White House Comes Clean

Buffett Tax not designed to fix deficit

Introducing a minimum 30 percent income tax on millionaires “was never our plan to bring the deficit down and get the debt under control,” Jason Furman, the principal deputy director of the White House National Economic Council, told reporters on a conference call Monday afternoon. “This is not the president’s entire tax plan. We’re not trying to say this solves all our economic problems, all our budget problems.”

Making the argument for the rule based on billionaire investor Warren Buffett’s argument that it’s wrong for him to pay a lower tax rate than his secretary, President Barack Obama said in the State of the Union address in January that paying the “fair share of taxes” was necessary for a “sense of shared responsibility. That’s how we’ll reduce our deficit.”

In other words, passing the "Buffett Tax" is designed as a measure to make the planned middle income tax hike palatable.  Given the enormous disparity between spending and income, even confiscatory taxes on the wealthy won't be sufficient to balance the budget, let alone pay down any debt. We can't tax the poor; that's not where the money is.  And, that's where much of it goes, to income support.  That leaves the middle class.

The money the "Buffett Tax" is supposed to catch is money, that for the most part, has already been taxed as corporate profits, before it was passed on to investors and taxed as capital gains.  That is one of two important rationales behind reduced rates for capital gains (the other being to encourage those investments).  One can question the wisdom behind the the reduced tax on capital gains, but to raise it again only for the upper end of those investors is not only non-productive (and likely strongly counter productive), but unfair.  And as Ace showed today, it's aimed at a very small number of people:

Of the 400 highest income Americans, one out of every three in this group of the most financially fortunate Americans paid less than 15 percent of their income in income taxes in 2008.

One third of 400 people is 135 people. In the White House's own words.  This is all about battlefield preparation for the tax increase to come, to pay for the Administrations outrageous spending.