Obama Failed Buffett Rule Test
The loudest rhetoric coming from President Obama lately has been about the Buffett Rule, which states that millionaires should pay 30% of their income in taxes.
But now it comes out that he and Michelle only pay 20.2% of their income of about $800,000 in taxes! They flunk their own standard by ten points!
How much brains does it take to get the whole country stirred up, demanding that the rich pay 30% in taxes and then fail to do that yourself?
The other major point Obama has been touting is his success in turning around General Motors, saving American jobs. Oh, really? The fact is that, of the 202,000 General Motors employees, only 68,500 live and work in the United States. Two-thirds of the corporation’s labor force lives abroad. Obama is not saving American jobs, he is saving jobs around the world. Indeed, General Motors — of which the government with a one-quarter share is the largest stock holder by far — is also the biggest corporate out-sourcer of jobs.
And, while we are on the subject of having the rich pay their “fair share” of taxes, how about the fact that General Motors, which is, in effect, owned by the government, paid not a penny of taxes on a profit of $7 billion last year! They, too, flunked the Buffett Rule.
The fact, of course, is that all the Buffett rule does is, in effect, raise the capital gains tax rate from the current 15% to 30%. Every time the government has raised the capital gains tax rate, revenues have fallen. Every time it has lowered the rate, revenues have risen. It is a tax that costs money and raises nothing.
When Reagan cut the capital gains tax from 28% to 20% in 1981, capital gains tax revenues rose from $12.5 billion under the old 28% rate to $18.7 billion under the 20% rate. The rate dropped by a third and revenues rose by a third.
Then, when Reagan bowed to liberal pressure and put the rate back up to 28%, revenues from the capital gains tax fell from $328 billion to $112 billion. The tax had risen by eight points, but revenues had dropped by two-thirds.
And, in 1996, when Clinton cut the rate back down to 20%, tax collections from the capital gains levy rose form $66 billion to an average of $100 billion over the next four years. More important, the capital gains tax cut stimulated investment and capital gains. Under the higher tax rate in 1996, there were $261 billion in capital gains in the U.S. In the three years after the cut, the total of capital gains rose to an annual average of $440 billion. So the Buffett Rule makes no economic sense and won’t do anything to cut the budget deficit. In fact, it will probably cost us revenue. Nor does it make political sense for a president who himself, fails to live up to its requirements.