It’s not just that President Barack Obama’s Buffett Rule would make sure rich Americans—like Warren Buffett—don’t “pay a smaller share of their income in taxes than a middle class family pays,” as the White House puts it. The Buffett Rule would establish a hard floor, 30%, on the tax rates millionaires pay.
But if that’s the floor, how high is the ceiling, potentially?
In its defense of the Buffett Rule, the White House quotes the research of two economists featured today in The New York Times:
Emmanuel Saez and Thomas Piketty have spent the last decade tracking the incomes of the poor, the middle class and the rich in countries across the world. …
As much as Mr. Piketty’s and Mr. Saez’s work has informed the national debate over earnings and fairness, their proposed corrective remains far outside the bounds of polite political conversation: much, much higher top marginal tax rates on the rich, up to 50 percent, or 70 percent or even 90 percent, from the current top rate of 35 percent.
The two economists argue that even Democrats’ boldest plan to increase taxes on the wealthy — the Buffett Rule, a 30 percent minimum tax on earnings over $1 million — would do little to reverse the rich’s gains. Many of the Republican tax proposals on the table might increase income inequality, at least in the short term, according to William G. Gale of the Tax Policy Center and many other left-leaning and centrist economists. …
But Mr. Piketty and Mr. Saez argue that history is on their side: Many countries have higher tax rates — and the United States has had higher tax rates — without stifling growth or encouraging the concentration of income in the hands of the very rich.
The story should really be considered an in-kind contribution to the Obama presidential campaign and the Democratic party. It fails to mention, for instance, a new Cornell University study which disputes the Piketty-Saez findings on income inequality, research I have been writing a lot about lately. I’ve also written why tax rates as high as Piketty-Saez desire are a terrible idea.
But here’s the thing: I would wager Obama agrees with Piketty Saez on tax rates—90% or bust! Their inequality research, after all, undergirds his entire economic thesis that inequality (promoted by low taxes and deregulation) is America’s biggest economic problem. And Obama has written dismissively of the 30-year decline in U.S. tax rates. As Obama wrote in The Audacity of Hope: “The high marginal tax rates that existed when Reagan took office may not have curbed incentives to work or invest … but they did lead to a wasteful industry of setting up tax shelters.”
Of course, it would take higher tax rates to pay for the continued expansion of the welfare state that the Obamacrats desire—which is why the president has never presented a long-term budget plan. The grift would be revealed.
So tell us, Mr. President, just how high do you think taxes should go?