The Buffett “Rule” is President Obamas title for a new tax he wants to put on millionaires, named after the 2nd richest man in the world, Warren Buffett who is active in saying he should be taxed more, but very inactive in writing voluntary checks to the government (I guess it only counts if its forcibly taken from you). Peter Ferrara explains the tax & Buffets support:
The Heritage Foundation explained it like this on Wednesday. The taxation of capital is like a trip on a toll road, where you have to pay $3.50 to get on the road, then $3.50 at a toll booth on the road, then a $1.50 toll to get off the road. Obama’s understanding of the tax code is like saying the toll for this trip is $1.50, which is somehow unfair to those who take the bus on the same route for a $3.50 total fare (assume the bus is exempt from the tolls). So he thinks the toll to get off the road should be $3.50 as well.
But Warren Buffett is more than happy with Obama’s proposals. That’s because his Berkshire Hathaway is effectively the largest tax shelter in the nation, partially shielding its investors precisely from the multiple taxation of capital. So raising tax rates sharply to make that multiple taxation far worse will just mean more customers for him. Buffett’s company is like a subway next to the road that only charges $1.50 total fare.
Dana Milbank at the Washington Post writes about the gimmickry of the Buffett Rule:
Three years into his presidency, Obama has not introduced a plan for comprehensive tax reform — arguably the most important vehicle for fixing the nation’s finances and boosting long-term economic growth. His opponents haven’t done much better, but that doesn’t excuse the president’s failures: appointing the Simpson-Bowles commission and then disregarding its findings, offering a plan for business tax reform only, and issuing a series of platitudes. The Buffett Rule, rather than overhauling the tax code, would simply add another layer.
A search of the White House Web site yields 17,400 mentions of the Buffett Rule — a proposal that would bring in $47 billion over 10 years, much of that from 22,000 wealthy households. By contrast, the alternative minimum tax gets fewer than 600 mentions on the site. The AMT, if not changed, will take about $1 trillion over a decade from millions of taxpayers, many of whom earn less than $200,000 a year.
A few months ago I posted this video on why the new tax is bullshit:
Peter Ferrara calls it “Obama’s Community Organizer understanding of taxation” and explains:
His rhetoric doesn’t recognize that under our tax system the earnings from capital investment are taxed not once, but multiple times.
First, by the corporate income tax, then again by the individual income tax through the tax on dividends, then if you sell the capital investment, through the capital gains tax, then when you die, by the death tax. When he complains that the rich are not paying their fair share, he is just looking at the rate on any one of these taxes, and not considering all of the others. So he wants to raise them all for those making over $1 million per year to what he considers the tax rate paid by the middle class, which he calls the Buffett rule.
As a result, Obama would increase the top capital gains tax rate by 100%, increase the top tax rate on dividends by 100%, increase the top two income tax rates by nearly 20%, and increase the death tax rate by nearly 60%, while the corporate tax rate remains the highest in the industrialized world. The capital gains tax rate under the Buffett Rule would be the fourth highest among OECD nations, as the Wall Street Journal noted on Wednesday.
UPDATE: How Buffet stands to profit over his public calls to pay more taxes:
Berkshire Hathaway, Buffett’s holding company, owns NetJets. NetJets is a company millionaires use in order to arrange fractional ownership of private jets — time shares, of sorts. NetJets lobbied like crazy, as Ryan Grim and Ariel Edwards-Levy at Huffington Post explained last month, to change the treatment under the tax code of flights on fractionally owned jets.
It’s complicated, but basically it’s about whether to charge a per-passenger tax as Washington charges commercial flights or a per-gallon tax as Washington charges the operators of private jets that are owned by one party. The latter treatment results in lower taxes.
Congress — mostly Ohio Republicans Pat Tiberi and Rob Portman, according to media accounts — stuck the NetJets provision into the transportation bill. The result is a “a much-reduced tax liability” for NetJets customers, and thus much higher profits for Warren Buffett. And earlier this month, the IRS began implementing this tax-law change.