Barack Obama, September 19, 2011:
Middle-class families shouldn’t pay higher taxes than millionaires and billionaires. That’s pretty straightforward. It’s hard to argue against that. Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it.David Freddoso in the Washington Examiner, September 20, 2011:
It was even more straightforward than he seemed to think. Not only should middle-class families pay less than millionaires and billionaires, but in fact they already do pay less than millionaires and billionaires. Much less.John S. Gordon in the Washington Post, September 24, 2011:
Obama said raising taxes on millionaires isn’t class warfare, but "math." His math may be off: According to the IRS, those with adjusted gross incomes of more than $1 million paid an average of 23.3 percent in federal income taxes in 2008; those earning between $100,000 and $200,000 paid 12.7 percent; and those earning between $50,000 and $100,000 paid 8.9 percent. Nearly half of American families don’t make enough money to pay federal income taxes at all.Daniel Indiviglio at the Atlantic, September 20, 2011:
So how much would the so-called Buffett Rule bring in? It's hard to say, because Obama didn't define precisely how it would work. But he did say it would create a tax rate floor for those who make more than $1 million per year. So let's use 2009 tax return data from the IRS to imagine some possible scenarios for how much additional tax revenue the new tax could bring in. Here's a chart:Mark Perry on Carpe Diem, September 19, 2011:
Let me explain what's going on here. I used IRS data for 2009 adjusted gross income (which I know isn't perfect, but it was the best they had). I then calculated the effective tax rate based on its data to be 29.1% for all Americans who earned more than $1 million. I consequently took the total income of the group and multiplied by different tax rates (as shown). I subtracted the taxes already paid (at the 29.1% effective rate) to figure out how much additional revenue they'd provide to the U.S. government at those new tax floors.
As you can see, the short answer is: some, but not enough to make a dent in the deficit. If you put a floor at their current marginal tax rate of 35%, the government would obtain $37 billion more dollars. That might sound like a lot, but it amounts to just 2.5% of the 2009 $1.5 trillion deficit (which is the red line shown). If you increase the floor to the pre-Bush-tax-cut marginal rate of 39.6%, the additional revenue grows a bit -- to $66 billion, or 4.5% of the year's deficit.
Even if we account for payroll taxes (which the chart below does for 2007 using CBO data), Buffett's tax analysis still doesn't make sense. Most "super-rich" taxpayers are paying federal taxes (income, payroll, corporate and excise) at a rate of 25-30% of their income (much higher than Buffett's 17.4%), and the middle-quintile and second-highest quintile groups are paying average tax rates of only 14%-17% (about half of the 33-41% Buffett's employees are paying, assuming they fall in those income groups).Peter Ferrara in Forbes, September 22, 2011:
[W]hat creates jobs is capital investment. The result of all of Obama’s tax increases on capital investment would be even less such investment, which means even fewer jobs. If the prospect of those tax increases drives the economy back into recession, unemployment will soar further, along with government spending, deficits and debt.An anonymous Facebook user quoted on Instapundit, September 19, 2011:
If you try to rob the rich, you only end up stealing from the poor and working people. That is because the poor and working families have the most to lose when the economy turns bad, as they lose the jobs and wages they need to maintain a basic standard of living.
Obama is great at math. He divides the country, subtracts jobs, adds debt and multiplies misery.Agreed, several times. See also the Washington Examiner in April.
Wall Street Journal, September 27, 2011:
As data from the Internal Revenue Service make clear, the vast majority of those earning more than $1 million per year typically pay tax rates two to three times higher than people making less than $100,000. In 2008, the average tax rate for millionaires and above was 23.3% and for those earning between $30,000 and $50,000 it was 7.2%.MORE & MORE:
But the opportunity to educate the public would be even greater if Mr. Buffett would let everyone else in on his secrets of tax avoidance by releasing his tax returns. Going only by Mr. Buffett's unverified claims, his federal taxes in 2010 amounted to 17.4% of his taxable income, probably because much of his income was from capital gains and dividends. It's also likely that he took significant deductions for charitable donations. No doubt the millions of Americans who could end up paying more because of this claim would love to see the details.
Mr. Buffett also wrote in the New York Times that none of the other people in his office paid less than a 33% rate, and at least one colleague paid 41%. This suggests that Mr. Buffett's Berkshire Hathaway staff are the kind of folks the President would consider "rich." Mr. Obama might even call them "millionaires and billionaires" if some of them have annual incomes of more than $200,000.
The Tax Foundation did the math and concludes Buffett's claim is, literally, "impossible."