New York Times tax reporter David Kocieniewski took advantage of Mitt Romney's admission (blared as Wednesday's lead story, under six bylines) that his personal tax rate is around 15% to fight decades-old tax-cut battles in Wednesday’s "Since 1980s, The Kindest Of Tax Cuts For the Rich." Naturally, he brought up liberals' favorite billionaire investor Warren Buffett, who made waves with an op-ed in the Times calling for higher taxes on "the rich."
It’s not Buffett's first appearance in one of Kocieniewski’s slanted "tax the rich" stories. Kocieniewski also took time to refute the head of the "conservative Tax Foundation" on eliminating the capital gains tax.
The effective federal income tax rate paid by the wealthiest Americans has dropped significantly during the last several decades, largely because of tax cuts on investment income.
The last major overhaul of the tax code, signed by President Ronald Reagan in 1986, set tax rates on capital gains at the same level as the rates on ordinary income like salaries and wages, with both topping out at 28 percent. But that link was uncoupled by his successor, President George Bush, and the rates on capital gains were reduced by President Bill Clinton. President George W. Bush then lowered the rates on capital gains and dividends to a high of 15 percent -- less than half the 35 percent top rate on ordinary income.
While rates for all American taxpayers have fallen to near 50-year lows, the wealthy have reaped the most savings from the changes because they derive a larger proportion of their income from investments.
Between 1985 and 2008, the wealthiest 400 Americans saw the percentage of their income paid in federal income taxes drop from 29 percent to 18 percent, according to data from the Internal Revenue Service.
Some economists say the cuts are necessary to keep capital from fleeing the United States to lower-tax countries. Scott A. Hodge, president of the conservative Tax Foundation, has written extensively that a capital gains tax is effectively double taxation on profits that have already been taxed at the corporate level. Many investors, and political leaders in both parties, have lobbied for tax cuts on capital gains and dividends by arguing that they spur investment and, therefore, job creation.
But there is little data to support that contention: the nonpartisan Congressional Research Service issued a report last year concluding that tax cuts on capital gains reduce federal revenues and do little to stimulate economic growth. And as income inequality and tax fairness have become major concerns for many Americans, the issue of tax fairness has brought calls to alter the tax code’s preferential treatment of investment income.
One outspoken critic has been Warren E. Buffett, a billionaire himself. Mr. Buffett stirred debate about the issue last year when he wrote an opinion article for The New York Times stating that the low rates for investment income had allowed him to pay only about 17 percent of his income in federal taxes, less than the effective rate paid by his secretary or any of the other 19 workers in his office.
On August 16, 2011, Kocieniewski dubiously claimed that Buffett's proposed tax hikes would raise revenues and falsely claimed that taxes were at a historic low.
A September 18, 2010 story defended Obama's failed push to rescind the Bush tax cuts, arguing the tax hikes would not hurt small business.