So, Obama’s new plan is the old plan. He hasn’t changed his tune since he told Joe The Plumber that we need to “spread the wealth around.”
From the AP:
President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totaling more than $3 trillion.
Obama said, “It’s only right we ask everyone to pay their fair share,”
Really? Because 47% of Americans pay NO federal income tax and “the rich” (top 1%) pay about 40% of all income taxes into the federal government. So, who isn’t paying their fair share? To me a flat tax is the only way to go. Everyone should have “skin in the game,” as Obama likes to say, even if it’s a tiny bit. We all need to be a part of the solution to our fiscal mess. This would be the fair way. The rich would pay a great deal more, so the class warfare guys would be happy, and everyone would pay at least a little bit, which would be fair all around.
But Obama wants to make this about class warfare. He seems to be using the third richest man in the country to do it.
Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.
Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.
You will be hearing the Buffett/Secretary line over and over. Trust me on that. But, as usual, it doesn’t tell the whole story. Greg Makiw, a professor of economics at Harvard, tells the rest of it:
You might wonder how Mr Buffett managed such a low tax rate. Most likely, it arose because corporate dividends and capital gains are taxed at only 15 percent. But the corporate income that funded those returns was already taxed at the corporate level, where the tax rate is 35 percent. Mr Buffett seems to be ignoring the first round of taxation. Is it possible that the world’s most successful has failed to pierce the corporate veil? (If you want to more reliable data on the progressivity of the tax code, see this old post for numbers from the CBO.)
Even more striking to me is a fact that Mr Buffett did not emphasize: how low his taxable income is. His income of $46 million represents a mere 0.1 percent of his reported net worth of over $50 billion. That is not an impressive rate of return!
Why is it so low? I can think of at least four possible ways investors like Mr Buffet can keep their taxable income, as opposed to their true income, low:
They hold stocks that pay minimal dividends.
They avoid realizing capital gains.
They hold some of their portfolios in tax-free municipal bonds.
They give appreciated assets to charity, getting a deduction for the current market value without ever having to realize and pay tax on the capital gain.
Notice that raising tax rates, as Mr Buffett seems to want to do, would not much affect any of these tax avoidance strategies. Even if tax rates were raised substantially, the tax savvy Mr Buffet probably wouldn’t be paying much in taxes as a proportion of his wealth or as a proportion of his true income.
And the last line is the kicker. Even hypocrites like Mr. Buffet use tax avoidance strategies. When Mr. Buffett writes a check for a few billion to the government out his $50 billion out of the goodness of his heart, instead of hiring lawyers to lower that bill, I can’t take him seriously.
The insane thing about all this is that at time we need jobs, all Obama is talking about is raising taxes.
Mitt Romney sent out this statement and it hits the nail on the head:
“President Obama’s plan to raise taxes will have a crushing impact on economic growth. Higher taxes mean fewer jobs – it’s that simple. This is yet another indication that President Obama has no clue how to bring our economy back. I encourage President Obama to look at my detailed economic plan to create long-term growth and prosperity for our nation. The only way to get our economy moving again is to elect a president who understands how to create jobs and rein in spending – that is why I am running.”
Update: Just wanted to add this graph from NRO. In it you can see that “the top 1 percent of earners (a household income above $380,000) shoulder 38 percent of personal federal income taxes and make only 20 percent of income. The top 5 percent of income earners pay almost 60 percent of income taxes and make under 35 percent of all personal income.”
It’s just hard for anyone to say with a straight face that the top 5% aren’t paying their fare share.