2012 Tuesday: With Buffett Rule, Obama ignores economics and leans on ‘fairness’

A lot of commentary about Barack Obama’s re-election campaign focuses on what’s different from 2008. But there’s one clear way in which it’s exactly the same.

In 2008, when ABC’s Charles Gibson asked Obama during a debate why he favored raising the capital-gains tax rate when the evidence suggests doing so would only reduce government revenues, Obama answered, “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.” (Amazingly, except to those who have noticed Obama’s tendency to try to have things both ways, he went on to talk about the need to spend more money on health care and education — without disputing Gibson’s premise that raising capital-gains tax rates would instead lower revenues.)

Now, in discussing the so-called Buffett Rule, which would require Americans making at least $1 million in a year to pay at least 30 percent of their income in federal taxes, we’re back to the argument of fairness, economic and fiscal logic be damned.

Obama described the Buffett Rule during his State of the Union speech as part of a “sense of shared responsibility. That’s how we’ll reduce our deficit.” Well, maybe if by “that” he meant, “The Buffett Rule and about 200 other things”: The White House’s own study of the rule’s fiscal impact puts it at less than $5 billion a year during the next decade. The projected deficit for this fiscal year is more than 220 times as much. Heck, the deficit last month alone was almost 40 times as much. To save the same amount of money on the other side of the ledger, Obama and Congress would have to cut just 0.13 percent of this year’s federal budget. That’s how insignificant $5 billion a year is in Washington.

Thus, the Obama campaign is back to playing the fairness angle. Here’s campaign manager Jim Messina on Monday: “The Buffett rule will help make our system reflect our values as all Americans play by the same rules, do their fair share and get a shot at success.”

Now, it is the opposite of true to say instituting a special minimum tax rate for a certain group of people amounts to ensuring “all Americans play by the same rules.” But more to the point, Team Obama seems to be abandoning the idea of dealing with Washington’s actual problems of deficits and debt, and instead wants the general-election conversation to be about what’s “fair.” As defined by them.

In any case, the outrage about “unfairness” is based on anecdotal evidence — Buffett’s allegedly lower tax rate than his secretary — belied by the statistics. (I say “allegedly” because, when people began wondering how much money Buffett’s secretary would have to make in order to pay a higher tax rate than him, Buffett became suddenly shy about airing her tax information.) The data demonstrate not only that the current tax code is plenty progressive already, but that the average effective tax rate for people making more than $1 million is already greater than 30 percent.

So, we have a president who wants to spend valuable election-season time talking about a policy that:

a) would amount to tenths of a percentage point of the federal deficit; and

b) purports to address a “problem” that covers a subset of a subset of the population; but

c) doesn’t actually address the “problem”; all while

d) distracting from the larger problem of our out-of-control federal budget.

Ah, but it also e) brings attention to the wealth of Obama’s likely GOP opponent, Mitt Romney. And that’s the only truly relevant factor here. The Buffett Rule is a club for Obama to swing at Romney, nothing more.

Anyone who falls for it, thinking it will lead to one iota of improvement for their own lives, will deserve what they get. Or don’t get, as the case may be.

– By Kyle Wingfield

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109 comments Add your comment

Jm

April 10th, 2012
12:23 pm

Aaamen. It’s also real bad policy, as discussed at Bloomberg.

I believe capital gains and wage tax rates should be equalized, but the stupid buffett rule is not the way to do it.

DannyX

April 10th, 2012
12:31 pm

SBinF

April 10th, 2012
12:34 pm

By your logic, since Obama’s plan would only lower the deficit 1/10th, why not drop capital gains tax to zero?1!!1

It may not fix the deficit, but it’s a start. I say we roll back the Bush tax cuts. That’s the big reason the deficit has increased so much in the last decade.

Inconvenient truth to leave out there, Kyle.

Republican plan:

cut taxes, increase deficit, complain about deficit that would not have existed but for tax cuts, seek to cut spending to control deficit.

ya, makes perfect sense

Kyle Wingfield

April 10th, 2012
12:36 pm

DannyX: What part of the tax reform Reagan was pushing back in 1985 — which resulted in two tax brackets, 28% and 15%, while eliminating a boatload of deductions — makes you think he would support the Buffett Rule? Yes, Reagan and Obama related similar anecdotes. But their policy conclusions couldn’t have been much more different.

Kyle Wingfield

April 10th, 2012
12:37 pm

SBinF: You do realize that about 70 percent of the “cost” of the tax cuts went to lower taxes for people other than “the rich,” right?

Kyle Wingfield

April 10th, 2012
12:38 pm

Also, how do you get 1/10th from a $5 billion tax hike out of a $1.1 trillion deficit?

MiddleClass

April 10th, 2012
12:45 pm

The deficit would be reduced if the tax cuts had expired; I don’t see a significant increse in jobs since it was allowed to continue. I’m positive the number of jobs we have seen the last year would be close, if not exactly the same. So, the extension of the tax cut hasn’t been as beneficial as reported.

Hillbilly D

April 10th, 2012
12:50 pm

In my opinion, the solution to this is a complete overhaul of the tax code. Make it a flat tax, everybody pays the same %, all forms of income are taxed the same, and cut out all the breaks, deductions and subsidies. That would buy us a few years until the lobbyists figured out what to get passed that would put their clients back in a “favored” status. And of course, I’m not naive enough to think it’ll ever happen. Too many people profiting from things just the way they are.

Now with Ten Percent More Flavor

April 10th, 2012
12:50 pm

Since 5 billion is such an insignificant amount in your mind, Kyle, why don’t you just make an annual charitable contribution of 5 billion yourself. By the way, how much would be saved by cutting funding to Planned Parenthood for abortions or for cutting NPR. How about heating oil subsidies? Oil company subsidies? Come on Kyle. Present a complete picture and lay off the talking points. Take a full year’s budget and go through it and show us what you would cut and who would be impacted by said cuts. Show us how much the deficit and debt would be reduced. Show us who would get more tax cuts and who would pay for it.

Mr_B

April 10th, 2012
12:53 pm

“at less than $5 billion a year during the next decade” is one more edition of the complaint that the President doesn’t want to do enough to control the deficit. When I try to balance my budget, I look at everything, and taxing all income at the same rate (which BTW the Buffet rule does not do) makes perfect sense. No $5G isn’t going to fix the problem BY ITSELF. But it’s a start, and come from a place where it impacts the rest of the economy the least.

In the middle of the Bush presidency (2007) tax revenues were 18.5% of GDP. In 2010 they were 14.9 % coming off a recession.

Doesn’t sound like were taxing ourselves to death to me.
Kill ALL of the Bush tax breaks.

griftdrift

April 10th, 2012
12:53 pm

Two thoughts on the chart you linked to, Kyle.

I’m curious how they computed the corporate tax rate. There’s no explanation, yet, it magically balloons to over 9% for the highest income level. Also curious how they didn’t include capital gains which is a flat 15% and I believe a significant factor in Buffet’s argument.

Second, since you’ve give the evidence, can we at least to agree to a moratorium on the ridiculous “47% of people don’t pay taxes” argument. After all, your own chart shows that’s completely false.

gm

April 10th, 2012
1:01 pm

Enter your comments here

Gordon

April 10th, 2012
1:05 pm

No taxes should be raised until meaningful spending cuts (read: fundamental entitlement reform) are made along with them. Otherwise that is just more money that is going to be spent, not applied to deficit reduction. Deficit reduction is not attractive to a large number of voters, so you can be assured that additional revenue will not be used for that.

Fundamental entitlement reform is what is needed before taxes are raised on anyone. Period.

gm

April 10th, 2012
1:12 pm

Amazing during Bush 8 years in office Kyle the right never talked about budgets, economy deficits, now that Obama in office every one on the right criticism is totally un warrent.
Maybe if we had these concerns while Bush was spending over billion month in Iraq we would be farther along now, and the country would be more united.

jconservative

April 10th, 2012
1:16 pm

“The Buffett Rule is a club for Obama to swing at Romney, nothing more.”

Correct, and it will probably prove to be a wise political maneuver.

Folks, Reagan tripled the national debt, so please do not start again the chant about what a great guardian of the public purse he was.

Lt Dan

April 10th, 2012
1:20 pm

I believe we do not have a revenue problem, but more of a spending problem. Our government simply spends more than it takes in. That being said, the current Federal tax system needs to go due to being too complex and unfair to citizens and businesses.

I would like to see two things happen:

1) Scrap the current Federal tax system and go to the Fair Tax (but politicians will hate it as it takes so much power from them);

2) Determine what are the true duties the Federal Government should perform and do away with those departments that are redundant or not necessary. Department of Defense – keep it, but structure as to the missions that are required of it. Department of Justice – keep it but reorganize it (the “war” on drugs has failed, adjust accordingly). Department of Energy – a miserable failure – reorganize it or do away with it. Department of Education – scrap it and the mule it rode in on. Let the states run their own education systems and allow them to keep their tax dollars they raise for it.

Any other ideas of what should be kept or scrapped?

Jefferson

April 10th, 2012
1:20 pm

If it is such a small amount it won’t hurt the millionaires that much.

Lil' Barry Bailout (Revised Downward)

April 10th, 2012
1:33 pm

“Fairness” is the refuge of losers who can’t cut it in the adult world.

Grow up, Democrats.

Jefferson

April 10th, 2012
1:35 pm

The super committee did a great job when given the task, why does anyone think its all the President’s job, unless they have agendas.

Tiberius - Your lightning rod of hate!

April 10th, 2012
1:42 pm

“Since 5 billion is such an insignificant amount in your mind, Kyle, why don’t you just make an annual charitable contribution of 5 billion yourself. ”

Deflection. Used when those who have no logical argument must post anyway.

Tiberius - Your lightning rod of hate!

April 10th, 2012
1:44 pm

“why does anyone think its all the President’s job”

They don’t. See: Ryan, Paul Congressman from WI.

Also see: Leadership, as in: this Disaster-in-Chief has none.

Richard

April 10th, 2012
1:45 pm

Jefferson,
“If it is such a small amount it won’t hurt the millionaires that much.”

The small amount means there’s no point in doing it. Tax is for the purpose of funding the necessary functions of government, not to hurt millionaires.

Gordon

April 10th, 2012
1:45 pm

gm@1:12,

I don’t think Kyle worked for the AJC for the vast majority of the time that Bush was president. And there are many of us who DID complain during the Bush administration about spending. But now that Obama is spending even more we are complaining louder. Anything wrong with that? The government spends too much money, and I want it to stop doing that. I really don’t care who is in charge.

Tiberius - Your lightning rod of hate!

April 10th, 2012
1:47 pm

“If it is such a small amount it won’t hurt the millionaires that much.”

Except it hits approximately 80% of small business owners who file as individuals and are the ones who are creating / maintaining jobs right now, but why would anyone expect you or this administration to know about job creators?

Kyle Wingfield

April 10th, 2012
1:47 pm

grift: See here about TPC and the corporate tax rate. Basically, if you own stock, TPC (like CBO) assigns some of the burden of the corporate tax to you. Because higher earners are more likely to own stock, they bear a larger share of that tax burden.

Capital gains, I’m 99% sure, are included in the income tax — after all, you don’t fill out a separate tax return for your income from capital gains.

As for the 47% thing — first, the correct line is “47% of people don’t pay income taxes”; payroll taxes are, of course, a different matter altogether. The “47% of people don’t pay [any] taxes” line is used either by conservatives who misspeak or don’t know what they’re talking about, or liberals who want to highlight misspoken or ill-informed conservatives.

Second, that particular chart doesn’t prove or disprove anything about the share of people paying income taxes, because it doesn’t tell us what percentage of the population falls into each income bracket.

MarkV

April 10th, 2012
1:48 pm

Kyle,

What exactly do you have against fairness?

Do you really think that the President should only talk about issues that have a more impact on the revenues than the Buffett rule?

Gordon

April 10th, 2012
1:49 pm

What most people can’t see is that raising taxes will never satisfy those who want to spend more. Does anyone honestly think if we got rid of the Bush tax cuts that you would here this from the left: “There. Now that everyone is paying their fair share, let’s get to work cutting this spending.” Other people’s money is a very addictive drug.

Kyle Wingfield

April 10th, 2012
1:50 pm

Once again, gm: I wasn’t writing for the AJC, or about federal government policies, when Bush was in office. You’ve beaten that fake horse well past the point of death.

Richard

April 10th, 2012
1:53 pm

I have two programs the government can eliminate entirely:

1. The Post Office. Self explanatory. This is a dying entity where the guy in charge is begging to be able to get rid of most of the work force and shorten the work week. Let UPS, DHL and FedEx bid on who gets contracted to handle government mail.

2. The US Mint. A bit more extreme, but honestly, who uses cash anymore? Also, it costs more than a penny to manufacture a penny. Our money is underwater.

Gordon

April 10th, 2012
1:53 pm

My 1:49 should read “….hear this from the left…”.

Tiberius - Your lightning rod of hate!

April 10th, 2012
1:54 pm

“What exactly do you have against fairness?”

Why don’t you understand the definition of the term “fair”?

Fairness to most logical people is when folks pay the same rate regardless of their situation.

Fairness to liberals is when rich people pay more than poorer people and – oh, wait – they already DO!

So what you and the current Disaster-in-Chief really want isn’t “fairness”, as that already exists; you want confiscatory rates for those you envy.

HIPPOCRIT

April 10th, 2012
1:56 pm

and who said Obama wants to be like France, I think he’s got a long way to go

The Socialist favourite in France’s presidential election, Francois Hollande, has said top earners should pay 75% of their income in tax.

Now with Ten Percent More Flavor

April 10th, 2012
1:57 pm

How about those huge savings resulting from proposed cuts to NPR and Planned Parenthood, TB? If those cuts are significant, then so is the 5 billion that Kyle speaks of.

Tiberius - Your lightning rod of hate!

April 10th, 2012
1:58 pm

“Folks, Reagan tripled the national debt, so please do not start again the chant about what a great guardian of the public purse he was.”

jconservative, Reagan was fighting (and winning) the Cold War and driving our main foe underwater. He also had to deal with Tip O’Neill in order to get his agenda moved forward. Not defending everything he did, but there were actual reasons (and good ones) to spend the way he did.

Not so now.

Tiberius - Your lightning rod of hate!

April 10th, 2012
2:02 pm

“How about those huge savings resulting from proposed cuts to NPR and Planned Parenthood, TB? If those cuts are significant, then so is the 5 billion that Kyle speaks of.”

First of all, another deflection from the topic at hand, which is increasing tax rates.

Second, you’ve apparently never heard of the old adage, “When you find yourself in a hole, stop digging”. We don’t have a revenue problem, we have a spending problem. Stop digging.

Gordon

April 10th, 2012
2:03 pm

Tiberius@1:58,

I have to disagree. Overspending is overspending. Reagan did it, Bush did it, and Obama is REALLY doing it. You’re either a budget hawk or you’re not. There are times when you have to spend more, but you have to adjust revenue as well during those times. Neither side is willing to reconcile the ridiculous difference between what we spend and what we take in.

The debt shows our complete fiscal irresponsibility of the past, the deficit shows it for the present, and unfunded liabilities show it for the future. Winking and nodding when a Republican does it should not be an option, though no one is in Obama’s league.

Now with Ten Percent More Flavor

April 10th, 2012
2:06 pm

You should follow your own advice, TB, and stop digging for it is you that attempts, poorly I might add, deflection.

HIPPOCRIT

April 10th, 2012
2:08 pm

gordon is correct
both parties are up in washington spending
they are both guilty

HIPPOCRIT

April 10th, 2012
2:09 pm

i am the 53%
are you?

Tiberius - Your lightning rod of hate!

April 10th, 2012
2:11 pm

Gordon, if you goal is to rid yourself of the Cold War without firing a shot, you have to either show the world and the countries involved that their way is wrong, or you have to spend them into oblivion.

Reagan had to deal with Tip O’Neill, who understood the concept of horse-trading for programs, as did Reagan.

What would this world (and our economy) look like today if the Cold War wasn’t settled back in the 1980’s?

That we didn’t STOP spending once the goal was accomplished was the problem, and that lays at the feet of successive Republican and Democrat Congresses and administrations, but Reagan got the job done he wanted to.

Gordon

April 10th, 2012
2:11 pm

I did my taxes yesterday. I am definitely the 53%.

Tiberius - Your lightning rod of hate!

April 10th, 2012
2:12 pm

Wow, another post by Ten Percent not on topic.

I’m shocked!

Get Real

April 10th, 2012
2:12 pm

SBinF Until you stop runaway spending you can tax successful wagon pullers at 100% and it would be like throwing a brick in the Grand Canyon….WAKE UP

Jefferson

April 10th, 2012
2:13 pm

Yep spending should be cut, problem is your have obligations you must meet 1st. Cover the obligations with income where income is. You folks don’t realize what a mil in income is and what would be left after taxes. Nobody got punished.

Kyle is lucky, don’t forget.

Now with Ten Percent More Flavor

April 10th, 2012
2:14 pm

I propose we eliminate all spending then and not spend any more money until the debt is paid off. :roll:

Now with Ten Percent More Flavor

April 10th, 2012
2:15 pm

Wow, another post by TB directed toward me rather than the topic. Why am I not surprised.

gm

April 10th, 2012
2:16 pm

Gordon

I would take Obama spending money on Americans any day, then Bush spending Billions on building up Iraq, spending is only out of control to the right when it does not benefit them.

HIPPOCRIT

April 10th, 2012
2:17 pm

now with ten percent better ideas

we can also wipe out several trillion right away by writing off intra-government debt…… in other words the money the general revenues owes the ss mis-trust fund can just be written off

we can go straight to pay as you go

Kyle Wingfield

April 10th, 2012
2:17 pm

In other 2012 news, Rick Santorum reportedly is moments away from announcing his withdrawal from the race. It’s over, folks.

Now with Ten Percent More Flavor

April 10th, 2012
2:17 pm

I can’t see from Paul Ryan’s budget proposal how much the debt will be reduced and how much the debt ceiling will be reduced versus time.