When Tax Policy Meets Reelection Campaignon January 28th, 2012 at 11:31 AM
I was reading this article in the Wall Street Journal, and I can’t resist putting in my 2 cents, so here we go.
Reading through this opinion article, you start to ask yourself a few questions. It doesn’t take long (the first paragraph) for most people to start raising their eye brows. Here is how to sum it up: The Buffett rule is not about reducing the deficit or having the top 1% of earners pay their fair share; it’s about buying votes using other people’s money.
I really do love the opening paragraph, because it exemplifies the problems with our President. A government taxes something for two reasons: to raise money or to create a negative incentive to purchase a product (i.e. sin taxes on cigarettes and alcohol). However, our President knows so much more about Economics that he decided to add a third: reelection.
The President was told, in a 2008 interview on ABC News, that lowering the capital gains tax actually increased tax revenue. Now, it’s easy to see why this happened; more people invested! What a great thing for our economy! But what did our Campaigner in Chief think? Obama’s reply was, “I would look at raising the capital gains tax for purposes of fairness.” And now that it’s time to be reelected, he is trying to do just that.
Well, let’s look at fairness for a moment. What is fair about taxes? Well, most people would argue not much, but we can draw a few conclusions. There are really only two ways to judge fairness in taxes: rate and amount. Either everyone pays the same amount (not very fair because people make different amounts), or everyone pays a similar tax rate.
The Buffett rule seeks to “correct” the latter by increasing the tax rate on people making over $1 million to 30%. Well, Mr. President, the Congressional Budget Office says that people making over $1 million already pay 29.5% on total federal taxes. This has never been about getting the rich to pay their fair share. Fair share would not have the top 1% of earners paying more than the bottom 80%. Nice try, Obama.
The main argument here should be for reduced taxes on all income brackets. Now, as we discussed earlier, taxes always create is negative incentive to do something. Therefore, reducing taxes on something (like investment) increases how much of that activity you will see. Increase the capital gains tax, and see less investment. Increase the taxes on being successful, and well, same situation. Why would I work really hard to make money so Mr. Obama can take it away and give it to someone who didn’t work hard? If we lower taxes on people earning an income, logic would conclude that we’d get more people with income. Now that is such a simplified statement that we know it doesn’t actually work out, but just think about it. If we tax income, we get less income.
So the Buffett rule will reduce government tax revenues, adding to the deficit. It will drive the tax rate far above the 30% that Mr. Obama is saying in public, due to economic factors that he neither understands, nor controls. How is this fair to the American people? He wants to add to our debt, tax people already paying the majority of tax receipts, all in order to win HIMSELF reelection. The Buffett rule is not for us, ladies and gentlemen. It’s for Obama.
*Picture taken from the Wall Street Journal