Barack Obama fails the “Buffett Rule,” depriving his government of vital revenue.
Americans have finished paying their taxes, according to Tax Freedom Day, which fell on April 17. But some of them should be paying a lot more, says President Barack Obama.
He wants rich people to pay a higher tax rate than their secretaries. Hence his support for the so-called Buffett Rule. However, it turns out the president pays a lower rate on his income than does his secretary. He should write an extra check to Uncle Sam.
The president has been on the campaign stump talking up the Buffett Rule, which would require anyone making more than a million dollars a year to pay at least 30 percent in taxes. The measure didn’t get out of the Senate, but that might make it an even better political issue for President Obama. At least it would if he — rich by any normal definition, though he didn’t make more than a million dollars last year — wasn’t violating the very rule he was promoting.
The proposal doesn’t make much sense as public policy. The top one percent of Americans actually pays an effective tax rate of 29.5 percent. The disparity of which the president complains reflects the difference in tax rates for earned income and investment income. Much of the latter is generated by investing the former, which already has been taxed. There’s no right or wrong tax rate in principle for either kind of income.
Moreover, the federal government already imposes the so-called Alternative Minimum Tax, which is supposed to set a minimum rate for the rich to override the effect of tax preferences. The AMT was created in 1969 after the revelation that 21 millionaires had not paid any income tax two years before.
However, the AMT is not indexed for inflation and increasingly covers the middle class. In 2008, 27 percent of those who paid the AMT made less than $200,000 a year. Every year Congress passes a temporary “patch” to override the AMT, since otherwise it would hit millions more Americans. More sensible would be congressional action to “fix” the AMT, whatever that means, than to add a new super-AMT under the guise of the Buffett Rule on top of the existing broken AMT.
Nor would the Buffett Rule collect much cash. The top one percent of taxpayers already pays 38 percent of total income taxes collected. The top five percent pays 59 percent. The top quarter pays 86 percent.
Turning the Buffett Rule into law would raise an average $4.7 billion a year. That sounds like a lot of money, but the deficit this year is expected to run $1.2 trillion. If enacted, the president’s budget would add about $3.4 trillion in red ink over the next decade to a collective deficit already predicted to run at least $3 trillion. The official national debt is more than $15 trillion. The real unfunded liability for Social Security and Medicare likely exceeds $100 trillion. The president’s proposal might assuage a bit of envy, but it wouldn’t do much to improve federal finances. For this reason even Barack Obama admitted that the Buffett Rule was a “gimmick.”
Worse, though, the president appears to believe in the political equivalent of cheap grace. The Obamas are rich, or rich enough — currently in the top .5 to one percent of earners. Moreover, they have been making well over a million dollars annually from their books; $844,585 was their worst year since 2004.
Yet the president is failing to meet what he claims to be a fundamental moral duty. Rather than do the right thing, he’s handing the issue off to government. “Under the president’s own tax proposals,” declared White House press secretary Jay Carney, “he would pay more in taxes while ensuring we cut taxes for the middle-class and those trying to get into it.” However, President Obama knows Congress won’t act. He is calling for higher taxes while he and his wife are pocketing their outrageously high earnings.
Treasury Secretary Timothy Geithner — who before his appointment had a little problem paying taxes that were legally due — claimed that “Just because Republicans oppose this does not mean it’s not the right thing to do and not the right thing to push for.” But surely that doesn’t mean the president should not do the right thing on his own if Republican opposition kills his proposal.
Last year the Obamas grossed $844,585. Their adjusted gross income was $789,674. Their itemized deductions ran $278,498. Their total tax due was $162,074. That’s less than 20 percent on gross and barely more than 20 percent on adjusted gross. In contrast, say administration officials, his secretary, Anita Breckenridge, paid a higher rate on her income of $95,000.
The president’s aides put the best face on things. “The president’s secretary pays a slightly higher rate this year than the president on her substantially lower income, which is exactly why we need to reform our tax code and ask the wealthiest to pay their fair share,” said White House spokeswoman Amy Brundage.
Instead of waiting for Congress to act, however, the president should pay the $73,628 necessary to make the 30 percent level on the Obamas’ AGI, or, better yet, the $91,302 to make the 30 percent level on their gross income. The easiest way would be to simply write a check for that amount — while not taking a deduction for the “gift.” But it would be more creative for the Obamas to enhance their tax liability. Since the law obviously doesn’t charge them enough, they should come up with better numbers.
It’s hard for the president to bump up his salary without a W-2 to match. But he has plenty of other opportunities to inflate his income. For instance, the Obamas declared just $3 (!) in dividend income. This is an easy one. Make it $10,003 or $20,003. The IRS wouldn’t mind. It certainly wouldn’t work to disprove that a (relatively) rich family collected that much in dividends.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?