So now we have the news that Congress has not supported the president’s proposal of the Buffett Rule, a trivial pursuit that stands in stark contrast to the revolutionary, government-expanding approach to health care pushed through by the same president just two years ago. If only he could be as courageous in his approach to our out-of-control federal debt as he was to the problem of 15% of the population lacking, not medical care, but medical insurance.
The Buffett Rule, a class-warfare escalating, vote-getting, success-punishing, equity market-crushing idea based on a nonsense statement by billionaire Warren Buffett, claiming to pay lower taxes than his secretary, would require that everyone earning more than $1M pay at least 30% of that income in federal income tax even if it is only from dividends and capital gains. The president wants everyone to pay his or her fair share, whatever that is. And in spite of the fact that, early in the debate, he suggested this rule would put the nation on a firmer financial foundation, current estimates are that it would have no significant impact on federal tax revenue or on the projected annual deficits.
And even that glum outlook ignores the fact that, if dividends are to be taxed at a higher rate, less will be paid out in dividends and fewer shares of dividend paying stocks will be purchased in the coming years, companies will instead just repurchase shares with profits not needed for investment, and retirement funds of rich and middle-class and poor alike will suffer.
Of course the president knew the Buffett Rule would never pass but apparently wanted to be able to use its defeat to attack the opposition for favoring the rich. We can expect The Buffett Rule to be a frequent topic of Democrat campaign ads and media-driven debate questions over the next few months.
The president had a much better option, one crafted at his own request not too many months ago. He could have put all his weight and political capital behind the Simpson-Bowles proposal for a wide range of deficit reducing proposals covering taxation and spending. Instead he is fiddling away time on trivialities, trying to assure his re-election, after which he assumes he will have more flexibility. He may or may not be re-elected, but surely we cannot allow him more flexibility. This government is neither a monarchy nor an empire after all, and it needs neither king nor emperor.
There is more explanation on the Buffett tax bill and his proposal here, here, and here. And one I took some heat for here.