Three days before federal income taxes were due, President
Barack Obama declared that tax increases can grow the economy.
“Now, this is not just about fairness. This is also about growth,”
Obama said in his
weekly radio address. “It’s about being able to make the
investments we need to strengthen our economy and create jobs.”
In other words, if taxpayers — and potential job creators —
pay more taxes we can afford more Solyndras. Such boondoggles will
create jobs, at least until they go belly up and lay everyone off.
There is a word for an economic strategy of taxing some
millionaires to give government loans to other millionaires. It can
be found in the title of a new book by Grover Norquist and John
Lott:
Debacle.
Naturally, the president vowed to raise only a small number of
very wealthy people’s taxes. His current gimmick is the “Buffett
Rule,” which assumes that super-rich Warren Buffett pays a lower
effective tax rate than his secretary and that this is normal under
the current tax code.
It might be more accurately described as the “Buffet Rule,” as
it advertises all the entitlements the middle class can eat at low
tax rates. Think of the Golden Corral commerical where a family
seeks steak, endless fried shrimp, and a vast salad bar and then
stipulates a low $10 price. Only one restaraunt remains a viable
choice as its higher-priced competitors are pushed offscreen.
Obama wants voters to believe he can offer universal health
insurance coverage, fully funded Medicare and Social Security, and
an all-you-can-eat salad bar of green jobs at a 10 percent
middle-class tax rate. Mitt Romney can’t offer that bargain. The
difference is that Golden Corral isn’t keeping its prices low by
adding a surcharge to bills of families dining at Morton’s.
More importantly, buffets can actually offer cheap salad and
fried shrimp. Obama’s tax increase won’t pay for all the government
he promises. According to the Joint Committee on Taxation, the
Buffett Rule would raise only $47 billion in ten years. The tax
hike could fund about seven days of federal spending.
Smarter liberal wonks have
pointed out that this baseline assumes the expiration of the
Bush tax cuts. Keep the current tax rates and the Buffett minimum
tax will raise somewhat more money. Return to the Clinton-era tax
rates, Brian Beutler writes, and the “$47 billion would come on top
of a flood of new revenue that would swiftly fill the country’s
budget hole.” That flood is a $4 trillion tax increase that also
soaks the middle class. Turn off the middle-class spigots by
letting only the tax cuts for the wealthy expire and the Buffett
flood starts to slow to a trickle.
Now it may be that once safely reelected, Obama will let all of
the Bush tax cuts lapse and then blame congressional Republicans
for not sending him a bill that preserved them only for the middle
class out of their slavish loyalty to the rich. Some observers
think he’ll
do just that. Taken at face value, the president’s fiscal
policy makes little sense.
The president wants the country to believe he can protect
middle-class entitlements, along with other domestic spending
priorities, without raising middle-class taxes. However much the
wealthy exploit tax loopholes, the numbers suggest otherwise.
In his book about the Reagan economic recovery, The Seven
Fat Years, the late Wall Street Journal editor Robert
Bartley tells a story of how the country came to adopt the
alternative minimum tax. In early 1969, Treasury Secretary Joseph
Barr (an LBJ appointee) told Congress that 21 millionaires had paid
no federal income taxes two years before as did 115 other tax
filers reporting income in excess of $200,000.
To pursue those Bartley called “Joe Barr’s millionaires,”
Congress concocted various minimum tax schemes. Eventually, the
alternative minimum tax ensnared millions of taxpayers, not just 21
rich scofflaws. According to one estimate, 27 percent of those who
paid the AMT in 2008 earned less than $200,000 a year. It takes
direct congressional intervention to prevent the tax from hitting
20 million more taxpayers, mostly residing in blue state
suburbs.
Think the Buffett Rule will turn out differently?
As you wave goodbye to your 2011 tax dollars, consider: Obama is
campaigning on the idea that only Paul Ryan’s budget plan requires
middle-class sacrifice. If the voters knew the benefits he pledges
to protect will be paid for by their own tax dollars going to
Washington, some of them would surely opt to cut out the middle
man.
