Saturday, April 14, 2012

The Buffett Rule...Stupidity on Steroids

The White House freely admits that even their most optimistic projections of the next ten years shows staggering, out of control deficits. 2012's deficit alone is 1.5 trillion dollars. This is an unsustainable national tragedy that demands serious reform to correct. So, what is the President's plan? The Buffett Rule.

Yes, the Sage of Omaha, the third richest man on the planet is famously annoyed by the fact that he pays taxes at a lower "rate" than his secretary. Our President, never content to let a perfectly good annoyance go to waste, immediately seized on his comments and decided to make the "Buffett Rule" the centerpiece of his strategy to rein in the fiscal insanity facing the country. Yes, passing a law demanding that anyone making one million dollars a year be required to pay a minimum of 30% in taxes is President Obama's solution to the trouble we face. Yes, the financial train wreck we find ourselves in stems from the horrible fact that the rich earn much of their income from appreciating assets and thus pay only 15% tax on that income. Guys like Buffett and Romney are awash in capital gains income. The Buffett Rule, we are told by the President,"will help us close our deficit. This is not politics, its math."

I will not here debate the wisdom of whether or not capital gains should be taxed at a lower rate. I will not debate the charge that millionaires don't pay their fair share of taxes. I will not even debate the politics of such a tax proposal during an election year. I prefer to examine exactly what kind of "math" the President could possibly be talking about?!

The Congressional Budget Office has estimated that full implementation of the "Buffett Rule" would raise 5 billion dollars in revenue to the Treasury. Other analysis estimate the number to be closer to 3 billion, but for argument's sake, I'll take the CBO at it's word. 5 billion dollars....or enough money to close our current 2012 deficit in roughly 500 years. 5 billion dollars....or the amount of money our government borrows every 24 hours. We are facing a tsunami of deficits and debt as far as the eye can see and the President's plan is...the Buffet Rule. Wouldn't it be better if the government just confiscated all 44 billion dollars of Warren Buffett's net worth instead of settling for 30% of his yearly income? Better yet, why don't we confiscate every dime from everyone who showed up in the Forbes 400 richest Americans list this year? In exchange for all of their money, the government would agree to provide them reasonable housing, food and medical care. Desperate times call for desperate measures. When the American people see the patriotic sacrifices being made by the super rich, our collective sense of fairness would be satisfied, and with all that money we could, we could...close the 1.5 trillion dollar deficit for 2012. Yep, we would only fix the problem for one year. Then in 2013, there wouldn't be another 1.5 trillion to confiscate. But, for one glorious year there wouldn't be any fat cats not paying their fair share, and certainly that would be worth it...right?

When Republicans talk about illuminating "waste, fraud and abuse" from the federal budget as a way to balance the budget I get angry because the amounts of money involved are like treating a knife wound with a band-aid. When Democrats call for millionaire tax hikes as a way to close the deficits I also get angry. Both approaches amount to score settling appeals to political interests, and do nothing the address the big problems driving our nation to the edge of a fiscal abyss. Those big problems are out of control spending, and a tax system that has successfully managed to remove half of our citizens from the tax rolls. Any real and enduring fix will HAVE to include dramatic reductions in federal spending AND tax increases..on EVERYONE, not just the Warren Buffetts of this world.