The so-called “Buffett Rule” was proposed by President Obama after billionaire Warren Buffett noted that he paid a lower tax rate than his secretary. And it turns out many wealthy people pay lower tax rates than the middle class working people. It stems from a tax loophole big enough to drive a truck through. And it was made even clearer when it was revealed that multi-millionaire Mitt Romney, who will be the Republican candidate for President in the fall, paid a tax rate of only 13.9 percent.
Yet while the House of Representatives just passed a large tax break for businesses, they defeated the proposal to try and fix the inequity of tax rates, calling it a political gimmick.
Just to make things clear, tax rates for the average American in 2011 looked like this for a couple who are married filing a joint return: If you make up to $17,000, you pay 10 percent. From $17,000 to $69,000, you pay 15 percent. From $69,000 to $139,350, you pay 25 percent. From $139,350 to $212,300, the rate was 28 percent. From $212,300 to $379,150, you would pay 33 percent. And over $379,150 it’s 35 percent.
So how is it that someone who makes over $20 million, as Mitt Romney did last year, pays a lower rate than a couple who make, say, $45,000 each? It’s because under President Bush, the rate for long-term capital gains, and qualified dividends (most dividends are “qualified” and therefore fit this category), are taxed at a top rate of 15 percent. So if you are wealthy, and don’t work a regular job, but instead live off the money you make on your investments, the top rate you will pay is 15 percent.
Additionally, if your job is investments, such as hedge fund managers that make millions investing other people’s money, you still only get taxed at the 15 percent rate, because your income comes from capital gains.
Does that seem fair to you? It doesn’t to me, especially in a time of large deficits, when the Federal government is trying to keep afloat financially. Yet this simple proposal, that a millionaire should pay a minimum tax of 30 percent (still lower than the top tax rate), has been lambasted and shot down by the opposition as “class warfare” and an “election year gimmick.”
Those opposing the Buffett Rule say that the amount of money raised by this change would be so miniscule that it wouldn’t have much affect on the Federal deficit. And they are right. According to the Tax Foundation, it would result in $36.7 billion per year in additional tax revenue. Not enough to make a significant dent in a budget that is over $1 trillion. But I don’t believe that should matter. It’s an issue of fairness. I don’t want to live in a country where Mitt Romney, who is making $20 million a year, is paying a lower tax rate than I am. I want it to be fair.
The second thing those opposed to the Buffett Rule are claiming is that it will kill investment and job creation. In fact, their mantra has been to call this, among other tax initiatives, “job killers.”
Yet the evidence is clear, concise, and obvious that that’s not the case. All the evidence is right in front of anyone that wants to look. All through our history, higher tax rates on investments have not changed the amount of investments. In the recent past, during President Clinton’s terms, the rate was 28 percent, and the economy boomed. There was no decrease in people investing.
President Reagan, with the Tax Reform Act of 1986, actually passed the law that set the capital gains tax rate at the same level as the top income tax rate, which was then 28 percent. All those who now worship at the altar of Ronald Reagan should take a good look at that. The capital gains rate was 28 percent, and the economy boomed.
And the same goes for jobs. If you look at historical data, especially in recent times during the Reagan and Clinton years, we experienced higher job growth than we did during the Bush years of lower capital gains tax rates. Jobs are created because of an increase in demand for the products and services that a company produces. If the lower and middle class had more income, they would spend more, demand for products and services would go up, and companies would add more jobs. Lowering taxes on the wealthy doesn’t affect job creation in the same way, because the wealthy are already spending a lot, and putting more money in their pockets doesn’t lead to much of an increase in their spending, if any at all.
Similarly, when a company gets a tax break, they don’t say to themselves, “I’ll hire more people.” They hire more workers when demand goes up, and they need more people to supply the product or service they are marketing.
If these politicians in opposition to the Buffett Rule really believe the rhetoric they continue to spew, about lower rates leading to job creation and investment, they are ignorant of history and what the facts clearly indicate. If they are saying these things due to the campaign contributions of wealthy individuals that require them to vote this way, they are morally bankrupt. And if they are simply following the lead of their Party leaders, they have become puppets and are not worthy of a leadership position in our nation.
For our country to be great again, we need everyone to feel that there is some semblance of fairness in what we are required to contribute to the government in the form of taxes. Right now, I don’t feel that way, and neither do the vast majority of Americans. It’s time for Congress to start thinking about the future of the country rather than the greed of the powerful campaign contributors. Let’s pass the Buffett Rule, or something similar, that will make us all feel a little better about paying taxes.