Heritage Foundation Scholars respond to Obama debt reduction proposal (Part 6)

I love going to the Heritage Foundation website for articles like this:

Obama’s Debt Reduction and Tax Proposal

Heritage Responds to Obama’s Debt Reduction and Tax Proposal

Mike Brownfield

September 19, 2011 at 11:16 am

Heritage’s experts watched President Barack Obama’s debt reduction and tax increase proposal. Here are their immediate reactions:

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Obama Vague on “Buffett Rule”

President Obama wants tax reform to adhere to his newly formulated “Buffett Rule” which states: Families and small businesses making more than $1 million should not pay a smaller share of their income in taxes than a middle income family.

But the Congressional Budget Office shows that Buffett Rule is already in effect. The highest earners pay more than double the amount of taxes as a share of their income than middle income earners. The top 1 percent of earners currently pays 29.5 percent of their income in all federal taxes while middle income families pay 14.3 percent.

The President and his staff surely know this so the Buffett Rule likely refers to something else. It is impossible to say for sure since, as usual, the President’s plan is light on details. One likely direction the President may propose when details come out is to equalize the taxation of capital gains with the taxation of income for millionaires. The President wants the top income tax rate to be 39.6 percent like it was before the Bush tax cuts. And that’s just for starters. Perhaps the Buffet Rule would  then raise the capital gains rate to that level. This comes after three years of the President claiming he only wanted to raise the capital gains rate to 20 percent.

So kind of surtax on high earners is not a new idea. Then Speaker of the House Nancy Pelosi wanted one to pay for Obamacare. It went nowhere then when Democrats controlled both houses of Congress so it has no chance of passing now. The President proposes to further tax the rich not because he wants his class warfare policies to become law, but so he has a talking point for his re-election campaign.

Should the President’s misguided Buffett Rule become law who would lose more?  Millionaires or the economy? The so-called coddled rich, or America’s workers? The cost of capital would rise considerably. This would make it harder to businesses to expand and add new workers. It would also hamper entrepreneurs looking to get their ideas off the ground. And even if President Obama and Warren Buffet can “afford to pay a little more” it’s not like this money is just lying around idly in mattresses – it’s already at work invested in some way in the economy, whether it’s cash in the banking system which keeps the nation’s finances moving, or invested in businesses which create jobs.  Pulling money out and putting it into government spending will not help the economy. Ultimately the Buffett Rule would result in fewer jobs for American workers and lower wages for those employed. The punitive effect the rule would have on American workers is hard to reconcile with the President’s supposed new focus on job creation.

Curtis Dubay

 
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