One of my biggest frustrations in working with Congress is watching them spend hours and hours focusing on legislation that either will never pass or will never solve a problem if it does. This is an all too familiar process of going through the motions, only made worse by election year politics.
Today’s latest campaign ploy disguised as governance is the push by the White House for enactment of the “Buffett Rule,” a law designed to ensure that households earning more than $1 million a year pay a minimum effective tax rate of 30%. The Senate has a vote scheduled on the Buffett Rule for April 16th, when both the House and Senate get back to DC for a short April session.
One of the best one-liners the President has had lately has been about the Buffett Rule and those of us who call it class warfare. His response? “It’s not class warfare. It’s math.”
While the President may not think it’s class warfare, it’s not really math either. It’s a gimmick. That’s all it has ever been. It won’t reduce the deficit in a meaningful way, it plays on people’s emotions and it helps the President contrast himself with Mitt Romney. It’s not good policy. It’s just a cheap ploy.
The basic point of the Buffett Rule ignores the truth about the tax code and how the richest 1% make their money. Most folks who have an income of more than a million bucks a year aren’t having that money paid to them in wages or a salary. It’s in the form of investment income, which is taxed at the 15% capital gains rate. That rate is a flat rate for everybody – millionaires, billionaires, the guy down the street with 50 shares of McDonald’s stock. You sell it or you make a return off it and you pay the gains rate.
That’s fair – everyone pays the same rate on the profits they make in the stock market.
The rich who have larger wages already pay more than the middle class – the top tax bracket is already 35%, compared with 25-28% for those in the middle class. The bottom line is simple: the rich will always pay more in actual dollars than the middle class does.
But putting all of that aside, let’s ask a more fundamental question. What is the point of taxation?
Taxation is the primary means of funding government. Government requires funding so it can provide services that traditionally have been the responsibility of the public – police, emergency services, national defense, and many others. Slowly, over the last hundred years, the purpose of taxation has changed, especially in the minds of Democrats.
Today, it’s as much about social engineering as it is funding the government. It’s apparently more important to confiscate wealth from the wealthy and try to reduce income inequality than it is to actually fund the government. That’s the whole point of the President’s goal of trying to “spread the wealth around” as he said to Joe the Plumber during the campaign.
That’s not why we have traditionally taxed and that’s not why we should be taxing. While some of this has gone on for so long it’s become accepted – like the mortgage interest deduction – we should be very careful trying to regulate behavior through the tax code. The line has to be drawn somewhere and the Buffett Rule is clearly over the line. It is simply not legitimate taxation designed to raise revenue for the government. It’s just social engineering and a convenient talking point the Democrats will use to play into their “Romney isn’t one of us” theme.
If the Buffett Rule were legitimate, it would have a bigger impact than it actually does. Even if enacted, the Buffett Rule will hardly make a dent in reducing the federal deficit – it would represent taxation to cover barely 1% of current spending. When it comes to solving the debt crisis itself, the revenue it does raise would have about the same impact as throwing a penny into the Grand Canyon.
If Democrats want to raise taxes to balance the budget, that’s a legitimate position to advocate and they should try selling it to the American people. But if they really want to raise taxes to reduce the debt and balance the budget, it’s going to take tax increases on everyone, from the poorest to the richest, to do that. Heaping taxes on the rich alone won’t solve it. But let’s be honest – that’s never been what this debate is about.
This is more politics than policy and it always has been. The Buffett Rule is just another cheap trick to paint Republicans as catering to the rich when the reality is we simply want every American to pay less in taxes and for the federal government to spend less, do less and get back to core government functions.
The Buffett Rule is an election year gimmick. I’m tired of governance by gimmick.
November can’t come fast enough.