

“If we go to a contribution system, I’ll match the total contribution made by all Republican members of Congress. And I’ll even go three for one for McConnell,” said Buffett, according to the excerpts of the interview released by Time magazine.

I’ll pay if you do but I won’t if you don’t: this is otherwise looked upon as the collective action problem. It’s actually one of the main reasons why we have this taxation issue. We can all certainly agree that some of the taxes raised by the United States government are certainly essential. And it’s safe to say that all taxpaying citizens should pay according to the abilities they have in which they are capable of doing so.

One of the main problems that seriously puts limitations on people’s willingness to chip in is the fact that they believe other people aren’t paying their fair share. It’s the collective action problem, and we need to come up with a way to figure out how everyone actually pays their fair share. That way nobody will backslide and everybody will play his or her part.

The answer to this problem is law and democracy. We might complain about it, or even whine about certain things, but if the elected officials tell us that we have to have to pay certain taxes, then by golly that’s exactly what we’re going to do because we have to.

But we can certainly look at this collective action problem from a different perspective. What is all the tax money being spent on? Is it going to end up in the hands of one group or another, or will it be distributed to the areas where it is truly needed? If it goes to the right places, then people will not have such a difficult time paying when extra money is demanded of them.

So Buffett has certainly made a very interesting challenge, but did he really deliver a knockout blow? There is still a possibility that taxes won’t actually need to be raised. Maybe we can cut our spending instead. If you take a good look at the Federal budget, I’m sure you can spot areas of spending that really aren’t necessary. But that’s just one man’s opinion, and obviously I don’t have any say in this matter.

It makes sense to not only ask people to pay their fair share in taxes, but really look over the existing budget and decide whether all of this money is actually necessary. You don’t always need to ask people to give up so much money if it is being spent in wasteful ways.

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