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‘Buffett Rule’ Is Another AMT ‘Fairness’ Tax

From Wall Street Journal:

The Obama Rule

He says taxation is about fairness, not growth or revenue.

April 10, 2012,

Forget Warren Buffett, or whatever other political prop the White House wants to use for its tax agenda. This week the Administration officially endorsed what in essence is the Obama Rule: Taxes must be high simply to spread the wealth, never mind the impact on the economy or government revenue. It’s all about "fairness," baby.

This was long apparent to those fated to closely watch the 2008 campaign, but some voters might have missed the point amid the gauzy rhetoric about hope and change. Now we know without any doubt. White House aides made it official Tuesday in their on-the-record briefing on the new federal minimum tax that travels under the political alias known as the "Buffett rule."

The policy goal is to impose an effective minimum tax of 30% on the income of anyone who makes more than $1 million a year. When President Obama first proposed this new minimum tax he declared that the rule "could raise enough money" so that we "stabilize our debt and deficits for the next decade." Then he added: "This is not politics; this is math." Well, remedial math maybe.

The Obama Treasury’s own numbers confirm that the tax would raise at most $5 billion a year—or less than 0.5% of the $1.2 trillion fiscal 2012 budget deficit and over the next decade a mere 0.1% of the $45.43 trillion the federal government will spend.

The President, being a Harvard trained lawyer, was just speaking in shorthand. (Which is Jay Carney speak for "he didn’t know what he was talking about.)

When asked about those revenue projections, White House aide Jason Furman backpedaled from Mr. Obama’s rationale by explaining that the tax was never intended "to bring the deficit down and the debt under control."

Okay. So what is the point?

The goal, Mr. Furman explained, is to establish a "a basic issue of tax fairness." Millionaires should pay an effective tax rate no lower than a middle-class secretary or a plumber. But wait: IRS data show that middle-class workers on average pay just under 15% of their income in federal taxes, while the richest 0.1% pay almost twice as high a rate on average, or 26%.

Picker of nits.

The U.S. already has a Buffett rule. The Alternative Minimum Tax that first became law in 1969 was also supposed to make sure that millionaires pay their "fair share."

In, fact, in 1969 when Secretary of the Treasury Joseph Barr testified before Congress, he claimed that 155 individuals had incomes above $200,000 ($553,000 in 2012 dollars) but owed no income tax. The resulting uproar led Congress to enact the so-called "add-on" minimum tax, a precursor to today’s Alternative Minimum Tax (AMT).

Oddly enough, the White House tweeted yesterday: "1,470 people paid no federal income tax on $1 million incomes in 2009. The Buffett Rule will change that." The Obama campaign is using the same exact line of argument, almost word for word, that gave us the now loathed and despised AMT.

The top AMT rate is now 28%. But the AMT has become a public nuisance, adding new complexity to the tax code and ensnaring more and more middle-class families because it isn’t indexed for inflation. The surest prediction in politics is that any tax that starts by hitting the rich ends up hitting the middle class because that is where the real money is.

And, if the Buffett Rule is enacted, a few years from now it will be hitting people making $65,000, and all of the politicians will be promising to try to get rid of it. But somehow they will never be able to do away with it.

An even greater absurdity is the White House claim that this is a first step to tax reform because it will ensure that the "rich don’t take advantage of tax breaks or structure their affairs to pay less taxes." Huh?

Obama and the Democrats always call their new or higher taxes, ‘tax reform.’ That is, when they are not calling them ‘investments.’

A basic principle of any tax reform worth the name is to broaden the tax base in order to lower rates for everyone, not to raise them. The point is to make the tax code more efficient by reducing the incentive for avoidance—legal or illegal.

The Buffett tax would only make loopholes more valuable…

The century-long history of the federal income tax teaches us one lesson over and over: The higher the tax rates, the more loopholes Congress inserts as a way around those rates. This is why the government collected roughly as much tax revenue as a share of GDP when the top tax rate was 70% in the 1970s as it did when the rate fell to 28% in 1986.

The Buffett rule is really nothing more than a sneaky way for Mr. Obama to justify doubling the capital gains and dividend tax rate to 30% from 15% today. That’s the real spread-the-wealth target. The problem is that this is a tax on capital that is needed for firms to grow and hire more workers. Mr. Obama says he wants an investment-led recovery, not one led by consumption, but how will investment be spurred by doubling the tax on it?

The only investment and hiring the Buffett rule is likely to spur will be outside the United States—in China, Germany, India, and other competitors with much more investment-friendly tax regimes. The Buffett rule would give the U.S. the fourth highest capital gains rate among OECD nations, according to a new study by Ernst & Young, to go along with what is now the highest corporate tax rate (a little under 40% for the combined federal and average state rate). That’s what happens when politicians pursue fairness over growth.

We are constantly told that Mr. Obama is not stupid. That, in fact, he is brilliant.

So the inescapable conclusion must be that Obama does not want to grow the US economy. He wants to destroy it – and whatever is left of capitalism in America, in general.

This article was posted by Steve on Wednesday, April 11th, 2012. Comments are currently closed.

7 Responses to “‘Buffett Rule’ Is Another AMT ‘Fairness’ Tax”

  1. Rusty Shackleford says:

    “So the inescapable conclusion must be that Obama does not want to grow the US economy. He wants to destroy it – and whatever is left of capitalism in America, in general.”

    I hear a bell ringing. And I’m hoping that this thing that Steve and at least half of Americans know is true is now starting to sink into the minds of the rest of the rabble. There will always be 10% who prefer to be ignorant and loyal to the communist cause. Then there are those in government who have their own myopic view of everything. They cannot be changed. But they can be voted out.

    Remember, the socialists use the words

    would’a
    should’a
    could’a

    The conservatives use

    is
    was
    will be

    Please note the difference

  2. River0 says:

    This president is the Manchurian Candidate on steroids. He’s done more to aid our enemies and destroy the economic, social, and political fabric of America than any external enemy ever could have in three years. And he’s done it by turning our own citizens into agents of destruction and chaos.

    This endgame has always been in the cards, though, ever since the crypto-Marxist ‘progressives’ gained a foothold in 1912 by putting Woodrow Wilson in the Oval Office. This brought us the ‘Progressive’ Income Tax, the Federal Reserve, re-segregation of the Armed Forces, Prohibition, an activist federal government, and a clearly stated policy of setting aside the Constitution as an archaic and useless relic of the past.

  3. Tater Salad says:

    I have listened to The Presidents remarks and statements on TV today and his request to write my Congressman on taxing the rich relating to his so-called “Buffet Rule”.

    I believe this is just a big scam by him, just like cap & trade, climate change and Agenda 21. Taxing the rich more at higher rates is class warfare being created just like Nazi Germany did and even if taxes were raised, it will not cover any deficits that we have. Just cut spending and the country will get back on track. Very simple.

    The President can not have it both ways on this Buffet Rule that he whines about.

    Warren Buffet on the Buffet Rule: http://www.youtube.com/watch?v=koDhgSLa-Wk

    Obama trying to explain his concept: http://www.youtube.com/watch?v=0VnwRo7DrNM

    Evidently the “Buffet Rule” means that a person doesn’t have to pay any taxes. Which way is it Mr. President?

    http://newsbusters.org/blogs/noel-sheppard/2011/08/29/warren-buffetts-company-hasnt-paid-taxes-years-media-mum

    http://therealrevo.com/blog/?p=71718#comment-97034

    Please do not support any raising of any taxes on anyone! Read my lips: “No new taxes”!

    Thank you for your time and concerns.

    • Rusty Shackleford says:

      He can’t help it, the narrative that evokes emotional reaction is what’s important. More important than facts or truth.

      It’s what made him a community organizer, which is perhaps his only true talent.

      Barack Obama, annoying people since 1961 (If the birth certificate is legit)

  4. Petronius says:

    The Buffett Rule is a tax on investment capital –– in effect a tax on the stock market.

    As such, it is a tax that will fall mainly on retired senior citizens who live off their investments –– investments they made with after-tax earnings and savings during a lifetime of work.

    Perhaps we should make a TV commercial of Nerobama pushing grandma off the cliff?

    • Rusty Shackleford says:

      Most people I know who pay taxes are also aware of the percentages of what the rich pay. It can’t be helped because the 1040 forms have the charts. Often there’s talk of “being put in a new tax bracket” when a person gets a raise at work and their percentage of withholding is higher. So their pay raise actually was a lot less than the gross amount would suggest.

      I have yet to discuss income tax with anyone in the past 30+ years where the subject of percentage of withholding isn’t brought up. So the people who are blindly ignorant of who pays the higher percentage is that 46% or so that doesn’t pay taxes at all. As Rush put it, “It’s the stupid people that Obama is talking to”.

  5. canary says:

    “Oddly enough, the White House tweeted yesterday: “1,470 people paid no federal income tax on $1 million incomes in 2009.”

    And it took Obama’s hiring of 4000 IRS workers when he took office to figure this out.


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