Warren Buffett is back in the national news. With talks on the “fiscal cliff” heating up, Buffett is once again pushing for a “millionaires” tax (also known as the “Buffett Rule”) as bridge between some sort of comprehensive tax reform plan:
In an op-ed column in Monday’s New York Times, Buffett advocates that taxable income of between $1 million and $10 million should be taxed at a minimum 30% rate, and that income above $10 million should be taxed at 35%.
“A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours,” Buffett writes. “Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.”
Some have suggested comprehensive tax reform, which eliminates many deductions across the board and simplifies the tax code, would be the best policy for the economy. Buffett writes he supports such tax reform, but that he believes higher tax rates on the wealthy should be an interim step.
“The reform of such complexities should not promote delay in our correcting simple and expensive inequities,” he wrote in the Times. “We can’t let those who want to protect the privileged get away with insisting that we do nothing until we can do everything.”
Pretty sure we’ve been over this idea before. It was first touted as a revenue generating scheme (more on that in a minute) and then later as a matter of “fairness.” However, the Buffett Rule is bad tax policy, dishonest in its nature, and irrelevent in terms of revenue.
As a matter of tax policy, the Joint Committee on Taxation (JCT) looked at the Buffett Rule earlier this year, finding it to be pointless. In its report on the JCT study, the Wall Street Journal explained that “many millionaires would find ways to avoid the new rule, mostly by cutting back on stock sales and other transactions that produce capital gains.”
The argument is also dishonest since Buffett and people like him don’t pay taxes on wages like his secretary, who is frequently used as an example for the need for the rule. Buffett earns his money off capital gains, which are doubled-taxed, once on at the corporate level and then again through the capital gain tax. Additionally, the 400 people that the tax would hit already shoulder 39% of the total tax burden. They’re already paying their “fair share,” folks.
And lastly, the Buffett Rule would bring in a relatively small amount of revenue, covering about a half a day’s worth of federal spending. This was the argument used by Senate Democrats until they realized that the revenue argument was, well, a pretty poor excuse to justify the Buffett Rule.
If Warren Buffett feels like he isn’t paying enough in taxes, he could just head to pay.gov and make a donation to the federal government to ease his conscience.