Warren Buffett, President Obama’s favorite billionaire, once said that “you only find out who’s swimming naked when the tide goes out.”
Well, it looks like the tide has gone out for Obama when it comes to pushing his Buffett Rule “millionaire’s” tax. There was never much of an economic rationale for the idea. It would only raise about $5 billion a year over the next decade, a span when the U.S. is on track to compile average annual budget deficits of $1 trillion or more.
Wait, actually it would add nearly $800 billion to cumulative deficits because it would replace the Alternative Minimum Tax, according to government bean counters. No, wait some more! The numbers would probably be even worse. Other taxes targeted at the rich, such as President Bill Clinton’s 1993 tax hikes and recent tax increases in the UK, either raised less than forecasted or lost money.
As Bloomberg recently pointed out, affected taxpayers–fewer than 0.5% of Americans with annual incomes exceeding $1 million and tax rates of less than 30 percent–could avoid the tax via tax-free investments such as municipal bonds. They also could time asset sales for maximum tax benefits, engage in transactions that don’t result in taxable income, and make charitable contributions that yield deductions. “Largely, the Buffett rule is going to be manageable,” said David Miller, a partner at Cadwalader, Wickersham & Taft LLP in New York. “That is, with tax planning, people will be able to avoid it.”
Obama’s strongest argument, really, was his moral one: that having the rich pay a lower tax rate than middle-class voters was just plain unfair from an income inequality perspective. But now he seems to have abandoned that one, as well:
That is not an argument about redistribution. That is an argument about growth,” Obama said in response to a reporter’s question at a news conference in Colombia. “In the history of the United States, we grow best when our growth is broad based. This is not an argument about taking from A to give to B. This is not a redistributionist argument that we’re making. We’re making an argument about how do we grow the economy in a 21st century environment,” Obama said.
Really? If there is an Obama Rule, it is the one he articulated back in 2008 to Joe the Plumber, that we need to raise taxes to “spread the wealth around.” But I guess “spread the wealth” isn’t polling as strongly as Team Obama would like in 2012.
OK, so now Obama is focusing on the economic growth argument, his weakest one. Economic growth is produced by innovation and the acceptance of the creative destruction it brings. Obama would argue that by raising taxes, he could avoid cutting supposedly critical government investment to spur innovation. But is the federal government so lean and mean that the only way to reduce spending is by axing the NIH or the National Nanotechnology Initiative? Or is Obama talking about more Solyndra-style industrial policy? If that, better to keep that $5 billion in the private sector. And time for Obama to float some new economic ideas.
James, have you no shame?
Criticizing the Buffett rule because it will ‘cost’ $800 billion? Ridiculous!!!!!
First, aren’t conservatives supposed to applaud cutting taxes? And in my mind, eliminating the AMT is a HUGE tax cut. Am I wrong? Even if the political price of eliminating the AMT is the imposition of the Buffett rule, it is still a HUGE tax cut. I, for one, would love to see $800 billion in tax revenues go poof. And if the end result of the horse trading is a smaller number of people subject to an AMT-type surcharge, why aren’t we clapping?
Second, are you really arguing that we shouldn’t accept the Buffett rule because too few people are subject? Or that they have ways of avoiding the impact? Carried through, it seems that you would prefer more people be subject to the tax. That can’t be so, can it?
Third, what self-respecting conservative accepts the static analysis of the impact of tax cuts? You’re just accepting the $800 billion number? Aren’t we the ones arguing that reducing tax rates leads to net gains in the amount of tax revenue? Doesn’t eliminating the AMT – which by any definition is a cut in the marginal rate its victims pay – fall into this category?
I agree that the Buffett rule is a gimmick and shouldn’t be implemented… but I want to stay true to my conservative nature in making the arguments against it.
Even when those jackas ses in Congress (11% approval rating) tell Americans that there will be no increase in a certain budget, what they are not telling us is that the baseline for any budget is STILL an 8% increase. In other words, some department gets $100, Liberals in Congress complain because Conservatives want to “cut” spending in that department, and so both sides make a big show including name calling, and no increase goes to the department, but it STILL gets an 8% increase, so next year’s budget will allot it $108. I’m just using simple numbers to make a point. Congress is not being upfront and they still have backroom deals going on.
And once again we see Darrel Issa coming to the rescue pointing out all the dirty little secrets that Congress (all 3 parties) that Congress doesn’t want you to know.
So we’ve given up on robbing Peter in order to pay Paul, we’re just robbing him to appease Paul’s ressentiment.
let me guess; the Joe the Plumber video is available here because you don’t need a genious to run things? The regular folks resent being talked down to and talked over by a genious Harvard type, while the ‘Joe the Plumbers’ of the world actually solve the problem using common sense. To the poster Steve, above; You have the advantage of editing the context for the benefit of being smarter then everyone else. Save that for the liberals. And the tax itself, accept the premise for what it was, a political play to solidify the base for election purposes.
I agree that the tax is a political play (alternative, and really scary, theory: Obama actually thinks it will help the economy?).
However, it is important that we criticize it for the right reasons. Given all the right reasons for opposing this tax, why resort to silly arguments?
Let the liberals make things up and be inconsistent from issue to issue. We’re supposed to be better than that.
supposed to?
Yep, supposed to. Per my original comment, we don’t always meet that standard