It could almost make your head spin. With an economy on the front end of another recession, President Obama’s tax attack on the folks who are most likely to succeed, invest, start new businesses, and create jobs is nothing short of staggering. Only liberal-left class-warfare ideology can explain this.
In his speech on Monday, Obama laid out $1.5 trillion in tax hikes over ten years, aimed almost entirely at America’s well-to-do. This includes $800 billion from rolling back the top rates in the Bush tax-cut plan, $470 some-odd billion to reduce itemized deductions for upper-bracket payers, and -- oh yes -- a millionaire’s tax called the “Buffett Rule.”
Pause a moment on the Buffett Rule. Almost all of Warren Buffett’s income comes from capital gains taxed at 15 percent. He only pays himself $100,000 a year, which would be taxed at the top rate. Most of his wealth is untaxed as unrealized capital gains. So his effective income-tax rate is lower than his secretary’s.
The vast majority of millionaires pay a 35 percent current tax rate on personal income from salaries, bonuses, and small-business income. Their effective tax rate is around 30 percent, much higher than the roughly 20 percent effective rate for the so-called middle class (depending, of course, on how you define the middle class).
Remember that the top 1 percent of income-tax payers shoulders 40 percent of all income taxes. They are paying their fair share. Then remember that 50 percent of income-tax filers don’t pay any income tax at all.
Obama refuses to tell us what the new millionaire tax rate would be, or what the formula might be in relation to middle-class taxpayers. But one thing’s for sure: This new Buffet tax is a penalty on investment, risk-taking, and job-creation.
No one even knows what the targeted group is going to be. A New York Times story suggests that the Buffet tax will hit three-tenths of 1 percent of taxpayers, which could be 450,000 people out of 144 million tax returns.
A Wall Street Journal story suggests the Buffet tax would have hit just 22,000 people in 2009, those households making more than $1 million annually and paying less than 15 percent of income in federal income taxes. According to the Tax Policy Center, doubling the tax burden of those 22,000 would raise just $19 billion a year. How silly is this?
And let’s also not forget that over the past four decades the evidence is absolutely clear that a lower capital-gains tax produces huge gains in revenues. Raising the cap-gains tax lowers revenues. It’s a pure Laffer-curve effect.