President Obama has been pressing hard for passage of the so-called Buffett Rule since late last summer. The Buffett Rule is a proposed tax law that would require anyone making over a million dollars a year to pay a minimum of 30% of that money in income taxes. Actually, the proposed law is much more complicated than that as it is phased in and only those making $2 million a year would bear the full brunt of the tax.
President Obama vows that the Buffett Rule is not “class warfare” and that it is not “political.” I think I can prove him wrong on both counts. The Republicans vow that the Buffett Rule would be a “job killer” and would depress the already anemic economic recovery. Actually, there’s not a lot of data to support those claims either. Let’s take a look at both sides.
President Obama has had to change his rationale for the Buffett Rule at least three times. Last fall, Obama claimed that the Buffett Rule was crucial to “stabilize our debt and deficits for the next decade.” But the congressional Joint Committee on Taxation estimates that the Buffett Rule revenues would amount to only $47 billion over 10 years, or only one-half of 1% of Obama’s proposed budgets over the next decade. Oops! So much for that argument.
Then in his State of the Union speech in January, Obama argued that the Buffett Rule was necessary “to change our tax code so that people like me… pay our fair share of taxes.” Yet as many pointed out, how is it fair to raise taxes on roughly 236,000 taxpayers that make over a million dollars a year? That’s less than two-tenths of 1% of the estimated 145 million who paid federal income taxes in 2011.
Then in his radio address last Saturday, Obama claimed the Buffett Rule would “strengthen our economy and create jobs.” There is absolutely no basis for this claim. The point is, the president will say anything in his quest to get this bill passed.
The Republicans argue that the Buffett Rule would kill jobs and slow down the already weak economic recovery. It is true that small business owners are the largest source of new jobs in the economy. But how many small business owners make over a million dollars a year? This may surprise you but a Treasury Department study released last year found that only about 1% of small business owners make over $1 million a year.
Of those that do make over $1 million, many are already paying an income tax rate above 30%. Thus, neither group of small business owners will be seriously affected by the Buffett Rule, which makes me wonder if the revenue estimate of $47 billion over 10 years is too high. And let’s not forget that many people who make over $1 million a year can adjust their incomes to get below that threshold. So, if the Buffett Rule were to become law, actual tax revenues may be significantly lower than $47 billion over the next 10 years.
President Obama and his number-crunchers have to know this. So why then is the president so relentless in pushing for the Buffett Rule? Here’s why: A Gallup poll on April 12 found that Americans favor the Buffett Rule by 60% versus only 37% that oppose it. There’s the answer!
I suspect that President Obama knows the Buffett Rule will never pass. The Democrats in the Senate failed to get enough support to bring the bill – the Paying a Fair Share Act of 2012 – up for debate earlier this week. Clearly, Obama and his advisers believe that the Buffett Rule is a winner politically, even if it fails in Congress, and that class warfare is an acceptable re-election strategy. Actually they may want the Buffett Rule to fail so they can beat up on Republicans for protecting the “fat cats.”
The bottom line is that the Buffett Rule, in the unlikely event it is passed: 1) won’t raise enough revenue to materially reduce the budget deficits since the $47 billion in added revenues is probably overstated; and 2) it won’t tank the economy, again because the number is not all that big considering how huge the federal budget is and the fact that we’re running trillion-dollar deficits.
So President Obama will continue to push for the Buffett Rule, even if he knows it won’t pass. Sadly, his supporters don’t know that. Republicans will continue to vocally oppose it, even though they probably know it won’t pass. Their supporters probably don’t know that either.
At the end of the day, it’s all about politics and winning the election in November. Unfortunately, class warfare is alive and well in America.
I suspect I’ll get criticized by both sides on this one.
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