Here we go again.
At the beginning of his presidency, Barack Obama argued that the country’s spiraling debt was largely the result of exploding health care costs. That was true. He then said the cure for these exploding costs would be his health care reform. That was not true.
It was obvious at the time that it could never be true. If government gives health insurance to 33 million uninsured, that costs. Costs a lot. There’s no free lunch.
Now we know. The Congressional Budget Office’s latest estimate is that Obamacare will add $1.76 trillion in federal expenditures through 2022. And, as one of the Medicare trustees has just made clear, if you don’t double count the $575 billion set aside for the Medicare trust fund, Obamacare adds to the already crushing national debt.
Three years later, we are back to smoke and mirrors. This time it’s not health care but the Buffett Rule, which would impose a minimum 30 percent effective tax rate on millionaires. Here is how Obama introduced it last September:
“Warren Buffett’s secretary shouldn’t pay a [higher] tax rate than Warren Buffett. … And that basic principle of fairness, if applied to our tax code, could raise enough money” to “stabilize our debt and deficits for the next decade. … This is not politics; this is math.”
OK. Let’s do the math. The Joint Committee on Taxation estimates this new tax would yield between $4 billion and $5 billion a year. If we collect the Buffett tax for the next 250 years — a span longer than the life of this republic — it would not cover the Obama deficit for 2011 alone.
As an approach to our mountain of debt, the Buffett Rule is a farce. And yet Obama repeated the ridiculous claim again this week. “It will help us close our deficit.” Does he really think we’re that stupid?
Hence the fallback: The Buffett Rule is a first step in tax reform. On the contrary. It’s a substitute for tax reform, an evasion of tax reform. In three years, Obama hasn’t touched tax (or, for that matter, entitlement) reform, and clearly has no intention to. The Buffett Rule is nothing but a form of redistributionism that has vanishingly little to do with debt reduction and everything to do with re-election.
As such, it’s clever. It deftly channels the sentiment underlying Occupy Wall Street (original version, before its slovenly, whiny, aggressive weirdness made it politically toxic). It perfectly pits the 99 percent against the 1 percent. Indeed, it is OWS translated into legislation, something the actual occupiers never had the wit to come up with.
Clever politics, but in terms of economics, it’s worse than useless. It’s counterproductive. The reason Buffett and Mitt Romney pay roughly 15 percent in taxes is that their income is principally capital gains. The Buffett Rule is, in fact, a disguised tax hike on capital gains. But Obama prefers to present it as just an alternative minimum tax because 50 years of economic history show that raising the capital gains tax backfires: It reduces federal revenues, while lowering the tax raises revenues.
No matter. Obama had famously said in 2008 that even if that’s the case, he’d still raise the capital gains tax — for the sake of fairness.
For Obama, fairness is the supreme social value. And fairness is what he is running on — although he is not prepared to come clean on its price. Or even acknowledge that there is a price. Instead, Obama throws in a free economic lunch for all. “This is not just about fairness,” he insisted on Wednesday. “This is also about growth.”
Growth? The United States has the highest corporate tax rate in the industrialized world. Now, in the middle of a historically weak recovery, Obama wants to raise our capital gains tax to the fourth highest. No better way to discourage investment — and the jobs and growth that come with it.
Three years ago, Obama promised universal health care that saves money. Today, he offers a capital gains tax hike that spurs economic growth. This is free-lunch egalitarianism.
The Buffett Rule redistributes deck chairs on the Titanic, ostensibly to make more available for those in steerage. Nice idea, but the iceberg cometh. The enterprise is an exercise in misdirection — a distraction not just from Obama’s dismal record on growth and unemployment but, more importantly, from his dereliction of duty in failing to this day to address the utterly predictable and devastating debt crisis ahead.
Charles Krauthammer’s email address is letters@charleskrauthammer.com.
The debt Obama inherited was from the unfunded tax cuts, expansion of Medicare and the wars. Obama’s debt came from the bi-partisan response to global phenomenons and our housing crisis. Please don’t skew the truth. Comparing any available proposal (either from current or previous candidates), the same, similar or worse results would be yielded.
Beyond that, the Buffet rule is about equity. It was initially proposed by a man named Ronald Reagan. It isn’t supposed to be a silver bullet to our problem, but it would do great measures for our country in terms of being right and fair. It isn’t right that someone as fortunate as Romney pays a lower or similar tax rate compared to someone of the working class. You can’t get around that fact. Someone making millions a year (who could make millions a year just sitting there) can and ought to pay a higher rate than someone working and struggling, especially given our current state of affairs. Nothing good can come of concentrating wealth, which has been happening in the last few decades, into a small minority of the population.
You can keep bemoaning our “high corporate tax rate” in the world, but the fact is, it isn’t once you add up all the deductions, subsidies, credits, etc, all of which, when tried to be reduced, simplified, or repealed are fought tooth and nail against. There are dozens of profitable multi-million and multi-billion dollar companies that pay tiny fractions of that supposedly highest corporate rate in the world. There are some who are even given refunds.
This editorial follows closely the definition of propaganda. It uses half-truths and non-truths to distort reality and persuade. That’s wrong.
Look, if we are expected to deal with facts and the truth, however will Conservative media compete in the marketplace of ideas?
Tell me, if the evidence shows that increasing the capital gains tax ends up bringing in less revenue, would you still support increasing it just because you think it is more fair?
Absolutely, but I doubt it would bring revenues down. Regardless, it’s about who we are as a country. As it is, we’re subsidizing “job creators” who don’t actually base their hiring choices on mere percentage points in their taxation rate. We’re subsidizing profitable oil companies. It’s not right. A teacher, a bus driver, a secretary, an electrician, etc. — that’s all more important than someone who trade money and assets back and forth. That’s my opinion. I find it wrong. I see value in the working class, but I see them struggling.
“We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share. In
theory, some of those loopholes were understandable, but in practice
they sometimes made it possible for millionaires to pay nothing, while a
bus driver was paying ten percent of his salary, and that’s crazy.” Ronald Reagan
And Reagan closed all the loopholes he was referring to. He never ever considered Capital Gains a loophole and knew what a high tax rate could do to the economy. It is easy to see that neither economics or history are not your strengths.
I could do without your personal jabs. Please argue against the points I make and leave it at that, will you?
Are there no new credits, cuts, loopholes, deductions, etc. since the Reagan administration? Profitable corporations and even millionaires are paying no or little federal taxes how then?
It does nothing for the integrity of this country (or health of the economy) to have those of the working class paying hindering rates in order to pay for the tax cuts/loopholes/deductions that benefit the wealthy. Get equity back into our tax code and everyones’ rates will go down, except those who have lobbied for those loopholes, of course.
It’s my personal opinion that hard work should be done with pride and not be punished. It is punished all simply to give benefits and rewards to those who just invest. Trickle down is a farce.
May I remind you that it was you that decided to quote (or misuse the quote) of Ronald Reagan? You made no points with that quote because you didn’t understand it and what Reagan did to change the tax code. Then on top of that you attack what you call-trickle down which is what Reagan was talking about.
I find it unfortunate that you resort to personal jabs.
I did make a point to the quote, I made the exact point of that quote. Quoting someone isn’t the same thing as invoking the entire body of philosophies of that individual. A bus driver shouldn’t be paying a similar rate as a guy with hundreds of millions of dollars. That’s the point and it’s a good one.
Trickle down is a farce in my opinion. That’s not an attack.
Regarding your Reagan quote. Context is everything and you misused it therefore it is fair to say you don’t understand what he meant.
I assume, though you did not say it, that you object to Capital Gains tax rates?
Normally taxed at about 15% rate. Am I correct?
Your busdriver example is bogus because the average school bus driver earns about $29k nationally. According to you this driver should be paying $4,350 income tax at a 15% rate. That is just plain and simply not true. It is more likely that the busdriver has zero tax liability as “on average” people don’t start getting a tax liability until they earn $34K.
This busdriver if single childless would have to earn about $100k with absolutely zero deductions in order to pay 15%. Likely much more even if he/she used other deductions.
What you say is not fair, doesn’t happen anyway.
The quote works perfectly fine in isolation. I very clearly understood what it meant and you have provided nothing in terms of a correction, that somehow Reagan didn’t mean a bus driver shouldn’t have an at or similar rate of a millionaire.
In 2009 there were 7000 who made over a million and paid nothing in Federal income taxes. Yes, it does happen and it isn’t right. I’m advocating a meritocracy, not a plutocracy. It’s that simple. You ought to read what people are saying instead of searching for hidden and non-meanings beyond their posts.
If everyone can be financially equal, that is social and economic justice, the problem is that everyone will be broke.