Via Sean Hackbarth. Remember, this gimmick is aimed at rich people who make most of their dough from capital gains, which of course are taxed at a lower rate than ordinary income in order to encourage investment. The idea is to make sure they’re paying as much federal tax as the average middle-class taxpayer is. You already know what an embarrassing sham that is in terms of deficit reduction — look no further than this graph — but how many rich people are we talking about here, exactly? Must be an awful lot to warrant a presidential speech on fiscal policy aimed squarely at this group. Watch the Bloomberg video below for the answer. Turns out that the vast, vast majority of the rich already pay tax rates in excess of the average middle-class rate of 15 percent. Depending upon how you calculate the effective federal rate, there are either 22,000 households (the White House’s number) across the span of the United States that make a million or more per year and pay 15 percent or less or just 4,000 households according to the nonpartisan Tax Policy Center. But among that sample, most of the potential revenue would come from the mega-rich at the very top, not the millionaire small-business owner. The White House’s numbers on them:
Of the 400 highest income Americans, one out of every three in this group of the most financially fortunate Americans paid less than 15 percent of their income in income taxes in 2008.
In other words, we’re talking here about a rule championed by the president of the United States and set for a vote in the U.S. Senate that’s targeting something like 130-135 households across the entire country. Which, incidentally, explains why the Buffett Rule would set a federal rate of 30 percent for millionaires, not the 15 percent needed to make sure they’re on par with John Q. Public, which is supposedly Obama’s big concern. If they set the minimum rate at 15 percent instead of 30, the already razor-thin amount of extra revenue they’re going to get out of this would all but vanish.
So yes, this is a total charade as a matter of serious fiscal policy, something that should be packaged as part of a “grand bargain” on entitlement reform to make the left happy rather than offered in isolation as a moronic “fairness” gambit. If Obama was 1/100th the “pragmatist problem-solver” that he claimed to be in 2008, he’d drop it now out of sheer embarrassment. But it does do three things politically for him, which explains why he took time for a speech about it. One: It’s an excuse to force a tough vote on the GOP. When they filibuster this in the Senate, Obama gets to roll out the “party of rich” messaging. Two: Reframing the tax debate in terms of “fairness” instead of revenue will help the Democrats later this year in their campaign to let the Bush tax cuts on the rich lapse. Unlike the Buffett Rule, that really would raise a bunch of revenue, but some voters may prefer the “fairness” logic in saddling the country’s job creators with an extra fiscal burden. Three: It’s a way to call attention to Romney’s wealth. Mitt paid an effective rate last year of 14 percent, which makes him an irresistible “Buffett Rule” talking point for Democrats for the next six months. (Never mind that his rate was reduced in part because of his great generosity to charity.) I always hoped we’d be lucky enough to nominate the guy whose health-care plan inspired Obama’s, but I never dreamed we’d be so lucky that the same guy would fit perfectly into their class-warfare narrative. Terrific.