President Obama admitted this week that the “Buffett Rule,” his plan to raise taxes on wealthier Americans, is “a gimmick.”
“There are others who are saying: ‘Well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule won’t do enough to close the deficit,” Mr. Obama told a handpicked group of backers the White House gathered here Wednesday.
“Well, I agree,” he added. “But the notion that it doesn’t solve the entire problem doesn’t mean that we shouldn’t do it at all.”
Where’s the logic in that? No, it won’t really fix the severe economic problems America faces, but that doesn’t mean we shouldn’t give it a try.
Actually, raising taxes wouldn’t scratch the surface of the gargantuan fiscal and financial mess he has created and that now threatens America’s economic security.
The revenue from his Buffett Rule tax increase has been estimated at about $47 billion, a thimbleful of what may be needed to pound his huge $1.3 trillion budget deficit into submission. It wouldn’t even pay a fraction of the interest on his ballooning $15 trillion debt.
Yet he’s made this pathetic excuse for an economic and fiscal agenda the centerpiece of his campaign for another four years.
Before Mr. Obama made his “gimmick” remarks, Democrats on Capitol Hill were saying essentially the same thing.
Sen. Christopher A. Coons, Delaware Democrat, acknowledging Republican criticisms of Mr. Obama’s Buffett Rule, admitted that it “isn’t going to balance the budget. This is an issue about fairness.”
So that’s what Mr. Obama is peddling in this fiscal snake oil remedy that the Senate will vote on next week - fairness. Obama Democrats say it isn’t fair that wealthier Americans like billionaire Warren Buffett pay a 15 percent tax rate on their income, while ordinary taxpayers pay a higher rate on lower income.
Here’s what’s wrong with Mr. Obama’s foggy thinking, which is sorely in need of an economic overhaul:
1. Mr. Obama’s tax hike plan is aimed at the capital gains tax, which was cut from 20 percent to 15 percent in 2001. That tax, which is levied on dividends, interest and capital gains from stocks, is lower than regular, middle-income tax rates because the government wants to encourage investment.
Whenever the capital gains tax has been raised, as Mr. Obama wants to do, it discourages the sale of assets and reduces badly needed investment in our economy. That will lower tax revenues and worsen the deficit. That’s what will happen if Mr. Obama has his way.
2. Billionaires and millionaires benefit from a lower capital gains tax because almost all of their income comes from capital investment in our economy. But they’re not the only ones who benefit from the lower tax. More than half of all American workers who save for their retirement years by investing in stocks, mutual funds or other assets also pay the same rate that Mr. Buffett does on their capital gains and dividend income. But Mr. Obama doesn’t seem to understand this or conveniently chooses to ignore it because it sounds fair.
3. Warren Buffett’s secretary, whom he said paid a higher tax rate than he does, probably invests in stocks, too, and the tax rate on her capital gains and dividends is the same rate that her boss pays. Millions of retirees today, who do not think of themselves as rich, live off the capital gains and dividends from a lifetime of savings and investment and pay 15 percent on that portion of their income.