Some high income Americans pay a lot of tax; others do not. If you have right tax advice and if most of your income can be structured as some form of "capital gains," your marginal rate -- what you pay on the your last dollar of income -- may be very low. The highest marginal income tax rate currently is 35 percent, while long-term (over a year) capital gains are taxed at 15 percent at most.
The Buffett Rule is a proposal to establish a minimum tax rate for "millionaires" -- people earning more than $1 million per year -- and the Senate is likely to vote on a version this week. The exact amount of revenue that this would bring in depends on the details, but there is no question that it is small relative to the country's need to control the federal budget. (The Joint Committee on Taxation scored one version of this proposal as generating about $30 billion over 10 years; the annual budget deficit will remain over $1 trillion in the near term even under the most optimistic projections.)
The biggest sticking point for any reasonable strategy to control the U.S. federal budget is that one side -- the Republicans -- steadfastly refuse to raise taxes, at all and on anyone.
There are three ways forward. Either the Republicans begin to compromise -- and agree to raise taxes as part of a comprehensive deficit reduction and debt control strategy, just as Ronald Reagan did. There is a great deal of confusion about whether Reagan raised taxes after first cutting them; see chapter 3 of White House Burning for the details of what actually happened.
Or the Republicans who have signed the Taxpayer Protection Pledge will prevail -- no one's taxes will go up and, most likely, some people's taxes will go down. In this case, either the deficit will continue to grow (which is what Newt Gingrich is proposing) or Medicare and almost everything else the federal government does will be scrapped (which is the position represented by Paul Ryan). My guess is that, in this scenario, we will say farewell to any meaningful form of social insurance -- good luck getting healthcare when you are 85 (unless you earned over a million dollars a year for many years).
Or the Republicans will lose big -- and fiscal consolidation can proceed without them.
A complete loss of support for the Republicans seems unlikely -- they will surely hold more than 40 seats in the Senate for the foreseeable future.
So the fiscal trajectory of the country -- and whether Social Security and Medicare survive -- depends very much on whether the Republicans will compromise on taxes.
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.
Much of federal government public finance is complex and hard for people to comprehend -- demystifying deficits and debt is a major reason we wrote White House Burning. Some of the reaction to our book is encouraging, particularly from people who are willing to spend some time with the details.
But the question behind the Buffett Rule is crystal clear and does not require you to buy a book or even read the newspaper. Should all high income Americans pay a moderate level of tax?
Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario.
Follow Simon Johnson on Twitter: www.twitter.com/baselinescene
Leo W. Gerard: Titanic Tax Shirking by Those in First Class
Phaedra Ellis-Lamkins: Let's Use Taxes to Put America to Work
Dean Baker: The War on Public Sector Workers
Joseph Rauch: Why Obama Should Raise Taxes in 2013
BUFFETT (Buffett Uber Fair Flat Everybody Taxed 30%) Tax has 3 parts:
1. Classical Buffett Tax - 30% on all income over 1 million dollars.
2. Buff Tax - 30% on hot sexy buff (but poor) celebrities and posers not eligible to be POTUS.
3.(All You can eat) Buffet Tax - 30% for everybody else, even those on SSI/SSD and corporations (since corporations are people too).
Thus the Democrats can increase spending while the Tea Party Republicans (who represent taxpayers) can recruit more voters and in a few years reduce both the debt, the spending, and eventually the 30% rate (in all 3 parts) to 20%, thus letting all tax payers (including secretaries AND Romney) pay as little/much as Obama and Buffett paid on 2011 income. With no special rates for investment income or deductions, the only way to make this tax more fair would be to make it a per capita tax.
Taxes need to rise and expenses need to be reduced. Everyone will be impacted.
Paul Ryan's plan would raise taxes on these people more. In fact an additional 6% more.
It is not hiding income, it is investing capital that they have already been taxed on. Capital gains have already been taxed at the corporate level. Taxes are already taken out of dividends at a rate of whatever that corporation paid so lets say 22%. Now they are hitting it again at 15% on the individual.
How are you treated unfairly compared to Mark Zuckerberg? Of the Billions of dollars that Mark has did he take that from someone else, or did he actually create that capital that was never there to begin with? In other words without Mark Zuckerberg everyone that has benefited financially from Facebook would not have.
Must like Elizabeth Warren, we need Simon in Washington now.
Do you know what percentages of a new business survive more than a year?
While Obama actually approved the Solyndra loan, the Bush administration laid the foundation it and supported the funding of next generation renewable energy projects.
I agree that the government is inefficient at using tax dollars wisely, but I do hope that you're not excluding Republicans from this judgment.
source:
http://georgewbush-whitehouse.archives.gov/news/releases/2009/01/20090106-4.html
Will not help an average person a bit.
I get that Obama who is worth 10.5 million doesn't really think about this but how about cutting spending?
Better symbolism might have been for the President to push the recommendations of HIS very own Erskine Bowles Commission. Instead, he has let that work gather dust while our deficit careens out of control.
Do you remember debt limit fiasco? It takes to tango. Where are Republicans?
If regardless of tax breaks the ultra-rich pay 30% on their income, they have no incentive to push for tax cuts or to dismantle our social welfare system. If the Buffett rule passes they will pay 30% no matter what.
The Buffett Rule means Repubs have nothing to offer the ultra-rich, meaning they've lost their funding. That is why extending the Bush tax cuts for the rich and defeating the Buffett Rule is do-or-die for Repubs. If the Buffett Rule passes there was no advantage to the rich to having Repubs control the House, so they won't contribute to them anymore. Either Repubs block the Buffet Rule or the party is defunded.
Solyndra failed because solar prices fell so far Solyndra's technology could not compete. Solar is now $1 a watt, and is cheaper than retail electricity in southern CA. Prices are dropping in half every 7 years, a decade from now solar electricity will be the cheapest source, cheaper than coal.
Bush inherited a balanced budget. He cut taxes for the rich, started two wars, signed Medicare Part D, and left Obama a $1T deficit and a Depression. The US lost 800,000 jobs Bush's last month in office, the most in history. What good did "that" do?
Supply-side is a failure, demand creates growth not investments. The US has too much capital relative to demand, that's why 10-year bonds yield 2%. Corporations are sitting on $1T in cash, so are investors. It's called "pushing on a string", trying to inject capital into a system where there is no demand. Interest rates are 0% but nobody will borrow and grow their business until consumers have money.
And most money is debt, not investment. Bush cut taxes for the rich by $300B a year, government borrows exactly that much extra back from them, sells them T-bills. The tax cut is sucked backed up, no net increase in investment capital, but the rich now have $300B more that we owe them every year. 20% of taxes is now to service the debt, and growing. The rich living off taxpayers, it's called a "rentier" society.
I know you won't read it, because of course you are smarter than the Nobel Prize committee:
http://www.nytimes.com/2011/11/07/opinion/krugman-here-comes-solar-energy.html