Enough already, with the Buffett rule. Once again, President Barack Obama is pushing the idea of imposing higher taxes on the rich as a way to solve the nation's budget deficit problem. In reality, however, his campaign season rhetoric is less about getting the country's books in order and more about getting himself re-elected.
Rather than appeal to populist sentiment, Mr. Obama should try to earn votes by delivering what Americans know we need: a serious plan for getting more people back to work and the nation back on firm financial footing.
By stoking resentment against the rich in these difficult times, Mr. Obama clearly hopes to nail Mitt Romney, his likely Republican challenger in the upcoming presidential election, for having disclosed in January that his tax bill last year came to about 14% of his $21 million income — about the same percentage paid by taxpayers who earn between $50,000 and $75,000.
Why else would Mr. Obama have chosen a fundraising event last week in Boca Raton, Fla., as the venue to plug his Buffett rule tax proposal?
When it was first proposed back in the fall, the Buffett rule, named for billionaire investor Warren E. Buffett, would have required that people earning $1 million or more per year pay at least 30% of their income in federal taxes.
Democrats plan to bring a bill based on the Buffett rule, the Paying a Fair Share Act of 2012, for a procedural vote in the Senate.
That bill would require that taxpayers with at least $2 million in adjusted gross income to pay a minimum rate of 30%. Those earning between $1 million and $2 million would pay a higher rate on a sliding scale, but not the full 30% minimum.
ENOUGH VOTES
Senate Republicans have enough votes to block the bill from advancing.
The House most definitely will nix it, anyway. And that is good from a fiscal perspective.
The Buffett rule would do little — in fact, very little — to get the nation out of debt and the economy growing at full speed again. And even as a government revenue raiser, the rule is a stinker.
If enacted, it would raise just $46.7 billion in additional revenue through 2022, according to Congress' Joint Committee on Taxation. That represents less than 4% of the current $1.2 trillion budget deficit and a mere 0.7% of the $7 trillion in projected budget deficits through that period.
Forget also that the basic premise of the Buffett rule — that most millionaires pay lower tax rates than less affluent Americans — is simply untrue.
Millionaire tax filers pay an average tax rate of 25%, compared with 11% for all taxpayers, according to the bipartisan Tax Foundation, which analyzed the most recent available
Internal Revenue Service data. Those earning less than $200,000 a year are taxed at an effective rate of no higher than 12%, the analysis showed.
To be sure, many millionaires — not to mention some billionaires, such as Mr. Buffett — pay significantly less than the 25% rate. They do this because they take advantage of the preferential tax rate on capital gains.
For that reason, a proposal in the administration's fiscal 2013 budget plan, which was released in February and calls for capital gains to be taxed at a top rate of 20%, up from 15%, makes sense. Increasing the rate should help boost revenue without dampening investors' willingness to realize their gains.
TAX LOOPHOLES
The administration's efforts to close major tax loopholes, such as the so-called carried-interest loophole, which allows wealthy
hedge fund managers' performance bonuses to be taxed at the long-term capital gains rate, rather than at the ordinary income rate, also make sense.
Mr. Obama's political grandstanding in his revival of the Buffett rule is an unfortunate and unnecessary detour on the road to solving the nation's serious financial problems.
