Megan McArdle on the "Buffett Rule"
By David Henderson
Megan McArdle has an excellent post today on the so-called Buffett tax rule. That’s the idea that high-income people should pay some minimum percent of their income in federal taxes.
After demolishing the case, pointing out that to trap every single millionaire would involve violating the rule of law–see her post for why–she goes on to write:
Even if you dismiss the above as so much airy fairy theorizing in the face of REAL WORLD PROBLEMS, the fact is that as far as I can tell, the Obama Administration itself has not outlined anything of the sort. At least in the White House document that I read, I saw no proposal to set some sort of AMT [Alternative Minimum Tax] on millionaires. Instead, it claims to do this, while rehashing a bunch of things that the administration has long proposed: allowing the Bush tax cuts to expire for those making more than $250,000; changing the treatment of carried interest income accrued from capital gains; and altering the treatment of deductions for very high earners. If all of these things were passed, guess who would still pay a lower effective tax rate than his secretary? Hint: his initials are WB, and he lives in Omaha, Nebraska.
If a “Buffett Rule” is such a great idea, how come the administration doesn’t actually propose enacting one?
Presumably for some of the following reasons: it would add complexity to the tax code; it might not be possible to do in a way that would stand up even in our very IRS-friendly tax courts; it would have upsetting effects on the market for various forms of capital, particularly municipal bonds; it might well involve taking away deductions that less well-heeled voters currently enjoy, and they’d freak out. Note that I do not include “Republican obstructionism” on this list, because the existing proposals won’t pass the house; there’s no reason not to include a real hard “Buffett Rule” if they think such a thing is even vaguely workable. From the fact that they didn’t, I infer that they thought the idea maybe had some problems.
So no, I don’t think that it’s unreasonable for Fox News to be dismissive. The administration seems to have dismissed the idea as well.
Incidentally, most of the discussants of this idea, on both sides, fail to distinguish between “the rich”–the apparent targets of the proposed tax–and high-income people–the actual targets. There’s a very strong positive correlation between wealth and income, but it’s not close to 1.0.