By Fareed Zakaria, CNN
On Monday, Senate Republicans blocked debate on the Buffett Rule, the 30% tax rate floor called for by President Obama affecting anyone earning more than $1 million a year. If I were in Congress, I'd vote for the Buffett Rule even though it remains highly unsatisfactory. Here's why:
The Buffett Tax will raise about $47 billion over the next ten years and the federal government will spend vastly more than that - $45 trillion over the next ten years. So the total revenue from the tax is clearly trivial in comparison to the scale of the problem in terms of deficit or debt. I made this point in my discussion with the Chairman of President Obama’s National Economic Council, Gene Sperling. His response was to really not view it in isolation but to view it as one part of a much larger deficit reduction strategy. He said 'We already have cuts in many programs; we proposed more.' Sperling implied that President Obama was going to accept even more discretionary spending cuts.
Sperling referenced the deal that President Obama and Speaker John Boehner almost came to this past summer in which there were deep cuts. Sperling said that when cutting programs like Medicaid quite substantially, the Administration is saying ‘We have to balance those on the principle of shared sacrifice by asking those who have been most fortunate over the past decade to pay their fair share.’
I think as a matter of fairness, the Buffett Tax makes sense.
My problem with it is that what we really need is comprehensive tax reform. We have what I would describe as the world’s worst tax code. It is the longest, the most complicated, riddled with loopholes, exceptions and deductions - all of which are fundamentally institutionalized corruption. They are a way that Congress is able to reward powerful constituents by giving them what seem to be small giveaways in the tax code but which are, of course, government grants often amounting to hundreds and millions and billions of dollars in perpetuity (because unlike appropriations, these do not come up for review every year; once you put in a tax exemption or preferential tax treatment, it exists forever).
I would be much more comfortable with the Buffett Rule if it were part of a larger tax reform strategy. Gene Sperling told me that President Obama has laid out broad outlines of what tax reform should look like. The implication was that it was up to Congress to do it. But the chance that this broken, dysfunctional, divided Congress is ever going to do something as large-scale and sweeping as major task reform strikes me a highly implausible. This is an area that would take substantial presidential leadership.
I don’t have any objection to the Buffett Rule. I don’t have any objection to paying more taxes myself. But I think that we’ve once more missed a great opportunity for really solving a problem through comprehensive tax reform with the kind changes Simspon-Bowles suggested with the elimination of hundreds and hundreds of loopholes raising hundreds of billions if not trillions of dollars. Instead what we have is something more on the lines of a gimmick. All that said, if I were in Congress, I would vote for the Buffett Rule.
We have the highest corp tax rate in the industrialized world, but most major corporations pay little or nothing because of loopholes & offshore havens. Only small & mid-size businesses pay full taxes because they cannot afford to play in the loopholes. The same is true of our personal tax code. No matter how you slice it, the big 3 (SS, MC, & Defense) suck up the majority of our budget, and they either need to be paid for or changed. Easy math, hard decisions.
Cut spending down to its traditional 20% of GDP and then we can discuss raising revenues. But of course, history already shows that if goverment spending is held in check, then revenues natually flow to government coffers.
I sometimes get sad reading these posts. I can't believe that so many people really believe that ANYONE should have to give over a THIRD of their income to the U.S. government. This administration and the FAR left are appealing to the worst in people (GREED & ENVY). I don't make a lot of money and I don't care how much money someone else makes. Good for them. So many people keep talking about the RICH not paying their fair share although the stats show that the top 10% in this country pay the majority of Federal income tax while over 40% pay NOTHING.
Besides, why should an investment be charged the same % as payroll? The person investing is taking a RISK can could quite possibly lose some or all of their money depending on the investment. In addition, the money they are investing had to be taxed before at some point down the road. The problem is that Americans are becoming so used to being taxed on everything that we'll let anyone tax us on anything.
And for those intellectually dishonest people out there that complain about %s. 14% of 1 million dollars is still a heck of lot more that 20% of 50,000. What are those people paying more of an amount in taxes getting from our government that the middle class or poor isn't? Do we have tanks guarding their houses? Do we take them to work in F-15s? NO! They do create jobs however. This % argument is the same BS argument America haters use against our charity #s. You hear people talking about the % of charity/aid given by the U.S. to the world is a lower percentage of our GDP compared to some other countries. YES, that is quite possible because our GDP is SOOOOO MUCH higher then most of the world. Ask some starving guy in Africa if he would like a whole truck load of rice from the U.S. or one piece of rice from France and see if he cares what % it is.
If you really want FAIR establish a FLAT tax with no deductions except charity.
Less Government, Less Taxes, Less Spending. --> More money to spend on our own families
I agree. An overall tax reform is needed. I would also pass the buffet rule because it is fair. Sure over time what it brings in won't compare to what is spent but its a step in the right direction. Just because its not a cure all doesn't make it any less legitimate. Part of the problem is the fact that for many years we have been missing out on all this millionaire tax to begin with. But I agree in the grand scheme of things, tax reform is needed. The loopholes are the real problems but that doesn't make the buffet rule less fair whether a political ploy or not. Thats like saying .. why drive a hybrid when our carbon emission is still off the charts. ... Baby steps. Its hard to make overwhelming change all at once, especially when people have to agree to it. No one likes immediate radical change.
I haven't read all of the responses... but has anybody at all brought up the topic of reforming CONGRESS? How about we start with them AND the tax code at the same time.
Too much work? I don't think so.
Why do a certain few people basically get to write their own checks if they are elected? Why are there no term limits? Why did it take an independent investigator to prompt change in Congress regarding insider trading? Their rules, aside from classified military information, should be no different than the rest of us.
They are to SERVE us, not burden us with their differences and inability to negotiate.
First of all lets be clear when they state Buffet pays a lower percentage that his secretary that is a lie. He pays 15% on capitol gains, his secretary pays the same on capitol gains, Buffet may or may not pay a higher or lower tax rate on his wages but that is not what Obama, the media or Buffet are talking about.
How is this for tax reform ...
1. Eliminate the difference between WORK income and INVESTMENT income ... if you earn $1 you pay taxes on $1 ... including income tax, FICA, medicare, etc
2. Us a progressive tax system with gradual step up ... maybe 5 / 10 / 15 / 20 / 25 as the levels – Each step up should double the prior break point ...
3. Eliminate the marriage penalty – a married couple earning 2X pays the same rate as a single person at X...
4. Eliminate all of the deductions from the system EXCEPT one base deduction that is based on an average for the poverty level (and cap these at 4 deductions per return).
5. On the corporate side go to a flat tax based on earnings with only one deduction to lower the rate for products PRODUCED in the US ...
My guess is it can meet a lot of the goals ... earn more / pay more, reduce overall rates, increase total amount raised and encourage US based investment ...
however with the rules, the left base would be unhappy. Only 4 deductions ( oh my god !!!)
The wall street will cry and complain
The politicians dont have the guts or courage to make real changes
Ramesh, what communism. Where in the maniofest it says that rich should pay 30% min tax. And in the bible for that matter. Of course hey should as we live in different world, where mass production and technological advances made some work irrelevant and non existent, where lucky few enjoy success even as the result of thier own hard work. As a society we need to be more fare, not communism fare, but somewhat fare to less fortunate. But I agree that this is not a solution and even more agree that nothing substantial can be done with tax code or anything at all with this Congresss and political state in the country.
Buffer rule is a basically a quick fix attempt to add yet another amendment to essentially cancel the effect of some previously adopted amendments. Basically a proposal from someone who did not take time to understand what is in the current legislature, but decided to fix it with an axe.
1. Tax Capital Gains at the same rate and any other types of income, AND AT THE SAME TIME,
2. Abolish the $1500(single)/$3000(couple) limit of the Capital Loss for each year - make it possible to write off any about in your Schedule D.
NOTE: I am not proposing any new legislation: all what I am proposing is to get rid of some portions of the existing legislation.
The problem is: some say that taxing Long Term Capital Gains and Qualified Dividends at 15% rate is not fair: 15% is too low. However, it may be gain one year and loss for the next, then gain again. In happened in 2007-2008-2009-2010-2011 - You have gains you pay taxes, then you loose what you gain but have no ability to write off your loss, then you partially recover what you lost and pay 15% as it would be a fresh gain starting from the lowest position as the "base cost" for the purpose of Capital Gains Tax. The current Capital Gain Tax Law literally works like a rectifier. That is not fair: on a longer term you end up paying your real money for fake Capital Gains - the gains which exist only on papers sent to you by your bank, but not real money.
Rob, I will show you a few counter points to your tax proposal.
1. When you work at a job you're essentially putting nothing at risk. You get a place to work and the materials are provided. You usually get some benefits. When you invest your own (after tax) money in a company, it is all at risk. I have lost much doing this. So based on this reality, investment return should be taxed less.
2. A simple tax code can still contain progressive levels as your state. The lowest level will have to be 0.
3. Forget the marriage penalty. The cost of living for two people living in the same house is lower than two single people living in two houses. And don't say it takes a bigger house, it doesn't.
4. Forget deductions altogether, start the income tax at 150% of poverty level, below which it is 0 tax on income. One possible exception is a deduction for up to two kids. You want to over populate the world, do it at your own expense. But this would mean no deductions for spouses that don't work for income and lets get rid of alimony.
5. The corporate can be tiered, maybe 3 levels. What is made in the US? that is complex, Raw materials, parts, assembly. Some incentive seems like a good thing but must be well defined.
In the real world none of it will happen. The Senate can be blocked by some threat of filibuster so even a majority can't rule. One last thing. Anyone who has complained about those who pay no income tax (remember there are plenty of other taxes) should just trade places with them for a year, income, house and all. It might change your mind.
NewsBusters: CNN's Zakaria Supports Obama's Buffett Rule
Taxes are not the real problem – the real problem is that our governments (local, state and federal) are just too big to be effective. They have become to compartmentalized and they don't interact well. we need to cut about 30% of the workforce. We also need to consolidate departments and we need to allocate our tax dollars for essential things like roads, education, healthcare for the unfortunate. Further, we need to cap discretionary spending for things that really don't serve the people of america – like perpetual welfare
Tax reform is badly needed, but it likely won't solve the problem of government (on all the unnecessary and somewhat redundant levels we have) simply costing far too much.
n 2011 our household paid 33.12% of every gross dollar earned in one form of tax or another. Counted in that number are real estate taxes, self-employment taxes, unemployment taxes, state replacement taxes, regular medicare and social security taxes, state and federal income taxes, sales, liquor, utility taxes, tolls, gasoline and vehicle taxes like annual license stickers. Adjust income taxes, and just like "whack a mole", another levy, fee, or other inventive way to feed the king's coffers will shortly take it away.
About 7% of the American economy is underground now. Keep up the never ending taxation fiasco and our underground economy will mushroom to the 30% or so found in Greece or Italy. Once that many people are evading taxes, it will be tough, if not impossible, for the king to reassert control.
This is nothing more than a political gimick by the president. His only hope it to galvanize the democratic base . He knows that in an election year, this was never going to be passed. He just brought it up so that he can hammer Romney on the campaign trail.
What happened to the 2008 promise of being different!!!!
I read the other comments I can't help but wonder who are these people that don't pay taxes? If anyone in this country buys anything in this country they pay taxes. Those with food stamps, wellthey have to buy clothes, buy gas, if they own a car they pay property taxes, they buy a burger there's a tax (Burger King, McDonald's & Wendy's don't accept food debit cards) and don't think those free cell phones are free, there's a fee for the minutes and guess what , there are taxes! So where are these people getting that BS line about they don't pay taxes? But yet there are some who'd rather see someone get paid $12 million a year to dribble/shoot a basketball, throw/catch a football, throw/hit a baseball and pay less in taxes then the ones watching them and worry/complain about the poor not paying taxes! As a comedian says, "Wotta Country!"
those who work under the table don't pay much fed taxes. They under-report income.
Amongst some of those grossing under 100,000. per year, they cheat the Fed .Gov't. by 700 billion a year. It was about 400 billion 10 years ago. So most of our deficit could be blamed that.
II think we need a little more honesty and integrity as so much is based on the "honor system."
Two simple fixes for what ails America:
1. Flat tax to eliminate waste, corruption and abuse while raising revenues, making people's lives easier and wiping out a giant, parasitic swath of the economy that preys on tax scams, deductions, etc, while making revenue raising more transparent and more directly linking payer and payee and programs – see 2 below for details
a. Variant is VAT
2. Reform election process including elimination of Super PAC, PAC and all lobbyists, with restricted campaign schedule like other countries where representatives actually serve the electorate
Top rate when Eisenhower was President, +90% all 8 years, on couples making $400k/yr. There were 24 Federal tax tiers.
When Nixon left office, top Fed tax rate was 70% on couples making $206k/yr.
Pres.Obamas Buffett rule is showing that the rich can have a patriotic heart,by coming forward and voluntarally investing in our country ,tax wise...You won't see the Romneys of the 1% coming forward ,I assure you.They invest in only things profitable for THEMSELVES,the rich,egotistical rightwing extremist ,who think they're holier than thou.Pres.Clinton had the right idea and it left us with a measureable federal surplus,a fact that has not been achieved governmentally since.Even with bipartisan support,remember republicans when people were civil with one another, is that too hard to comprehend,not really.Years ago,before the rise of republican teabaggers and extremism,people actually worked together to help, not hinder this great country.There was no obstructionism,no anti-government radical groups,nothing.Just people working across the aisles in both houses patriotically for the red,white and blue.
Pete, you have no knowledge of American political history. In your view, conservatives should just go along to get along with whatever the left wants. Then there will be no divisiveness.
The 1% pay 39% of the taxes! If that is n ot fair, what is? Actually, a flat tax of 10% on all income (wages, dividends, cap gains, individual and corporate) with no deductions would be fair to all. That way, you pay in direct proportion to what you earn, and everyone pays someting.
Even Warren Buffet doesn't believe in the the "Buffet Rule", because he still owes about a billion dollars in back taxes! ...put your money where your mouth is Warren! ...LOL
Good point! Buffett can well afford to pay tax lawyers to F with the public sector union grade dummies from the IRS.
That's why the IRS targets the little guys (like waiters who don't declare all their tips) more than the big guys like Buffett. It's easier.
Liberalism is a mental disorder.
European Socialism: Tax the rich until they've either left the country or there is anyone left to tax and everyone goes broke.
It worked so well for Greece, Spain, Portugal, France, England and Italy. And its working so well in California, Wisconsin, Connecticut, New York, Illinois and New Jersey.
Liberalism is a mental disorder.
The Buffet Rule has a lot of basis for it's proposed enactment. America's wealth barrier is getting larger by the year and it's time that those whose portfolios are in the millions should pay the equal amount of tax that a $50,000 or less pays!!
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