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A Further Perspective
Buffetted by Obama’s America
If you want to be a winner it’s going to cost you — and everyone else.
It looks as though Barack Obama and the Democratic Party are going to make their central argument for the 2012 election that America should greatly increase the cost of capital to small and medium sized businesses that need such capital to expand and create jobs. Mitt Romney and the Republicans could hardly have asked for a better gift. I say “hardly” because it would be an even bigger gift if Obama and the Democrats decided to run on their “achievements” of the past 3+ years.
The Obama-Biden team (it’s not quite apparent yet how many Democrats in the House and Senate will fall into line) are spinning the proposal at the top of their agenda that would effectively double the capital gains tax rate for those who do the most investing (the “Buffett Rule”) as simply a matter of “tax fairness.” Unsurprisingly, the mainstream press has uncritically accepted the official Obama election team line. David Jackson of USA Today is not alone among news reporters when he characterizes the “Buffett Rule” as “a requirement that millionaires pay at least the same tax rate as middle-class Americans.” Initially, the Obama administration defined the average “middle-class American” as Warren Buffett’s secretary who, it turns out, makes a salary of $200,000 or more. In this specific instance, Warren Buffett’s claim that he paid a lower average effective rate than his secretary is likely true. But the claim that people like Buffett or Mitt Romney, who derive most of their income from capital gains (and who give a lot to charity), pay a lower average effective tax rate than do average Americans, is demonstrably false.
Under current law, long-term capital gains are taxed at 15%. The “Buffett Rule” would impose a minimum 30% federal income tax rate on all income from any source, and exclude most deductions, for people with incomes over $1,000,000. The liberal Center on Budget and Policy Priorities (which thinks that Americans are fundamentally undertaxed) puts the average effective income tax rate for the median income family of four at about 6%. This is also in line with data from the more conservative Tax Foundation, which has calculated the average effective tax rates by income bracket as of 2009 as follows:
Top 1%: 24.01%
Top 5%: 16.40%
From 5% – 10%: 11.40%
From 10% – 25%: 8.23%
From 25% – 50%: 5.58%
(Note that the average effective tax is federal income tax divided by income, and should not be confused with marginal tax rates, which is the tax paid on every additional dollar of income.)
The administration’s own official calculation in the 2012 Economic Report of the President is similar, though some have quoted it as determining the average effective tax rate for the middle quintile of Americans (those making 40 to 60 percent of the national average) at 13.3%. That, however, is grossed up to include Social Security taxes, which are supposed to be recouped by the payer during retirement. But even Mitt Romney, the Obama administration’s poster boy for the “unfairness” of the current system, paid an average income tax rate (without Social Security) of about 14% in 2010 and will pay about 15% in 2011.
The only group that really has a legitimate gripe about people like Warren Buffett and Mitt Romney paying a lower effective tax rate than they are would be the top 5% of income earners. (To qualify to be in the top 5% in 2009, your adjusted gross income had to be at least $154,600.) But if you’re in the top 5%, guess what? The Obama administration wants to raise your income taxes, too.
So the “fairness” argument at the heart of Obama’s reasoning for the need for the “Buffett Rule” is a lie. This being the case, most observers (outside of the mainstream media) will probably come to the conclusion that Obama’s campaign is therefore merely using the same old cynical populist class warfare rhetoric that we’ve come to expect from liberal Democratic politicians in an election year. That is no doubt the case for many congressional Democrats who will be toeing the Obama line, and to a certain extent true of Obama himself. But in the case of Obama, there is another layer; he actually believes that taxing the rich more is, in and of itself, a good policy objective.
Never mind that the top 1% of taxpayers (earning about 16% of national income) pay almost 40% of federal income taxes. Never mind that the top 5% of taxpayers pay about 59% of federal income taxes. Never mind that the amount of money raised by the “Buffett Rule” would be inconsequential compared to the annual budget deficit. High-income groups should pay more because they have more and it is always “fair” to tax them more as long as they have more. Obama believes what he told “Joe the Plumber” in the 2008 campaign — government needs to “spread the wealth around.”
To understand Obama’s thinking regarding “fairness” just take this line from his recent campaign swing through Florida: “the share of our national income going to the top 1% has climbed to levels we haven’t seen since the 1920s.” My issue here is not with the accuracy of the statement (I haven’t checked it out). My issue is his implication that the top 1% has not earned their income, but rather, it is “going” to them. It is “fairness” that people are given things in equal measure, but it is not “fairness” that money earned by some people should be taken and given to those who didn’t earn it. In Obama’s worldview, high-income earners don’t earn their income, it somehow just goes to them, and government should step in to even things out. He goes on to say, “The folks who have benefited from this are paying taxes at one of the lowest rates in 50 years.” So, again, rich folks didn’t actually do anything to earn their money, they just “benefited” from some cosmic alignment that threw more of the “national income” their way.
For the better part the of the last 90 years, Democrats and Republicans have found common ground in the belief that long-term capital gains should be taxed at a meaningfully lower rate than ordinary income because of the widespread recognition that encouraging people to put money at risk to expand the economy is a good thing. It creates jobs by increasing the availability capital, and lowering the price of that capital. Even past Democratic administrations, such as the Kennedy administration, pushed for lower rates on long-term capital gains. But aside from being more crassly political than most past administrations, the Obama administration is also far more driven by leftist ideology than its predecessors.
The “Buffett Rule” has nothing to do with fairness. It also has nothing to do with deficit reduction. It has everything to do with trying to “unite” the country by demonizing one small group of people, which non-coincidently includes the Republican presidential candidate. But it is more than just a cynical ploy; it is also a reminder of the Obama administration’s ideological core. So with only ambiguous and unsupportable arguments about “fairness,” just how will the Obama-Biden team answer counterattacks by the Romney campaign exposing its falsehoods and exposing the “Buffett Rule” as the jobs killer that it is? The Obama re-election team thinks it has a winning issue as, up until now, fed only by the Obama administration’s “fairness” spin, a majority of Americans have voiced support for the “Buffett Rule.” But the Obama team may get snared in the trap that it thinks it has laid for Romney. If Romney and the Republicans play offense on the issue, it will be Obama who is boxed in trying to defend why he supports stifling job creation merely for the sake of punishing Mitt Romney and a few thousand other successful capitalists.
About the Author
Brandon Crocker is the chief financial officer of a commercial real estate development and management company in San Diego.
Letter to the Editor View all comments (22) | Leave a comment
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Brian Mc| 4.18.12 @ 8:18AM
The liberal "Envy" Amendment is paying off for them in a big way since they've been able to control the indoctrination processes of our schools for so long...and have the media in their back pocket to ensure the indoctrination sticks. The only way to cut off the head of this snake is repeal of the sixteenth amendment. This would halt the class warfare arguments and force the government downsizing. If this does not come soon Tytler's prophecy will come to fruition sooner than later.
benny havens| 4.18.12 @ 9:41AM
THE TEN COMANDMENTS OF
THE PROGRESSIVE NARCISSIST
1. Lie whenever you can because the ends justify the means.
2. Separate the masses, divide them and create animosity between them.
3. Create a peasant class that is totally dependent on your handouts.
4. Cripple the military. Reduce their numbers and their ability to wage war.
5. Remove religion from the culture.
6. Circumvent the Constitution and make the Congress inept.
7. Use the media to divert attention away from all controversy.
8. Do not offer solutions, only criticize the opposition’s proposals.
9. Reward the business leaders who support you financially.
10. Don’t let a good crisis go to waste.
cvrgrl| 4.18.12 @ 11:12AM
"play offense", i like article's end...
on every issue, spin it right
back at the democrats
i am seeing it in little and big
ways and it seems to work with
lib tards at my office, hum
romney puts dog on car
roof, barak eats dog
ads repeating barak's own
duplicitious double talk, yeah
ad re "no excuses", ooh, i like it
could it be...the gop will
actually try to to win by
scoring points instead of being
defenders of the goal line...
nah, ...establishment gop and
romney never learned from the
gipper
darn, another fleeting (now gone)
belief that gop had a chance
Indy| 4.18.12 @ 8:19AM
Buffett pulls a lot of strings, I cannot stand him. I wish he would pay his tax bill and get off the TV circuit. Perhaps a "reporter" would ask him about his lobbying activities -
Previously reported was killing the Keystone Pipeline would benefit Buffett's Burlington Northern Railroad company, a lengthy post at The Blaze points out the connection between Senator Nelson and Buffett. There is more than Keystone in the piece...
"Overhauling financial regulation
Another noteworthy incident unearthed by GBTV was in Nelson’s involvement in overhauling financial regulation. Among the considerations during a tentative deal to set restrictions on trading derivatives, was a substantial provision being lobbied for by Buffett that would have buffered his company from financial blows. The WSJ adds:
The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses.
The article adds that the change “thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.”
As GBTV discovered, Nelson has also engaged in a series of votes, including in favor of TARP funds, that have benefited Buffett in some way."
Buffet plays the game well, what bothers me is how he uses his secretary (we never get to see her tax return, nor his) to drive Obama's agenda and then his has his lawyers fighting the IRS, the bum won't pay his taxes.
http://www.theblaze.com/storie.....cial-gain/
Eduardo| 4.18.12 @ 12:12PM
You nailed my sentiments, Indy. I live in Omaha about a block and a half away from Buffet's "humble" residence, which I belive Warren maintains as a prop to demonstrate his bona fides as a simple "aw, shucks" man. He really is the ultimate insider, which explains his phenomenal investment track record. Truly, unless you are gaming the system behind the scenes, you will probably lose as often as you win. And besides pulling strings in the shadows, he buys up already successful companies (Nebraska Furniture Mart, Borsheims Jewelers, etc.) that others spent their lives creating and then passes off their success as his own. Did I mention he just bought the our local newspaper (the Omaha World Herald)? I therefore expect the editorial content leading up to the election will start to slant decidedly left. I find this hero worship of Buffet by his shareholders both understandable and fascinating ; but watch them turn on him if/when things start to go bad and they start to lose money.
Appleby| 4.18.12 @ 8:23AM
If it's right for everyone to pay his "fair share", what does that say about the 50% of Americans who pay NO taxes? Shouldn't they too pay their "fair share"?
Lost| 4.18.12 @ 3:24PM
Why they do pay their "fair share". They pay little to nothing and get more money back than they pay in. Anything else would not be fair.
Clint| 4.18.12 @ 9:24AM
Dr.Ron Paul,
" The Founding Fathers realized that “the power to tax is the power to destroy,” which is why they did not give the Federal government the power to impose an income tax."
kwan| 4.18.12 @ 10:07AM
Again Obama reverts to class warfare in an effort to cover-up his failed presidency. It's already been proven that the money that the "Buffett Rule" would confiscate would run the government for exactly 11 hours. What is actually needed is a massive shrinking of our bloated government.
David W| 4.18.12 @ 10:47AM
Many seem to think that once Obama gets his millionaire tax that will be it, no more need to extract any more money from the "rich". Unfortunately, as the mighty Obama realizes he can't balance the budget on the backs of the ultra wealthy he will start mentioning that the people making $750,000 a year are also not paying their fair share..... Just wait.
Lost| 4.18.12 @ 3:26PM
If I am not mistaken he already think those that make $200,000 make to much.
TrueBlue | 4.19.12 @ 1:06PM
That's correct, $200k if you're single or $250k if you're married (better hope both don't have high paying jobs or you're REALLY screwed). Nevermind that a large number of small businesses (the mom & pop places in particular) file their taxes under personal income and they need far more than $250k/yr to run the business.
Von Mises Jr| 4.18.12 @ 11:33AM
Is it fair that Moochelle had a $300K+ "no show" job that was not filled when she left?
Is it fair that Moochelle and the daughters go on half-dozen extravagant vacations per year?
Is it fair that GSA parties like its 1999 while average people can't find work?
Is it fair that George Kaiser and Obama's bundlers get no lose investment deals?
Is it fair that our border agents and Mexicans get shot by "fast and furious" guns while Obama and Holder live in a protected bubble?
Is it fair that the DC politicians shuffle back and forth to Wall Street with sweet heart deals to bolster their fat pensions?
Is it fair that there are rules for the Country Class that doesn’t apply to the Ruling Class?
Is it fair that a Hispanic by the name of Zimmerman should fear for his life while Sharpton and the NBP get a pass from Obama and Holder?
What is fair???
You are seeing the most privileged class of people tell those who are suffering under their policies what is fair and not fair.
This is what happened in the French Revolution. The Ancien Regime (Nobles and Aristocrats, along with their intellectuals) attacked the new EARNED bourgeoisie money after they were displaced. The Ancien Regime was worthless, unproductive leaches whom once serfdom ended did not want to get a job.
Today, Obama and his ilk are still trying to recapture the privilege of the Ancien Regime and tell us it is only fair.
William Berger| 4.18.12 @ 12:17PM
" So, again, rich folks didn't actually do anything to earn their money, they just "benefited" from some cosmic alignment that threw more of the "national income" their way." -
To many of the elitist groups of which B.O. and others are part of, money does just appear, because of like mindedness not actual work or labor.
TrueBlue | 4.19.12 @ 1:07PM
They don't believe the rich work for their money because the majority of rich people in their circles DIDN'T work for that money. They're all trust fund babies.
Pat| 4.18.12 @ 2:04PM
According to a column by pundit Jonah Goldberg, Obama wants everyone to stop calling it the “Buffett Rule” – he insists it’s really the “Reagan Rule”. Since Obama has long held the firm belief that 50% of Conservative voters are dumber than a sack of hair, he figures to capture a sizable chunk of the Independent voters and the Conservative 50% dumbbell vote - (remember, Obama thinks us Conservatives are hopelessly wedded to our guns and bibles) – and he plans to do just that by walking like a Conservative Duck and quacking like a Conservative Duck.
Emulating Madonna, Obama is re-inventing himself once again as a middle of the road, perhaps even a right of center president. In the end, it’s really just a numbers game. If enough folks vote Obama, does it matter if the ghost of Ronald Reagan is spinning in his grave?
Obama and his handlers believe deliberate deception won’t matter to Democratic voters. After being sworn in for a second term, the old Obama will emerge from his Conservative chrysalis and a beautiful Liberal butterfly will spread his tax and spend wings. Friends of the Democrats can look forward to looting the Treasury for another 4 years, capped off by a fistful of presidential pardons for any taxpayer funds they were convicted of “borrowing”.
Based on his record of the past 4 years, Obama knows it will be a close election. But our beloved president certainly knows how to campaign – and that seems to be about all he knows. Unemployment is still very high, the housing market sucks, gas prices are rising like a Saturn rocket, our young folks are still being murdered in Afghanistan and the professional race baiters continue to refer to B. Obama as “my BFF”.
Looks bad for Mr. Hope and Change you say? Maybe not. The Republicans should be nailing Obama’s 4 year record of successful failures to his forehead with a ten penny nail - but they’ll probably fumble that golden opportunity. So, come election, another intelligence litmus test of America’s electorate. Don’t you get sick and tired of these constant litmus tests – there has got to be a better method for hiring a chief administrator to squander our money.
Anthony| 4.18.12 @ 3:03PM
Now that Bouffett has cancer, perhaps he will not be so enamoured with Obozo care.
Of course, when you're worth $30 billion, you can buy a whole country and its hospitals to treat you.
Sorry Warren, but fortunately, mankind has not yet managed to "buy off" mortality.
Even billionaires die, same as their secretaries.
shipley130| 4.18.12 @ 3:18PM
Why should anyone pay 30% of their income in taxes, especially when our government is running guns to drug cartels and it's agencies are wasting huge amounts of tax dollars? How many more decades are we going to continue supporting countries that can't get their crap together, such as Haiti?
Petronius| 4.18.12 @ 3:20PM
The New York Times said as much some time ago. "Quit trying to make it and get ahead of everybody else." These people are Levelers like the sore heads who fought for Cromwell in the English Civil War. While he waged political war, the Levelers fought a social one. They are ignorant, indolent, incompetent, and proud of it. The objective is a world where nobody ever gets ahead of them or accumulates any wealth. But Cromwell only had small numbers of this kind to deal with. This country is now saddled with 3 generations of losers who are howling about "the rich" and anybody who is "better than the rest of Us." Worst of all they do not want a better life for themselves. They just want their betters to suffer. And they will win again. And we will suffer under the tyranny of these Losers. Oddly enough the last battle of that war was fought here in Maryland on the banks of the Severn in 1655. Welcome to the 17th century.
POST American| 4.18.12 @ 11:23PM
---In this, the undeniable 11th hour of
the CFR--RED China handover, sellout,
TREASON and FINAL EUGENICS OP,
one and all must pause to marvel at the
impeccable continuity of agenda from
Bush Sr ---right through 'BAR--Rockefeller'
H. Obama.
----------------HUAC/Nuremberg 2012---------------
AND HOW!
rickg| 4.19.12 @ 5:22AM
Did you notice that the President took a $48,000.00 deduction on his taxes as a gift to his two children. He claims this will be for their college education.
Of course they can use if for anything they want. But if they do decide to go to college with this money, that means the taxpayer's are subsidizing the education for a millionaire that made around $800,00.00 last year.
Fair?
POST American| 4.21.12 @ 5:45AM
------------------BOTTOMLESS LINE---------------------
BEHOLD!
------------'BAR--Rockefeller' H. Obama!-----------------