Buffett Tax on Rich Will Hurt Average Americans
November 29, 2012
Billionaire Warren Buffett, writing in the New York Times, proposed a minimum tax of 30 percent on incomes of $1 million to $10 million and 35 percent on incomes above that. Unfortunately, Buffett's proposed tax hike is just another way of removing investment capital -- the engine of economic growth -- from the U.S. economy. It would also do next to nothing to close our long-term budget deficits, now running at $1 trillion plus a year, says Investor's Business Daily.
- Last year, according to the Treasury Department, the U.S. deficit was $1.1 trillion.
- According to a study by Congress' Joint Committee on Taxation, a Buffett-style 30 percent tax on all millionaires would generate just $5 billion.
- That's less than one-half of 1 percent of our budget.
Buffett and others have said tax hikes on the rich are "fair."
- The top 1 percent earn about 16 percent of all income in the United States, but they pay 37 percent of all the federal income taxes.
- The 400 richest Americans pay about as much in taxes as the bottom 50 percent -- about 72 million Americans -- do.
- As a group, millionaires have an effective income-tax rate -- that is, what they actually pay -- of 24 percent.
- For the rest of us, it's 11 percent.
As for Buffett's idea for a "minimum" tax on the rich, the United States already has one. It's called the Alternative Minimum Tax (AMT). It was put in place in 1969, after it was revealed that 155 people with incomes over $200,000 had paid zero in income taxes in 1967. It was meant to catch a handful of rich folks who were not paying their "fair share." Next year, thanks to bracket creep, the AMT will snare as many as 20 million middle class Americans.
Moreover, as economist Alan Reynolds of the American Enterprise Institute pointed out, the 1990 Omnibus Budget Reconciliation Act raised taxes on the rich to make things more "fair" and to boost revenues to reduce the deficit. How did that work out?
- In 1989, income tax revenues as a share of gross domestic product totaled about 8.3 percent.
- By 1992, after the tax hikes kicked in, they dropped to 7.6 percent.
Source: "Buffett Tax on Rich Will Hurt Average Americans," Investor's Business Daily, November 27, 2012.
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