What would Obama’s Buffett Rule tax really accomplish?

snipe 2012/04/11 15:35:45
Obama's "Buffet rule" is just another of his distractions. But, then, that's all it's ever been about. Obama can't run on his record, so his Campaign is one of distractions and outright lies.

Would the Buffett Rule tax raise much money? No, it wouldn’t. According to Congress’ official tax analysts, a Democrat bill designed to enact the tax would generate just $31 billion over the next 11 years. And that’s assuming crafty tax lawyers can’t figure out some new ways to hide that income, meaning less tax revenue. Of course, a simple way of doing this is to simply not realize capital gains. As e21 points out:

The higher the tax rate, the more powerful the incentive to avoid realizations. A “Buffet rule” or similar device to increase the capital gains tax rate on the top 1% would lead to economically damaging “lock-in effect,” where capital is not allocated to its most efficient use because of the tax disincentive to liquidate an existing investment. (A related issue is the elaborate tax-planning schemes where some investors use derivatives to replicate a sale without triggering tax liability.)

Would the Buffett Rule tax really make the tax system more progressive? Not so much. According to the Tax Policy Center, “middle-income households, on average, will pay 2015 taxes totaling about 15% of their income (using the legislation’s definition). Without the Buffett rule, more than 99 percent of millionaires will pay more than that and only about 4,000 will pay less. Barely 10 percent of them will pay less than 20 percent.” As it is, the total average effective tax rate—including payroll taxes—for the top 1 percent is already 30 percent vs. just 12.6 percent for the middle 20 percent. In fact, the top 0.1% pay 32.1% vs. 0.8% for the bottom 20%.

Also, taxpayers who only pay the 15% capital gains/dividend tax aren’t really just paying a 15% rate. That income is actually double taxed, first at the corporate level and then at the individual level. Indeed, a new report from Ernst & Young found that the current top U.S. integrated dividend tax rate is 50.8 percentwhich will rise to 68.6 percent in 2013—while the 50.8 percent integrated capital gains tax rate will rise to 56.7 percent in 2013. So the whole premise of the Buffett Rule — that some group of superwealthy Americans are paying some minimal tax rate — is false.

Would the Buffett Tax rule make the economy stronger? No, it wouldn’t. The Buffett Rule tax would move the tax code further away from the necessary goal of eliminating its bias against investment and toward consumption. Economic simulations have repeatedly indicated that replacing the income tax system with a consumption tax would boost economic growth. Even without the Buffett Rule, the expiration of the Bush tax cuts and new taxes under Obamacare would raise taxes on capital gains to 24% and dividends to 45%, triple today’s rate. Of course, just last year, the Obama administration noted in its budget that the lower dividend rate “reduces the tax bias against equity investment and promotes a more efficient allocation of capital.”


Obama’s solution to health care costs? Raising taxes on tanning salons and medical device manufacturers.

Obama’s solution to high gas prices? Raising taxes on oil companies.

Obama’s solution to a struggling economy? Raising taxes on investors through the “Buffett Rule.”

Notice a pattern here?

Of course, even if the “Buffett Rule” were enacted, the amount of revenue to the government is miniscule compared to both the annual deficit and our accumulated debt.

Savings from instituting the “Buffett Rule” in one year, according to the Joint Committee on Taxation: $5.1 billion.

By 2022, the committee estimates the Buffett Rule could be generating an additional $7 billion in revenue.

Savings from cutting federal spending from its fiscal 2011 level by one percent: $33.6 billion.

In other words, asking every federal agency and department to get by with 99 percent of what it received last year would generate six times the savings of the Buffett Rule.


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  • alanh 2012/04/11 17:06:18
    Idiot liberals will believe it will punish the rich, which will make them very happy to vote for Obutthead! Totally a campaign ploy to get votes.

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  • Rodney 2012/04/13 03:06:34
    The math would suggest about 4.7 billion a year, but in reality, it would likely produce nothing positive. The very wealthy will simply shift their money to where they don't have to pay. I'm sure Warren will do that as well. Course, if Barry could just get Buffett to pay what his company owes About $1 billion) and see to it that his other cronies pay up, or how about his own aides who owe over 800k?
  • Dee 2012/04/12 16:32:21
    The amount of money the class warfare tax errrr.... I mean the Buffett Rule.....will bring in is a drop in the bucket compared to our debt.
  • goblue1968 2012/04/12 16:07:52
    Any smart person knows that the Buffet Rule wouldn't make any substantial difference, and it's only another one of those liberal "feel good" issues. But who's stopping all these rich people who want to pay more tax from sending their money in? By all means, do it! Obama will waste your money just as fast as he wastes everybody else's money!
  • Flowers 2012/04/12 15:13:57
    I say we elect a Fair tax and be done with it. No more exclusions, no more loopholes.
  • Ken Flowers 2012/04/13 05:48:08
    But what is a "fair tax"? Is it the same percentage of income for everyone? And if a flat tax is your idea of fair, the next question will be: what is income? For "wage slaves", defining income is easy it is their paycheck. But the middle class, traditionally merchants and the trades, and the upper class, traditionally nobility, income is a much more elusive concept ... because you need to spend money to make money....and is that dinner I bought for a friend who referred a client an expense or a luxury? What about the drinks I bought for a tenant so she will renew the lease? Certainly the tax code can't evaluate whether she was attractive or not.

    But I completely agree our goal should be to establish a fair tax and remove social policy from the tax code, i.e., all income, capital gains, dividends, oil and gas revenues are taxed the same....all deductions are treated the same...either they are expenses required to create income or they are not deductions. Perhaps you could protect the mortgage interest deduction on the first home with such logic ... after all you need a place to sleep and shower if you want to earn a decent income .... but justifying the deduction on the second home would be difficult. .. and so on.
  • Flowers Ken 2012/04/13 14:05:15
    i think there is a difference between flat and fair. I used to say flat, and people would correct me and say 'fair tax is better option'. i think the main thing is eliminating all the loopholes and corrupt tax laws that are created by the corrupt to help the corrupt. a fair tax would eliminate that, everyone pays the same amount or you don't buy products.
  • Ken Flowers 2012/04/13 14:23:45
    You are using terms like "fair" and "corrupt" which lack precise definitions. I have questioned what you meant by "fair" and your answer told me one thing it was not. Now let me ask you about the term "corrupt".

    Obviously corrupt politicians and the associated laws should be eliminated....but who is corrupt and what is corruption?

    Think about this situation.....I request a service from an person responsible for providing that service. If I am happy with the service, I recognize that person's effort on my behalf by giving them a token gift which is 10 to 20% of the cost for that service. Is that gift a bribe? Is the person accepting that gift corrupt?
  • Flowers Ken 2012/04/13 14:31:25 (edited)
    I gave you what I have limited knowledge on. I know that the current tax system allows for 30 of the Fortune 500 companies from paying ANY taxes, yet they received Millions (might be billions) in Tax incentives. They don't PAY anything, yet they receive money back... THAT IS CORRUPT.
    To answer your post... if that person is not a public figure, and you are not in a business that could potentially benefit financially from that public figure and their influence then I don't consider it a bribe. Maybe I'm not understanding your question Ken. Bribery, is an act of implying money or gift giving that alters the behavior of the recipient.

    If you are happy with the service, why would that ever be considered a bribe? and how does that relate to fair tax?
  • Ken Flowers 2012/04/13 15:07:23
    Suppose I was happy with the service provided when I was issued a drilling permit on public land and the person I gave the token gift was a politician? Was the politician corrupt?
  • Flowers Ken 2012/04/13 15:11:00
    you both would be corrupt in that situation. You could give him a hand shake, show your appreciation. In that case, giving a gift is inappropriate regardless of whether it actually effected the permit or not.
  • Ken Flowers 2012/04/13 15:12:33
    So when I tip a waittress, the waittress and I are both corrupt? How is tipping a waitress different from tipping a public servant?
  • Flowers Ken 2012/04/13 15:17:46
    Because it's a public servant!! With a waitress, you are PAYING for food, or drinks and expect to be treated a certain way. If you are satisfied, then you show the waiter/waitress your approval thru monetary appreciation. ALSO, their paychecks depends on their service in order to 'force' the waiter/waitress into being nice/fast/efficient.
    With a public servant, you NEED a service and they are connecting you (in the form of a permit) and that is their job. Their job doesn't rely on you being satisfied, nor should it depend on whether you should or shouldn't get it. If the permit shouldn't be given, no amount of 'bribes' should achieve the goal. THAT to me is why tipping a public servant is wrong, in this country. What happens outside of this country I really have no effective knowledge on. Sorry.
  • Ken Flowers 2012/04/13 15:11:04
    The point I am making is no one argues with a "fair tax" or with eliminating "corruption". Unfortunately, we may not perceive a particular deduction, e.g., mortgage interest, as unfair to renters, or a specific activity, e.g., tipping a public official, as corrupt.

    Certainly the norm in the US is tipping a waittress is okay and tipping a public official is not but this is not the norm in Nigeria where customs officials, etc., expect to be tipped for good service like waittresses.
  • Flowers Ken 2012/04/13 15:12:55
    but are the Nigeria customs officials ALLOWING certain things to go through that they wouldn't normally, because of the tip? Are they preventing other things from going through if you don't tip? THAT would indicate corruption.
  • Ken Flowers 2012/04/13 15:29:20
    I understand why tipping a public official is problematic but then so is tipping a waittress...just so she won't spit in your food the next time you order.

    I am suggesting you need to think much harder about what is "unfair" and what is "corrupt" because everyone is for fairness and against corruption .... but not everyone agress with your definition of fair and corrupt.
  • Flowers Ken 2012/04/13 16:12:57
    We had two different comments going back and forth. Do the Nigerian officials prevent items if you don't tip?
  • Ken Flowers 2012/04/13 21:53:20
    Does the waiters and waitresses spit in your food if you are a poor tipper? Do you really want to find out?

    Same goes for the Nigerian customs official.....you may have time to figure out but then you aren't doing business in Nigeria.

    I eat at least half my dinners out and so I can't afford not to bribe my waiters and waittresses.
  • Howler Flowers 2012/04/13 22:24:58 (edited)
    I can't respond to this guy, so I'll respond to you.

    How would one ever KNOW whether or not one's food was "spit in" even if one does tip a waiter or waitress?

    What a foolish analogy from that guy IMO. Actually, it gives one cause to wonder what he would do if he was, or is, a waiter.
  • Flowers Howler 2012/04/14 03:29:12
    Honestly, I still don't see the correlation between waitresses and corruption in govt
  • Howler Flowers 2012/04/14 03:40:53 (edited)
    Neither do I...And even if that guy does, it is still a very bad analogy IMO.
  • Lady Whitewolf 2012/04/12 09:32:04
    Lady Whitewolf
    Nothing, because the richie-riches will shoot it down.
  • snipe Lady Wh... 2012/04/12 14:53:40
    I'd say the whole of Congress would shoot it down including most of the Democrats because obama's just selling envy and they all know it. I mean, look at what they did to his last two budgets. His first one was shot down by a 97-0 vote and his second by a 414-0 vote, that tells me that they know what a moron he is.

    If obama's buddy Buffett is so hot to pay more in taxes why is the IRS forced to sue him for $1 billion in unpaid taxes. And how about obama's other buddy Jeff Immelt who runs GE? GE’s success at avoiding taxes is nothing short of extraordinary. GE earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore. In fact, GE got a $3.2 billion tax benefit. obama hasn't said a word about GE paying their fair share, now has he? Of course not cause they're a big Donor to his Campaign.
  • Lady Wh... snipe 2012/04/12 16:32:31
    Lady Whitewolf
    "I'd say the whole of Congress would shoot it down including most of the REPUBLICANS..."
  • snipe Lady Wh... 2012/04/12 19:54:58 (edited)
    That's it? All you Libs want to do is spend, spend and then spend some more. How many times have you filed bankruptcy in your adult life? Let me guess, three? Am I close?
  • Ken snipe 2012/04/13 05:37:36
    Sorry snipe but the facts don't support you...during my lifetime the Republicans (I don't want to call them conservatives) have outspent and out borrowed the Democrats.
  • snipe Ken 2012/04/13 14:55:18
    That is a fact and look where we're at because neither party has the balls to rein in their spending. But, you would have to admit that the obama Administration has taken spending to a whole new level. And that my staement above was directed at the current administration. obama runs from one fire he's created to the next, trying to put them out with $100.00 bills (and lots of them)!
  • AL 2012/04/12 07:39:39
    This is almost as dumb as cutting off both your legs just to collect disability!
  • Soundstorm 2012/04/12 06:08:36
    The Progressive Democrats effectively reinstituted slavery with the passage of the Sixteenth amendment and the creation of the I.R.S.
  • Navajogirl 2012/04/12 03:01:38
    He wants to use that rule to attack Romney.
  • snipe Navajogirl 2012/04/12 03:02:26
    You bet!
  • KoAm 2012/04/12 02:22:17
    Like you said so well, it's only a distraction.

    It's an election-year bluff, designed only to give the appearance of actually doing something for the economy.

    It will not raise much money at all, nor will it improve the lives of working-class Americans.

    It's tired old liberal class warfare. They're very good at whipping up class envy and division. It's pathetic.
  • texasred 2012/04/12 00:52:25
    The beginning of Socialism.
  • JT For Political Reform 2012/04/12 00:01:14
    JT For Political Reform
    The only way to pay down debt is to curb spending, something the liberals know nothing about. You could tax the rich every penny they have and still wouldn't get us out of debt. STOP SPENDING. We ever ran a household or a business the way this country is run you would be homeless and out of business.
  • mich52 2012/04/11 23:12:56
  • Space Invader 2012/04/11 22:00:20
    Space Invader
    filling the coffers of the Obama Nation...
  • dallas 2012/04/11 21:29:47
  • snipe dallas 2012/04/12 00:40:59 (edited)
    That 7 billion you reference won't be generated til 2022. This fiscal year the Buffet tax would generate 5.1 billion for the entire fiscal 2012 year. Right now our debt goes up 3.6 billion a day, that's per day, not year. Savings from cutting federal spending from its fiscal 2011 level by one percent would generate $33.6 billion. And that would be for fiscal 2012. The point is: if you want to tax 'em go ahead I couldn't care less, but taxing the likes of Buffett and his friends won't make a dent in the debt, but cutting spending will. And besides, Buffett and his buds will find a way around any tax you Socialists can dream up.
  • dallas snipe 2012/04/12 05:10:14
  • snipe dallas 2012/04/12 15:12:50
    The 7 billion you keep talking about won't even be generated for 10 years, the amount is 5 billion NOW. And yes 7 billion is "pennies" when our Natl debt is $15.5 Trillion. By 2022, at the rate obama is spending, our debt will probably be 5x's the 3.6 billion per day it is now. Get over your obama mania and check it out for yourself.
  • dallas snipe 2012/04/12 22:44:15 (edited)

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