'Buffett rule': An exercise in hypocrisy

  • Article by: JASON LEWIS
  • Updated: April 28, 2012 - 7:03 PM

Its namesake and others seek higher taxes while dodging them themselves.

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Warren Buffett

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Sometimes, it's all just too much to take.

The president himself has admitted, if not in so many words, that the so-called Buffett Rule is little more than a gimmick. Bringing in $4.7 billion per year won't do much to solve $1.4 trillion dollar deficits. And, the administration concedes, this latest attempt at soaking the rich does little to spur growth.

But what's especially galling for those with a bull's-eye on their back is the pious specter of Messrs. Obama and Buffett demanding higher taxes while deliberately ducking -- albeit legally -- the tax man themselves. Just how is it you make a moral argument about "fairness," all the while eschewing your self-described moral obligation?

In the last couple of years, it appears that Mitt Romney, Warren Buffett and President Obama have had effective income tax rates of 15.4 percent, 17.4 percent and 20.5 percent, respectively. All took sizable advantage of charitable deductions, which taken together with other taxpayers costs the Treasury $52 billion annually.

This pales in comparison, however, with the tax code's biggest loophole, the exclusion of employer-provided health insurance from taxable income. According to the Congressional Research Service, that amounts to more than $164 billion per year in foregone federal revenue, barely surpassing another middle-class tax break, tax-deferred pension contributions.

So why then is the president so obsessed with the Buffett dodge? True, when not preaching to the rest of us, the Oracle of Omaha has studiously kept his corporate salary at a minimum (i.e., less than his secretary's), thus avoiding a 35 percent top rate on ordinary income.

By deriving the bulk of his annual wealth from his investments, Buffett enjoys the lower 15 percent rate for capital gains and dividends. But the "rule," levying a 30 percent rate on any income for folks like Romney, Buffett and Obama, represents a massive new tax on investment and ignores the fact that corporate profits are already taxed at 35 percent before any gain is realized and even after any dividend is distributed.

Moreover, history shows that the "demand" for capital gains is, in economic terms, the most of elastic of all. If rates go up, gains simply aren't realized, depriving the government of revenue. If rates decline, then revenue tends to rise along with after tax earnings. This is exactly what has occurred every time the capital gains rate was adjusted over the last four decades.

Regardless of the numbers, the larger ethical question remains. If paying more of one's income in taxes is such a moral imperative, why haven't those screaming the loudest for more government revenue voluntarily complied with their own rule?

No one forced the president or Warren Buffett to arrange their affairs in such a way to minimize their individual burden. It is, after all, one thing for those who think taxes are already too high to take advantage of every conceivable strategy to lower their effective rate. It's quite another for those sanctimonious liberal souls yearning for "fairness" to do the same.

Call it the triumph of hypocrisy.

Contrary to popular myth, the wealthy already pay their "fair" share, with just 10 percent of the nation's highest earners shouldering 70 percent of the income tax burden. And when you include the distribution of all taxes on the rich, the top 1 percent have an effective rate of 29.5 percent, according to the Congressional Budget Office. Meanwhile, the Tax Foundation reports that 58 million filers had no income tax liability whatsoever in 2010.

Yet if lower taxes on investment income so offend the sensibilities of the revenue-raisers, let me suggest a modest proposal: Lower the top marginal rate to, say, 20 percent, then tax all sources of income at that rate. Presto -- you've done away with the Buffett dodge without raising taxes overall.

Don't hold your breath -- because this runs directly counter to the administration's increasingly transparent strategy of raising taxes on a select few while taking larger and larger numbers of voters off the roles entirely for crass political gain.

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Jason Lewis is a nationally syndicated talk-show host based in Minneapolis-St. Paul and is the author of "Power Divided is Power Checked: The Argument for States' Rights" from Bascom Hill Publishing. He can be heard from 5 to 8 p.m. weekdays on NewsTalk Radio (1130 AM) or online at jasonlewisshow.com.

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