Let Obama have his “Buffett Rule.”
I have changed my mind. Until now, I have opposed raising taxes on “the rich.” The very idea that the wealthiest taxpayers don’t pay their “fair share” of taxes, as President Obama is constantly saying, is so much populist drivel. The top 10 percent of earners in America pay more than 70 percent of taxes while those in the bottom 50 percent pay essentially nothing.
I not only oppose raising taxes on the rich, I oppose raising taxes on anyone. Our problem is not under-taxation. The federal treasury is collecting about 19 percent of gross domestic product in taxes, a percentage that has been remarkably stable over the years irrespective of tax rates.
The reason we are running gargantuan deficits and the reason that we are piling debt upon debt is because of over-spending. The federal government is currently spending about 25 percent of GDP, up from under 20 percent as recently as 2007. As a result, the federal budget deficit has gone from $158 billion in 2007 to over $1.2 trillion today.
But with all of this said I am nevertheless changing my mind regarding Obama’s proposal of the so-called “Buffett Rule” – the rule under which high-income earners would have to pay a minimum tax rate of 30 percent, even if their incomes are derived entirely from investment as opposed to wages. I am going to stop, at least for now, pointing out that taxing investment at the same rates as wage income will have a devastating impact on business growth, investment and job creation. I’m going to quit harping on the fact that money that is used for investment is almost always money that has already been taxed. I’m just going to let it go because as correct as these arguments are, I am not changing any minds.
Instead, I am urging House Speaker John Boehner and Senate Minority Leader Mitch McConnell to arrange a meeting with the president at which they say, “Fine, Mr. President. We’ll give you what you want. But only if you agree to go out in public and accept responsibility, in advance, on behalf of the Democratic Party and liberals everywhere, for the results.”
If the arguments that conservatives have been making won’t change any minds, the results will. The results will not be pretty.
First, in all likelihood, federal revenues will actually decline. The wealthy have the greatest range of options with respect to when, where and under what circumstances they engage in the transactions that produce taxable income. If wealthy taxpayers are faced with an unfriendly tax environment, they will time their taxable transactions accordingly. The wealthy, more than any other group, can afford to wait. And wait they will.
Thus investment capital will dry up. Investment is not optional if you want to grow an economy so our already anemic economic growth will once again turn negative.
As for those young, enthusiastic voters that helped propel Obama into office; they will find themselves as debt-laden college graduates unable to find jobs.
Home values will continue to decline. Retirement plans will continue to lose value. Household wealth will continue its downward slide.
All of this will put even more strain on an already overspent federal treasury and the already stratospheric federal deficit will go even higher.
None of this will be pleasant but I’m now convinced it’s necessary. Only by tying liberal policy positions to real world results, as Boehner and McConnell should force Obama to do as a condition of enacting his agenda, will liberalism start to be discredited among those that still don’t get it.
It will be painful, no question. But in the end, it will be worth it.
And it may be our only remaining hope.