As you've probably heard by now, legislation to codify the "Buffett Rule" into tax law was introduced and then analysed by the Joint Committee on Taxation who estimated that the bill would rake in $47 billion over the course of eleven years.
The plan is named for billionaire investor Warren Buffett, who has said taxes on the rich are too low. Obama has proposed requiring that people earning at least $1 million annually pay at least 30 percent of their income in taxes, but has provided few details.
In an analysis provided to The AP on Tuesday, Congress' Joint Committee on Taxation estimated that a bill introduced last month by Sen. Sheldon Whitehouse, D-R.I., attempting to enshrine Obama's proposal into law would collect $47 billion through 2022. The measure has little chance of advancing soon, especially before the November elections.
That's a much less rosy prediction than the estimate put forth by the The Tax Policy Center which had projected a $114 billion gain over the next ten years. Either way, it's not much of a dent in the deficit.
This year, the Buffett rule would increase federal revenues by all of $1.1 billion.
That's less than one-tenth of one percent of the $1.2 trillion budget deficit Mr. Obama is scheduled to run this year. Through 2022 Joint Tax expects less than $47 billion in total new revenues from the Buffett rule while the government will be adding trillions of dollars to the national debt. Joint Tax even concedes, as it is rarely wont to do, that the rule will affect taxpayer behavior: By raising the effective tax rate on capital gains, the rule will encourage people to realize fewer capital gains.
Since Mr. Buffett has never been shy about touting his ability to avoid capital-gains taxes, the sage of Omaha was never going to take much of a tax hit himself.
In other words, the only way we're going to keep up with President Obama's spending habits is by raising taxes on more of us than just the "millionaires and billionaires." How? Stealth.
If the Buffett ruse is ever enacted, expect it to become a kind of Super Alternative Minimum Tax, slowly grabbing less affluent taxpayers—perhaps even Mr. Buffett's secretary—as inflation and income growth push people into higher tax brackets. That's where the real money is.
Welcome to 1981! A key feature of the Economic Recovery Tax Act of 1981, also known as the "Kemp-Roth Tax Cut," was the indexing of tax rates to inflation. Oh yippee... We get to fight that battle all over again.
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