The Buffett Rule: Gimmick or Good Start?

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The Senate returns from a two-week recess today, and one of the first items on their agenda is the so-called “Buffett Rule,” a tax reform aimed at millionaires that would make anyone earning $1 million or more a year pay at least 30 percent of their income in taxes.

President Barack Obama congratulates Warren Buffett after presenting him with a 2010 Presidential Medal of Freedom in an East Room ceremony at the White House. (AP Photo/Carolyn Kaster)

President Barack Obama congratulates Warren Buffett after presenting him with a 2010 Presidential Medal of Freedom in an East Room ceremony at the White House. (AP Photo/Carolyn Kaster)

The rule, an Obama administration proposal, was based on Warren Buffett’s complaint that his tax rate was less than his secretary’s. Republican lawmakers have called the proposal a “political sideshow” and a job killer. This morning, Texas Senator John Conryn called it a “Trojan horse” (there’s a lot of those in Washington these days).

“This is not just targeted at the very rich, and you know what [Bret], what we also need to do is look at why is it that half of the households in America pay zero income tax,” Cornyn said after questioning the past expansion of the Alternative Minimum Tax. “We need some real tax reform. This isn’t it, this is a gimmick.”

Almost everyone agrees that the bill will go nowhere this afternoon. Republicans plan to filibuster and Democrats don’t have the 60 votes to proceed.

Even if the bill were to pass and become law, many say that it wouldn’t actually do a whole lot to address the deficit or lessen the tax burden on the middle class anyway.

As Simon Johnson writes in the Baseline Scenario:

The Buffett Rule is a tiny tax, of little consequence to the people who would pay it or to the country as a whole. The idea that $30 billion of additional revenue would tip the balance in any way is simply ludicrous.

But this is precisely what gives the Buffett Rule its powerful symbolism. …

BusinessWeek’s Joshua Green writes that if the Republicans do strike down the Buffett Rule, it may make the bill more powerful in the long run.

Legislatively speaking, that means the bill will die a swift death. But the Buffett Rule will probably be more powerful in death than it was in life, because Republicans will have to cast a politically unpopular vote to strike it down—they’ll have to put themselves on record as favoring a tax system where the Mitt Romneys of the world pay a rate of only 13.9 percent (eventually, that is…after they get an extension).

According to a recent Gallup Poll, 6 in 10 Americans favor it. What’s your take on the Buffett Rule? Political distraction or meaningful start at reform?

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  • Joellyn Mabery Mumcian

    My take is that it is only fair. Regardless of how little the money generated from this bill will help the economy or deficit in the short run, it is at least a step in the right direction. Not only do millionaires, multi-millionaires and billionaires pay fewer taxes than the middle class, but many (maybe most?) of the corporations that they are CEO’s of, or on the board’s of, or President’s of also take advantage of the myriad tax loopholes that are plaguing our tax codes. First we must target the oligarchs, then we target the corporations, while revamping the way we collect taxes. Maybe if the Republicans strike down the Buffet Rule it will backfire on them in November, but can we count on that happening? We have to remember that it has only been in the last few decades of the 20th Century that the tax system has been manipulated as such to benefit the wealthiest among us, and the corporations they serve.  After WWII up until Reaganomics, they were taxed at a much higher rate, and our country was at it’s most productive, with few exceptions. During Eisenhower’s tenure the wealthy were taxed at a whopping 90% tax rate, and they still had enough money to live quite well. It’s just that to so many these days, money means more than wealth, and aquiring the trapping of such,  it means POWER. No greater aphrodesiac exists to some people. With their untold millions, and the power that comes with it, they have the kinds of power that will change the face of our country forever, and not for the better. I frankly do not see myself living in a country that is ruled solely by the oligarchs among us. If that happens we can no longer think of this country as a Democray. It will then be the Corporate States of America.

  • Therese Meuel

     Perfectly stated! 

  • John Tyler

    30 Billion here, 30 billion there, hay pretty soon it may add up.  The only way to get a rich person to pay attention, and feel the pain  the rest of us are feeling, is to take their money. Besides 30% is in no way an excessive tax if taken in a historical perspective.

  • CC

    If it’s “only” 30 billion, then why the debate? Mr. Johnson is making it sound like the amount is minimal, if so then why can’t they pay it? Of course it will make a difference if they pay it and that’s why they’re protesting it.

  • Anonymous

    Using simple math, the calculation of the increased revenue from a proposed Buffett
    Rule ($30 billion over 10 years) says something very scary about our distribution of wealth and the tax revenue structure of this country.

    Since the wealthiest mostly pay 15% tax on their income (see Mitt Romney’s returns)
    because the vast majority of their income is from capital gains and dividends, a Buffett Rule-based minimum tax rate of 30% should approximately double the tax revenue from the wealthiest.

    Now consider Simon Johnson’s projection of an increased $30 Billion over 10 years. This implies that before the Buffett rule there was only $30 Billion of expected tax revenue from the millionaires (over the tax revenue on the first $1 MM of adjusted income per individual) over the next ten years. $3.0 Billion per year.

    How is that possible?  How is that excluding the tax revenue from the first $1 million per
    individual, the country only collects $3.0 billion of tax revenue per year from the wealthiest in the country when there is such a huge concentration of wealth?

    How little are the wealthiest paying in this country?

    © All Rights Reserved 2012

  • Anthony

    Joellyn. Be careful what you wish for. A palty 3 billion a year with a deficit over 1 trillion will do one thing. Put a knock out punch on the lobby for the ultra rich… Guess who is lobbying for the middle class… NO ONE… This simply opens the door to tax those that cant take it.

    You wanna fix it. cut out all loopholes and increase everyones taxes 20%… Ah but who wants to fix anything so long as we can sling mud at others.

  • GradyLeeHoward

    How can anyone consider Simon Johnson, former World Banker, the final authority on this subject? I’ve always suspected that when Johnson trotted across to WNET (Moyers Journal) from the Petersen Institute and pontificated on the excesses that had destabilized the global banking system he was basically a minimizer, trying to make a financial coup look like a structural mistake from greed inertia, protecting the backsides of the big boys upstairs. The nature of the tussle between working people and parasitic owners is that the owners have final approval over the experts consulted, even final approval over how any spokesperson is certified or qualified, and paramountly what goes into the higher education of the potential and future experts. Nouriel Roubini often comments on this asymmetry. Noam Chomsky has accurately observed how any dissident opinion  is considered outside the established agenda, and how these speakers are disqualified as experts because they are outside a narrow elite consensus. Moyers&Company is walking  a fine line between mainstream credibility  and providing the missing critique. Piecing a narrative together using outtakes from approved authorities is an awkward method.

  • GradyLeeHoward

    At present and in the foreseeable future the Buffet Rule poses no liability for persons receiving a high income. It’s rhetoric, a woulda-shoulda-coulda game to gain attention and to criticize Mitt Romney’s (legalized) tax evasion. I agree with Simon Johnson that this is a tiny adjustment within the greater scheme of budgeting, but consider (the most extreme case) if you were getting a million per annum and your rate was doubled from $150K to $300K. It’d be like losing a 2BR ranch house or a hot dog stand every year. It will be easy for Rush Limbaugh or Romney to point and say,”Look what da Buffet gonna do to that poor realtor’s new Lexus.” All the minimum wage drudges holding a Mega Millions ticket are gonna prick up their ears and say, “There goes the BMW and season tickets of my dreams.”
    Think back to Herman Cain and the 9-9-9 Plan. Anyone who didn’t understand it was ashamed to say so. And yet when Herman discovered pizza employees couldn’t afford pizzas it was altered to a 0-9-9 Plan, so that even if you were kicking your own behind for not being rich you would not have to market a pound of that flesh to pay 9%. What matters is that the Buffet Rule does not address the accelerating wealth and income polarity, or the resulting  power polarity. To do that would require collecting 50% corporate taxes, excess profit penalties, transactions taxes on trades and derivatives,  and putting a 90% levy on the 1% of the 1%. That will not happen before global crony capitalism lies down and dies (It might… and sooner than we suspect.).  My message then is that the Buffet Rule is overcooked spaghetti, with about as much justice if implemented as a flat tax, such as some Libertariam matchheads shop around between firearm cleanings. Warren Buffet has no conception of how most of us scrape by, and I think Barack Obama has forgotten. IF the President hadn’t lost touch with  people who work, he would be proposing  something much stronger; and even more importantly, he would be prepared to see it through. As I once told my Grandma Berkinholdt: “Don’t send me $20 and tell me to get a Masters Degree.”
    The Duopoly has an excessively low opinion of the electorate.

  • GradyLeeHoward

    Concision is a key word here. 

  • Bob

     Right now the average hard working American is working until June just to pay taxes. Payroll taxes, real estate taxes, tax on gasoline, sales tax, the list goes on. And from this group you want to increase taxes by 20%. so they can work until September just to pay taxes while the wealthiest in this country only work until February to pay theirs? You see you brought up a good point.  The previous administration lowered taxes at the very top, gave away our money, and now we have to make up for that so from whom does this bell toll? Is it unfair to ask those who benefited the most to pay just the same amount as the rest of us?
    I like Obama’s approach, let the top few pay the same percentage as the rest of us, and at the same time do everything we can to cut any wasteful spending. How long will it take us to get out of Afghanistan?

  • Nancy G

    Those who say that $30 billion is a drop in the bucket and won’t affect the deficit are missing the point.  Think how many school teachers and safety officers that would keep employed; how many students could get scholarships (or state colleges and community colleges could get additional state support because the state wasn’t paying for federally mandated programs that weren’t having their expenses covered; how many people could be employed to fix our aging infrastructure. 

    The Democrats and Independents and Republicans who don’t always toe the party line need to reframe the argument about why not to go ahead with this.  Whether symbolic or not, it could decrease the number of budget cuts that the Republican House is trying to force onto our already weak and infrastructurally impoverished public.    And so far as these very wealthy being job creators, let their Republican and Democratic defenders provide proof that over 90% of those who would be taxed at this higher rate have created a large number of jobs (not just jobs for their kids running their trusts or their accountants or limited partnership managers).  They’ve been getting away with this argument for too long without it being challenged.  Maybe this is a job for the Planet Money team at NPR.

    Finally, in order for such a tax to work, it needs to be enforced.  There should be a maximum amount of income that can be squirreled away or donated to favorite charities, many of which serve the well off more than those in need of a safety net.

  • kore1986

    I choose “all of the above”.   Tax the rich, tax corporations.  Invest in the real economy.  Issue our own currency, again.  Use debt free money to pay off our illigitimate debt (or not) and get our economy growing green and sustainable.  Get your local economy going.  Drain the .01% of their power.  We have to because it is not a choice between this or that reform or consolation.  WE face austerity and debt into perpetuity.  We need to go another way, one heart at a time.  See BALLE, Fourth Corner Exchange, Fair Trade, Slow Food etc.  So many good and excellent things are being done.  It is just not on TV.  Of course we all know that only legitimate ideas are shown in the media.  So these ideas must not be legitimate, right?

    We need to get our lives back.  We need to work and struggle for it; the WTO will not approve of people taking back their economies, but world wide this is what has to be done.  We don’t need the experts to agree, they won’t.  Each of us has the ability to do something and whatever is it, someone somewhere is already doing it and they will help you.  There are plenty of good alternatives out there from local to regional to global solutions.  No more waiting to see what they are going to throw at us next,  we know the answer- poverty, war and debt servitude.  check out Jill Stien’s Green New Deal for America.  vote for what you want for a change.  We have been protesting this tidal wave of wealth and power and environmental destruction for at least the last 30 years. At the same time we have developed solutions, alternatives, our own economic indicators, you name it.  From large macro problems to micro ones.  For rural, cities, third world economies.  Despite what we see on TV  the human  species has been busy doing its thing- adapting for survival. 
    We do know what to do.
     It is time to make a stand.

  • Anthony

    Oh and Im not for higher taxes, I prefer just to clean up the bogus freeloader programs, corruption and other bs we dont need but it aint happening with all the whiners out there.

    Ok Bob… if it were that simple it would have been done. You really dont believe that by taxes these people only that xanadu awaits, do you? Seriously do you? This is about tough choices not playing games. So Obama’s plan is to raise a few billion in taxes from the ultra rich.. Thats like saying.. You know what.. dont remove all the cancer, just take out 1/1000th of it I am good with the rest. I sure as hell dont want to give anymore money to these fools to waste because the political system is so broken.

    This is all going to end up horribly but mark my words. Your taxes are going thru the roof over the next 4 years and it dont matter who is office and your programs are getting cut on top of it. Thru 800 years of global economic metldowns the governments always come to the people to fix their messes. There has never been a time they havent, so if you think this is the first time, someone needs to pinch you and wake you up. They all got 4 more years in November then watch the broken promises.. lol