April 12, 2012
Critics of the so-called "Buffett Rule," President Barack Obama's proposal to impose a minimum income tax on the wealthy, would like to have their gilded cake and eat it, too. On the one hand, they contend that the proposal would have a minimal impact on closing the deficit, and on the other, they claim that it would greatly discourage investment.
Clearly, it can't be so small as to have a negligible effect on tax revenue while simultaneously so big as to have a ruinous impact on the economy. But then the uproar demonstrates once again that it's almost impossible to have a reasonable conversation about U.S. tax policy in an election year — or most any other time, unfortunately.
What's most appealing about the Buffett Rule can be summarized in two words: tax fairness. Conservatives balk at what they see as a meaningless goal, but just tell that to Mr. Buffet's secretarial staff who famously were shown to pay a higher percentage of their income to the tax man than their billionaire boss.
Is it really so hard a concept to grasp that working people ought not be hit harder on April 15 than those who earn many times their income? Yet to even raise the issue is condemned by Republicans as "class warfare." Obviously, they'd prefer that the rich maintain their victory and not be questioned by those already vanquished in the tax-policy debate.
This much is true: By itself, the Buffett Rule will have a relatively modest impact on the deficit. It is projected to raise only about $50 billion over 10 years. Rolling back theGeorge W. Bushera tax cuts for those earning over $250,000 would have a much greater impact — about $800 billion over the same period.
Could either be an investment killer? That seems unlikely given that the rich of this country have faced far higher income tax rates in the past. That those earning more than $1 million might pay a little more on investment income is not going to keep the rich from putting their money in the U.S. stock market or other domestic investment opportunities.
Obviously, there's a political component to this. For President Obama, the Buffett Rule provides a golden opportunity to underscore one of ultra-rich Mitt Romney's more obvious liabilities in the upcoming election, that he pays far less in income taxes than the Buffett Rule's 30 percent standard — about 14 percent on his 8-figure income.
Thus, the president's pitch is not so much about raising taxes but about a call for shared sacrifice in difficult times. The usual response on such matters from Republicans — that it's better to cut spending than raise taxes — doesn't really work given that so many of the cuts proposed (by way of the Rep. Paul Ryan budget plan) require sacrifice from the poor and middle class but not the wealthy.
The real power of the Buffett Rule is that it does not demand anything of the rich that the less affluent aren't already providing. If Washington is really going to make a dent in the deficit, the wealthy can't be held harmless in the process.
After all, the reductions House Republicans and their tea party supporters are talking about would require spending less on Medicare and Medicaid and imposing limits on Social Security benefits, perhaps through delayed retirement or other benefit cuts. Can we really ask all Americans to make those difficult sacrifices without asking millionaires to offer something tangible, too?
Here's another way to think about it: Where will that $50 billion come from to help balance the budget if not from this minimum tax plan? From additional reductions in medical benefits to senior citizens? From cuts to education, public safety, research or housing? Or from broader tax increases that would hit the middle class?
Obviously, the Buffett Rule alone won't solve the nation's debt problems or make the tax system completely fair. There are far more loopholes to address. But there's nothing wrong with starting at a place of such obvious disparity. Warren Buffett was wise enough to notice this outrageous inequity; the American people have, too.
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