As NewsBusters reported yesterday, Warren Buffett has spent years campaigning with the liberal media to raise taxes on the rich. Buffett has found an ally in President Obama to implement the "Buffett rule," a complicated and misinformed proposal that would raise taxes even more on the wealthy. As explained by the Tax Foundation:
During his Rose Garden speech [Monday], President Obama once again fueled the general misperception that people who pay the 15 percent tax rate on their capital gains and dividend income are paying a lower rate than salaried workers who pay at the individual rate (which ranges from 10 percent to 35 percent).
The reality is that capital gains and dividends are taxed at a lower rate at the individual level because this income has already been taxed at 35 percent at the corporate level before it was distributed to shareholders. Both Mr. Obama and his tax advisor Warren Buffett seem unaware that the U.S. has the 4th highest overall tax rate on dividend income among the largest industrialized countries in the OECD at 52.1 percent. Only Denmark (56.5 percent), France (57.8 percent) and the United Kingdom (54 percent) tax dividends at a higher rate.
What are your thoughts on the matter? Let us know in the comments.
Using the anecdote that Buffett pays less in taxes than his receptionist, Buffett and Obama have created an inaccurate campaign to increase taxes on the wealthy. From the NewsBusters post yesterday:
But even the AP has pointed out, the idea that secretaries pay more in taxes than their bosses is inaccurate. A review of IRS 2009 tax tables (Link to Excel spreadsheet) shows that those making under $100,000/year pay an average of no more than 12.3% of their income in taxes, while those making above $500,000 pay an average of no less than 26.3% of their income in taxes. However, this fact hasn't stopped the liberal media from happily advancing Buffett's call to soak his fellow rich.
The Tax Foundation has also been working to combat the misinformation being spread by President Obama and Buffett on the level of taxes paid by the rich and how effective the Buffett rule would even be. As the Tax Foundation explains the Buffett rule:
Nobody is quite sure what it is or how it will work, but most indications are that it would be a bit like the alternative minimum tax used to be when it was first enacted back in 1970. The AMT's original goal was to solve the same problem that Warren Buffett now wants to solve - that high income taxpayers pay low effective rates, as a result of various deductions, preferential rates on various types of income, etc. The AMT used to be fairly simple, and was originally known only as the "Minimum Tax" - all you had to do was take your entire income (from all sources) and multiply it by a certain minimum rate; you had to pay at least that amount, regardless of any other deductions or credits or preferential rates on this or that.
Now, of course, the AMT has grown from that basic idea into an entire alternate tax system with its own set of rules, deductions, and exemptions, and many taxpayers need to calculate their tax liability using two completely different but equally complex methods and pay whichever is higher. On top of this, Obama wants to add the "Buffett rule" - essentially a third way of calculating one's tax, structured the way the AMT used to be before it morphed into the behemoth of complexity that it is today.
The complexity of the rule is one matter, but even then, the tax revenue generated from the proposed tax hike wouldn't even be significant in paying off the debt. Again, from the Tax Foundation:
[T]aking half of the yearly income from every person making between one and ten million dollars would only decrease the nation's debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation's deficit by 12 percent and the debt by 2 percent. There's simply not enough wealth in the community of the rich to erase this country's problems by waving some magic tax wand.
Do you think the Buffett rule will be implemented?