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.