Millionaire Tax Machinations
By Michael Krull
President Barack Obama and his fellow Democrats in the U.S. Senate are this week coordinating their support for the so-called “Buffet Rule,” which, is a bill that would impose a minimum 30% income tax on those who earn more than $1 million a year. Democrats say this is an issue of “tax fairness.” Senate Democrats will force a procedural vote on the bill, while President Obama will highlight the bill in a “non-political” speech in Florida. The bill is rightly a non-starter in the Republican-controlled House.
The Millionaire Tax is nicknamed the “Buffet Rule” because billionaire investor Warren Buffet once remarked that it is unfair that he paid a lower tax rate than his secretary.
Given that likely Republican presidential nominee Mitt Romney revealed earlier this year that he paid an effective tax rate of 14% in 2010, Democrats are using this week before the annual April 15th tax filing deadline as an opening argument in the November election.
The Democrats’ disingenuousness on this topic, however, is witnessed by the fact that right after President Obama gives his “non-political” speech, he will attend a $10,000 per person fundraiser in Florida, before attending a second Florida fundraiser that will charge $15,000 per person. Middle class Americans will not be attending either of these events – millionaires will. My bet is that none of those attending the two fundraisers pay the top income tax rate of 35% - except, maybe, the small business owner that will supply the food, beverages and wait staff.
Facts: on average, those with incomes over $1 million pay an effective overall tax rate of 25% on individual income and payroll taxes - that compares with an effective rate of roughly 9.3% for people who earn between $40,000 and $50,000 per year, according to the Tax Policy Center. The White House claimed last week that 1,470 millionaires paid no income tax in 2009 (which begs the question: If they know this, why don’t they prosecute them?). The IRS reports that in 2009 there were approximately 237,000 tax returns with adjusted gross incomes of $1 million or higher.
More facts: in 2009, the top 1% of earners – yes, the 1% that the Occupy Movement is all worked up about - paid 36.7% of all federal individual income taxes but earned just 16.9% of adjusted gross income (again, Tax Policy Center analysis). Add to this state and local taxes, which include property taxes, and it is clear that millionaires already pay the bulk of taxes.
High-income Americans pay their taxes, but they also have the means to hire clever accountants and tax lawyers to mitigate them. In an age where individuals can electronically transfer funds around the world from their smartphone, jacking up tax rates on those who earn the most is insane. These folks can easily establish themselves offshore where income taxes are much less – or nonexistent – and still live and work in the United States. Better to have lower tax rates and less burdensome regulations and gain from these high-earners than lose all of the income tax revenue.
Most economists who have looked at the Millionaire Tax agree that the bill would do little, if anything, to boost the economy or put a dent in the deficit. Even the Congressional Budget Office estimates that if it is enacted the bill would generate roughly $47 billion over the next TEN years; this is less than 1% of the $6.4 trillion deficit projected under President Obama’s budget.
The vast majority of Republican office-holders advocate lower tax rates and simplified tax rules for all Americans. This is a far superior way to address tax fairness than pitting Americans against one another.
It seems that is all Democrats are doing these days: Trying to divide the American electorate rather than lead. Their actions are cynical, pandering and political rather than helpful. President Obama’s budget is a purely political document. It is so political and out of touch with reality that it received exactly zero votes in Congress last month (414-0 in the House and 97-0 in the Senate). That’s right: No Democrat voted for the President’s budget. Senate Democrats have not passed a budget in more than 1,000 days.
These games are not only from Democrats in Washington, DC. Since he brought it up, there is no reason why Warren Buffet can’t assuage his guilt of paying a lower tax rate than his secretary by just deciding to pay the government more than he owes in taxes (though I would wager that the total amount he pays is more even if the rate is lower). The same goes for Hollywood liberals who have a grand time telling the rest of us how to live. Maybe all those millionaires at the Obama fundraisers should do so as well. Group therapy for these Democrats would be better than consigning us all to divisive politics and higher taxes.
But why should Democrats let facts and reason get in the way of a good political issue - especially in a big swing state like Florida?
Michael Krull is a graduate of Luther College and Iowa State University. He has worked on disaster relief for the State Department, a major Washington, DC public relations and political consulting firm, and is currently working for American Solutions for Winning the Future. He is a member of the Council on Emerging National Security Affairs.