‘Buffett Rule’ = unintended consequences

Really – how dumb does President Obama think we are? He’s playing that old tired class envy card again.

His latest scheme goes like this:

Middle-class families shouldn’t have to pay a higher tax rate than millionaires and billionaires.

So President Obama has proposed the “Buffett Rule,” which would require the wealthiest Americans to pay a tax rate at least as high as the middle class. Republicans are already calling this “class warfare,” and they will fight this plan with everything they have.

Yeah, that will do wonders for investment and job creation. So I don’t call it ‘class warfare’, I call it ‘sheer stupidity.’

In essence, what Obama seems to want to do is raise the capital gains tax rate for people making over a million dollars. (Needless to say, the White House didn’t have details as of this writing. We have to pass the bill to see what’s in it.) Now, Warren Buffett may have his stamp of approval on it because he makes scads of money and apparently won’t mind giving more to the federal government. (To which I say, Mr. Buffett, you can feel free to stroke a check to the United States Treasury whenever you want, instead of fighting the IRS every chance you get.)

But let’s say you are a moderately successful business owner. Well, first of all, someone who is successful will know how to figure out a loophole to avoid paying these taxes in the first place – that’s how someone like Warren Buffett can get away with supposedly paying a lower tax rate than his hapless secretary.

Second of all, this scheme seems to forget that the highest income brackets are already the most heavily taxed because we have a steeply progressive tax system – the top one percent (which is an income level of just $380,000 a year) makes 20% of adjusted gross income but pays 38% of taxes. Meanwhile, the bottom half (making under $33,000 per year) receives 13% of of income but sends in just 3% of the tax burden.

But third and most importantly, look at the effect the ‘millionaire’s tax’ had in Maryland. Not only did capital flee the state, the actual amount received fell far short of expectations. Those who can afford it – the truly wealthy – can always send their money offshore to avoid taxation. It’s the hard-working business owner who will have the stark choice of either having less money to invest in their companies and create jobs or “going Galt” and intentionally making less money in order to skirt the law. That’s not the American way, but it’s the way of socialism. Cloward and Piven would be proud.

The true alternative is the one Obama and his ilk won’t pursue because they can’t stoke the flames of class envy if it’s adopted, nor can schemers in Congress use the tax code to reward their friends and punish achievers who step out of line. By repealing the Sixteenth Amendment and enacting a consumption-based tax, the wealthy would pay their fair share because as a rule they consume more in taxable items than the middle-class or poor. And if the government doesn’t make enough to pay its bills, the better alternative is to cut spending.

So far among Presidential contenders Herman Cain’s ‘999 Plan’ has come the closest to this ideal, but there is room for alternative ideas which would truly make the tax system one where everyone has ‘skin in the game.’ All President Obama wants to do is skin the producers alive just to elicit a cheer from those who get their jollies out of soaking the rich – then wondering why they can’t find a job.

Author: Michael

It's me from my laptop computer.

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