To remind that, yes, Warren Buffett is wrong

Even Homer nods etc: he has "never known anyone that wouldn't invest in something they otherwise thought was attractive because of the tax".

This is incorrect. For the expected attraction is, of course, of the post-tax income to be had. The grand example of this is the municipal bond market over in the US. The income from lending to subnational government bodies in the US is free of income tax. Such subnational bodies can and do go bust so there is credit risk as well as the interest rate risk inherent to all bonds. Munis pay less interest than Treasuries - or at least often do - yet Treasuries are without that credit risk but income from Treasuries pays income tax.

The explanation is that people are looking at the post-tax return, they invest upon that expectation.

Which brings us to this about the recent dithering over inheritance tax in Britain’s farms:

The ONS data also revealed that fewer entrepreneurs were willing to start new farming businesses in the wake of the tax raid.

The lesson to be taken from this. The taxation of wealth, of assets, is not as straightforward as some would have it. It might well be true that some people have lots, also that others would like to take that lots and go spend it on their own fun ideas. But changing the taxation of investment, of assets, will change behaviour around investing and assets. As we generally think that investing, investment, is a good idea this places a limitation on how much can be nicked off other people.

The world’s a more complicated place than the rhetoric of the simpler populists would have it.

Tim Worstall