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  • Morning Bell: Tax Gimmicks, Tax Doom

    The U.S. Senate could vote today on the gimmicky distraction known as the Buffett Rule — President Obama’s plan to raise taxes on wealthy Americans and job creators in order to supposedly bring “fairness” to the tax code and pay down the debt. As the paper-thin justification for the proposal continues to fade away, the American people are staring down Tax Day, continued joblessness, and the prospect of a major tax meltdown coming on January 1, 2013.

    The facts of the Buffett Rule are simple. The President wants millionaires (and small businesses taxed as individuals) to pay a minimum tax of 30 percent. For all of his rhetoric that the measure would “stabilize our debt and deficits for the next decade,” the Buffett Rule would bring in only $47 billion in revenue in ten years. To put those numbers in context, President Obama’s budget calls for adding $6.7 trillion to the national debt. So the Buffett Rule would cover just 0.7% of all of Obama’s debt and .1% of Obama’s spending.

    None of this even touches on the failure in logic underlying the President’s argument, as we detailed in depth last week. In short, President Obama is employing the Buffett Rule as an election-year class warfare weapon. And he’s aiming it at the highest-earning families and businesses in America who are already shouldering the vast majority of the country’s tax burden. Just one example: The top 1 percent of income earners — those earning more than $380,000 in 2008 — paid more than 38 percent of all federal income taxes while earning 20 percent of all income.

    What’s more, the whole idea of the Buffett Rule is based on a fallacy. The President says his tax is necessary because people like billionaire Warren Buffett’s secretary pay a higher tax rate than the wealthiest Americans. In reality, Warren Buffett pays over 50 percent tax on his income. He earns much of his income as capital gains and dividends from stock he owns in businesses — he pays a 15 percent tax on this income, but first, the businesses that generate this income pay a 35 percent corporate income tax. Corporate income is subject to at least two layers of tax. To create an artificial political fight, Obama and Buffett conveniently ignore the first.

    Even some of the President’s friends on the left are seeing the Buffett Rule for the ploy that it is. Last week, liberal Washington Post columnist Dana Milbank devoted an entire column to “Rebuffing Obama’s gimmicky ‘Buffett Rule,’” picking it apart as flawed policy and political rhetoric, noting that even White House reporters are “tiring of the theme.” Milbank concludes that, “Obama’s prioritization is no mystery: The populist Buffett Rule polls well. This explains its inclusion in countless presidential speeches and statements.”

    While the President keeps delivering those speeches and waging his war on the wealthy, the rest of America is being left behind in an economy that’s barely growing. Placing more of a burden on investors and job creators will exacerbate the problem, and the debt will only keep growing.

    To make matters worse, American taxpayers face an even bigger burden coming on January 1, 2013, unless Washington takes action. On that day, an unprecedented $494 billion tax hike known as “Taxmageddon” will descend on the United States. That includes, among other things, the expiration of the 2001 and 2003 Bush tax cuts, the payroll tax cut, the patch on the Alternative Minimum Tax, the ability for businesses to fully expense capital investments, and the tax cuts from the 2009 stimulus. On top of all that, Obamacare’s new taxes will arrive, and the death tax will rise to 55 percent while the exemption will fall. And while America waits for some certainty in tax policy, job creators are taking a step back not knowing what the future will hold. In turn, the economy is suffering as a result.

    Instead of focusing on the country’s debt crisis, unemployment, or the imminent tax maelstrom, the President is pitching a policy that makes for a nice talking point in his war on the wealthy. What the nation needs are serious solutions to our spending and debt crisis, and policies that really do create jobs. What it doesn’t need are distractions from the problems at hand.

    Quick Hits:

    Posted in Economics [slideshow_deploy]

    56 Responses to Morning Bell: Tax Gimmicks, Tax Doom

    1. Victor Barney says:

      Welcome to Adam's world. Just saying…Watch!

    2. Ken Jarvis says:

      What we need is a NSTx – National Sales Tax.
      There would be NO Loopholes. ALL Taxes are paid when the Purchase is made.
      It would be the ONLY Fed tax. No Withholding, or records to keep. 10% NSTx –
      8% to the Treasury
      1% to Soc Sec
      and 1% to Medicare.

      • Ben C. says:

        Absolutely – I agree in principle. The only question is the amount of the tax. The current tax system is crippling small business and is inherently unfair. The only problem is that it will take a minor revolution to get this passed. I'm in – are you?

      • Ron H. says:

        I like it! The current system is so complicated we must hire people to do the taxes for us or buy special software. The more Washington tiwes to fix it the worse it gets.

    3. @snowcloud79 says:

      "the whole idea of the Buffett Rule is based on a fallacy. " Their entire ideology is based on a fallacy.

    4. Disgusted in Houston says:

      The "Buffet Rule" is a red herring. It disgusts me when I hear Obama and his sycophants whine about “the rich” paying their “fair share” of income taxes. However, the top 10% of wage-earners already pay 70.5% of the income taxes! What really disgusts me is that nearly half of the wage earners in the US pay no income tax at all. (I believe the exact number is 49.5 %.)

      Obama has never addressed what a “fair share” is for citizens who pay nothing! Is that "fair"? It is my opinion that people who pay no income tax should not be allowed to vote, since voting largely determines how the taxes are spent by government. To paraphrase the original Boston Tea Party participants: NO REPRESENTATION WITHOUT TAXATION! Citizens who pay nothing in income taxes shouldn’t have a vote to determine how government spends income taxes!

      I can hear the bleeding heart liberals disparaging me because I’m suggesting that the poor be taxed and complaining that the poor are taxed alternatively, by sales taxes for example. There will always be destitute poor and I agree fully that they should pay no income tax. I have no issue with the truly needy paying nothing. However, there is no way that nearly half of the population fits that description. There should be a bracket where the truly poor pay zero. Beyond that level, everyone should pay something, even if it’s only 1 or 2%. Will we ever hear Obama suggest something like that? I think not.

      • Mary A says:

        you are aware that the average income of the 50% of taxpayers, individuals and families, that pay little or no taxes is about $30K annual. Try to support a family of say 2- 3 on that annual income before withholdings.

    5. Jaime Calva says:

      Our government wants more revenue. Fine, then redefine what constitutes qualifying as a non-profit entity. Begin with requiring Unions to pay taxes. They collect dues for providing a serrvice. This is no different then an accountant providing a servicer. They collect so much in dues they are the largest contributors to their political causes.

      • Juan Martinez says:

        I agree, Jaime. And tax the churches (and all religious organizations) too. Oh, and all of the political oriented think tanks that enjoy 501(c) status while paying their top officers more than $1m per year.

    6. saintpio1 says:

      AND OBAMA KNOWS THIS (and all the power people who lead him. He just takes the "heat")

      • Mary A says:

        I understand your ANGER and FRUSTRATION, however it was not sheep that gave Obama a shellacking, in his own word, in Nov 2010, it was not herds of sheep that that have been in DC consistently and throughout the states protesting policies and laws Obama and the liberal/left have been hoisting on the American people, it was a peaceful but powerful citizen uprising called the Tea Party. Anyone who has any understanding of taxation is well aware the CONSUMER inevitably bears the burden of increased business taxation as well as inflation, those that don't hopefully will not be voting.
        And a far as "NO ONE TELLS IT LIKE IT IS.", don't know which media sources you frequent, but you may consider investigating some others, even left leaning LSM acknowledges that the consumer ends up paying more when taxes are raised, although they are deceptive in most other issues and are Obama's lapdogs.
        Calm, down saintpio1, the SLEEPING GIANT has been awakened and he's pretty pissed, but Rome was not built in a day nor was the USA, it will take awhile to get rid of the rot, hope you will grab a shovel.
        God Bless you

    7. David Kruse says:

      Your point is well taken, but you should get your numbers straight: $47 Billion is 0.007 x $6.7 Trillion (or 0.7% of $6.7 Trillion). Someone will take these errors and run with them, adding their own calculations, and before you know it democrats will say we republicans don't know what we're talking about.

    8. Mike Tawney says:

      Thank you as always. Regarding the $47 billion raised. On what figure of merit is the $47billion raised? What I'm getting at, is things can change- and the $47 billion target may actually be quite less. Also: use Parts Per Million (PPM) as well as percents. 0.001% = 10 parts per million. That means, as you are trying to point out- only $10.00 for every $1,000,000 taken in will go to reducing the defeceit; spitting in the ocean.


    9. Robeert A Hirschmann says:

      Don't these people realize that the "rich" are the ones who hire us? Is it any wonder that with them under attack they will stop hiring? That's what's happening folks. Are you still unemployed? Do you wonder why? This is your answer! With Obama at the helm, this ship of state is aimed directly at the iceberg! Please people, stop him before it's too late!

    10. Jeanne Stotler says:

      Anyone who thinks they should pay more taxes than they do, PLEASE feel free to write a check and send it to the Treasurer of the USA. Also Mr Buffett needs to pay his back taxes, and BHO needs to pay more than he does, if he's so concerned, But OH that would mean Michelle would have less to spend. I am for a fair tax and it does start with loop holes and making it illegal to stash money in overseas accounts to avoid taxes. Even then it's a drop in the bucket against what we owe, the FIRST thing needed to be done is to cut Goverment spending and that means an audit of EVERY branch of Goverment and eliminating kick backs that are favored by Congress.

      • Joseph McKennan says:

        Asking rich liberals to pay their fair share of taxes is equivalent to clubbing yourself hard with a sledge hammer. Liberals are running congress and they have exempted themselves from laws we must obey. In addition, they are exempted from obamacare. John Kerry, the Clintons, Obamas, Bidens, and of course Gore etal.

    11. John says:

      I really dislike the 50% taxation argument because capital gains are NOT based one a corporations income. Capital gains are based on the value of the stock which include a lot of factors beyond just the income earned by the corporation. I would prefer that the focus of the argument be on overall tax reform in that Warren Buffet's secretary shouldn't be paying 30%. Further, we don't have a revenue problem, we have a spending problem.

    12. amirabella says:

      Splendid article not only because if emphasizes the political gimmickry in the so-called Buffet rule, but also reminds us how disproportionate taxes already are on the upper 1% of earners. Also love that link to Dana Milbank of the Post with his criticism of Obama's tax perspectives.

    13. Roger Grossel says:

      Bah Humbug on the "Buffett rule".
      The "shell game" of tax RATES continues almost unabated.
      But the real issue is taxes PAID. If high-income people pay more in taxes, that should be considered fair, since they have more to protect. But they DO pay more in taxes, so it IS fair.
      Does Buffett pay more in taxes than his secretary? Without even seeing their tax returns we can answer unequivocally, "YES".
      So, let's quit deceiving people on this issue!
      And, as some claim, the additional revenue would be only a drop in the bucket of excessive spending by our federal government. It would.
      In spite of the above, I do support raising taxes on incomes over $1 Million, not only to put this issue to bed. Tax those golden parachutes! Tax "excessive" pay and benefits. Tax hedge fund investors at more equitable rates.

    14. Roger Grossel says:

      I am a proud Heritage member. But I must say that Heritage is being unprincipled in calling the estate tax a death tax. It is due upon transferring wealth under given conditions, does not require death, and thus is an inheritance (receive as an heir) tax. Rational people don't trust or believe unprincipled persons or entities.

      • Bobbie says:

        someone does die in order to collect estate taxes so what's your point? Why should inheritance be taxed again? Because the abuse of government can?

    15. Lloyd Scallan says:

      What this nation need is to get rid of Obama and his Dem lackeys in Congress! Obama entire presidency
      has been a total "pallacy". He was elected through fraud, deceit, and omission by the national news media
      that continue to this day. There is nothing redeaming about Obama or his policies. He is basicly dishonest with no core values. He can not run for reelection on his record. His only option is to lie and deceive the American people, hoping that enough fools will believe the disgraceful deception.

    16. toledofan says:

      Taxes, more taxes and sooner or later no taxes. Let's face it who is going to want to invest in anything if you have to continue to pay your hard earned money to the government just so they can implement every imaginable social program that fixes nothing. The Democrats have turned into the Socialist Party of America and is doing whatever it can to buy votes and retain their power. I just wonder, why, people can't look back a few short years, especially during the Regan years, and see the prosperity that was happening and then look to today and in comparison see the utter failure.

    17. Ron Stewart says:

      Why cant everyone see thru this. The Buffet rule is all BS.

    18. American Thinker says:

      The Democrats WAR ON SUCCESS continues. Raise taxes and spend us to oblivion! Yay Big governemnt!

    19. Citizen "Bill" says:

      I am just so sick and tired of the 'gimmick agenda' being profusely expounded from the DC Bubble and the BUFFOONS that are entrusted with our welfare in that "farce" environment. When are we going to get true 100% representation? I honestly believe that it is going to take a full and complete, open revolution before they realize that "WE THE PEOPLE' mean business. All three tags above turn me absolutely off: Super Secret Committee .., Biden and Reid's 'Jobs Bill', Buffet Rule … They are all three misleading and not really necessary for management of anything (business or government). It's all smoke and mirrors.
      "Keep On Keeping On" "Not On My Watch" Citizen "Bill"

    20. amirabella says:

      Splendid article not only because it emphasizes the gimmickry in Obama's so-called Buffet rule, but reminds us that the upper 1% already pay taxes vastly disproportionate to its number and income. Also appreciate the link to Dana Milbank of the Post who surprisingly and roundly criticises Obama.

    21. boberic says:

      The so called Buffet rule is a total clever political distraction. Obama knows it is a meaningless financial gimic. The plan polls as popular so obama invests almost all his efforts at this time while ignoring real monetary problems he is causing. He simply can't run on his record so he will use distractions and outright lies to get re-elected. The Republicans must not let him get away with this kind of crap. they must be as agressive as possible in using obama's own words against him. I for one am afraid that they will be to timid. Mcain showed no passion, he was so afraid of being called racist he lost the election. This must not happen again.

    22. Wayne Peterkin says:

      As poor as the stats appear, should the Buffett Rule be enacted, the reality is that the stats are probably even worse in reality. This is because of the adverse effect on the economy from this tax increase, and the even worse impact of the general tax increase 1/1/2013 which would slow economic growth even further. Obama is playing class warfare, but he is also proposing to damage, not help, a very sluggish economic recovery. As with most things he advocates, it is not in America's best interest at all.

      • Joseph McKennan says:

        I will never concede that Obama is trying to help the country. Everything he has done so far has been done to achieve an opposite effect. I dislike communists and their propaganda campaigns. Obamacare was made law before anyone even knew what it was– a death blow to the United States.

    23. DAN Y says:

      How about the Republicans touting how Obama favors both Buffet rules. the first is to tax earners 30%, and the one which Buffet himself favors is the second: Don't pay your corporate taxes, since he has about several hundred millions owed the IRS for several years

    24. Dan Robbins says:

      His fascination with being reelected is scaring him into not only making outrageous statements, but attempting to raise taxes on the wealthy in an desperate attempt to win over his quickly decreasing base. Anyone familiar with successful economic history will tell you the road to prosperity comes from freeing up unused capital for expansion and creation. All taxing the wealthy will do is force them to hide their wealth to avoid paying high taxes instead of investing it for the good of the populace. This President is so far in over his head he is grasping at anything in an attempt to keep from drowning.

    25. allen says:

      What would YOU expect from a President who "LIES", At best tells Half-Truths. As this goes on more people are starting to thinking that the President is a MUSLIM, But will not own up to it. You are like your Father. I did not say that being a Muslim is bad. You can Worship any way you want in this Country.

      • Bobbie says:

        he is covering it up which shows his deceit. half truths are worse than whole lies because half truths cause misleading and when no one is the wiser working with half truths thinking it's the truth, things become extreme and complicated. Whole lies can be nipped in the bud.

    26. conservativechick757 says:

      unfortunately the gop has done a horrible job at explaining that this is not even about income tax rates, it's about capital gains tax rates…..when over 40% of republicans are polled (whatever poll fox news has been pointing to) as being in favor of this, the gop has failed!!

    27. Juan Martinez says:

      Mr. Brownfield – you've kind of obfuscated the point of the Buffet Rule. The issue is whether high income individuals (defined as more than $1m of income per year) should receive special tax breaks not available to lower income working americans. It's all about tax fairness, not about how much money is raised, or not raised. As it happens, americans are smart enough to understand this issue, and 67% of americans favor passage of the Buffet Rule. I think that is why you deliberately failed to address this issue of fairness, focusing on unrelated issues of excessive federal spending, and so on. Your readers deserve better.

      • Ben C. says:

        The tax code is applied equally to all US citizens. There are not two tax codes – one for the "rich" and one for the "poor." The "poor" certainly are able to use any and all of the tax code as they see fit.

        • Juan Martinez says:

          Yes, the tax code is applied equally, but the way it is written, the effects are far from equal. Warren Buttet's secretary pays (effectively) 15% of her earned income in Social Security taxes, and then another 15 to 20% in income taxes. Warren's dividends and capital gains income pay 0% in social security and medicare taxes, and only 15% in income taxes. As a percentage of total income, Warren's secretary pays far more in sales taxes than Warren does. Mitt Romney can (and does) deduct the mortgage interest from 2 of his 6 homes from his taxable income. Warren's secretary has only one home, with a modest mortgage, if any. Right, there is only one tax code, but the benefits are structured for high income earners. The issue here is the fairness of our (one) tax code. Don't you think it can be made more fair?

    28. Gill O’Teen says:

      The incompetent won is sort of the Don Quixote of politicians. The original did not slay dragons because there were none. The teleprompter lecturer in chief is afraid to even pretend to slay dragons. Both are reduced to tilting at windmills. In a fictional sense the first Don's windmills were real; whereas, his majesty's in a real sense are fiction.

    29. Bobbie says:

      When is this man going to be exposed for the man he is? America was built on common principles that aspires humanity from around the world to live by. Obama is abusing people who live by common principles while he destroys the common rule of law. Why? Because the president doesn't want to hold all Americans to the same level of common principle. ("Muslims have low self esteem?") That embarrassed me and I'm not Muslim! Personal problems aren't expressed by government authority. But he caters to the weak instead of letting them gain their own confidence common principles aid to achieve. Not sure why Muslims or any immigrants are allowed to be burdens to this country when they came by choice, while the president exposes by promotion their inability to live up to common principles the rest of America and immigrants before were proud to be held accountable to. History will show the costs of burdens immigrants shouldn't be proud of. It has to stop! He uses his abuse of authority ruthlessly taking full advantage of those that live by common principle Muslims won't bring themselves to aspire to. Not his role in government!

      Some commentary "rich people want to pay more in taxes" so why is it even national? Let them by choice. Obama can't even stick to his own job interfering in personal matters and wants to go by "his book" and expose the rich by "his distortion" building resentment and hatred of fellow Americans and IF he gets his foot in that door don't think he isn't going to control everything else. And notice he only expresses the rich as the "rich" which means he will discriminate by his own ruling of determination, those rich he's already picked out for his unjust punishments WHILE ALL THE OTHER RICH HE'S PROTECTING PAT HIM ON THE BACK FOR THANKS!

      He's egregious and disrespectful and intentionally circumventing fairness for those he promotes weak whom are immigrant to this country by their freedom of choice! Go where you don't have to stand on your own, don't carry your burdens for us to deal with! Heres obama's fundamental change of America, don't move for yourself until I have you covered by taking from those that do move for themselves. The more unfairness he delivers the less people will be able to freely move for themselves.

      Common law has to rule in order to save America and her standing principles that no part of humanity has the decency to oppose! We're done with the personal problems of the weak kneed that came here on their own accord, just to live off everyone else! We have our own personal problems. One of them being the force to pay for theirs! This president has become a president of personal preference, the rest be damned!

    30. Hunter Moore says:

      I keep hearing the progressive talking points that Obama loves the poor and Romney can't relate to the poor. I have to admit, Obama loves the poor, that is why he is making so many of them.

    31. Howard says:

      Heritage folks, check the email version, it incorrectly added a couple of decimal places to the percentages.

    32. Blair Franconia, NH says:

      Like the Buffett Rule?

    33. Nate says:

      It's better to be wealthy now in the US, than in any other country or any other time period.

    34. F.D O'Toole says:

      Sure, Obama is full of horse feathers. But look what Romney is up to. I live in Connecticut, one of the highest tax jurisdictions in the USA. My only real deduction is state and local taxes. And the first thing out of this "conservative's" mouth is to do away with this deduction? So we should pay tax on already taxed income? Of course, he says, we will also lower the tax rates by 20%. That's a big "maybe." Even if successful in lowering rates, we've…Been there, done that. What happens is what always happens. The deduction goes away permanently while the rates climb upward over time. If Romney doesn't know that, it's too bad for all of us.

    35. Red Baker says:

      "So the Buffett Rule would cover just 0.007% of all of Obama's debt…." Sorry, the correct figure is 0.7% of Obama's debt. Use of percent removes two decimal points. And that's only by under-counting the amount of debt each year, in my opinion.

      I prefer saying the Buffet Rule will cover one day's federal borrowing each year, or about $4 billion per year.

      Whenever the Buffet Rule is discussed, the impact on capital gains and investments should be noted. The tax rate is 15% in order to remain competitive with other nations. If we raise it, we make what are already the highest corporate taxes in the world worse, and we make the most progressive individual income tax rates in the world even more progressive. Which means we drive more jobs to other nations. It is economic suicide.

      • Joseph McKennan says:

        Wherever the decimal point is after a number with 12 zeros and multiples of 6.7 renders the Buffet rule ineffective anyway. The interest alone has 9 zeros. The way it is going, our (choke) president is going for the alltime record quadrillions–15 zeros.

    36. frank says:

      why isn't heritage investigating the new presidential order regarding voter tabulation by a foreign company?

    37. American says:

      OH !! here we go again when are we going to take this C.C away from Obama, 6.7 Trillion for WHAT foundation if Obama dosen't leave this office we are all DOOMED even the wealthy.


    38. KC-NM says:

      Obama's 20%+ income tax rate is lower than my 28% tax rate and I am under 200K. His ploy about making this fair is only good for the poor. We are in need for change to the tax process – suggest that we dump the entire process and base the flat tax on income – no deductions, no exclusions, no loop holes, etc.

    39. Blair Franconia, NH says:

      Obama makes less than his secretary.

    40. Jeanne Stotler says:

      CAUTION!!!!! all this rhetoric is to keep us off what they are realy doing and to keep us from the real things, ECONOMY & THE BUDGET (which doesn't exist) I have to keep within my budget in running a household and I expect the country to do the same. Obama is desperate to wina second term and we need to be alert and not let these incidents side track us from the REAL PROBLEM, WINNING THE WHITE HOUSE in 2012 and gettin the USA back on track.

    41. Larry L says:

      changing the subject…this is the person you want to serve as President. I don't think so. How uninformed…
      Here's what that Romney said:
      > > "I understand how difficult it can be for an African-America in today's society. In fact, I can relate to black people very well indeed. My ancestors once owned slaves, and it is in my lineage to work closely with the black community. However, just because they were freed over a century ago doesn't mean they can now be freeloaders. They need to be told to work hard, and the incentives just aren't there for them anymore. When I'm president I plan to work closely with the black community to bring a sense of pride and work ethic back into view for them". -Mitt Romney.

    42. Larry L says:

      I am not sure about the Buffet rule…all I know is I paid this year 32% of my income to Fed and State Taxes. While others pay 15% or less. State and local fees are also increasing and clearly the burdon to support all levels of government falls on the middle class.
      And the Republican party is ok with that!
      Instead of trying to get the President out of office, if the truth is told because he is African American, maybe more time and energy should be spent on considering how the burdon of taxation can be more equally shared with the upper 2% of income earners in the country. Get real…we non-African Americans are suffering silently!

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