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The Buffett Rule, Rebuffed: What Now?

April 17, 2012, 11:42 AM
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Now that Senate Republicans have blocked debate on President Obama’s proposed “Buffett Rule” to impose a minimum tax rate on Americans who earn over $1 million, a few questions present themselves.

Will this defeat strengthen the President’s re-election campaign?

Believing it will accomplish just that, Joshua Green compares yesterday’s GOP rebuff to Darth Vader’s vanquishing of Obi-Wan Kenobi in Star Wars, Episode IV. Just before succumbing to Darth Vader’s light saber. Obi-Wan warned:

You can’t win, Darth. If you strike me down, I shall become more powerful than you could possibly imagine.

On this reading, Obama rallied his troops to fight a battle he knew he’d lose in order to win the war a few months down the road. Michael Medved, by contrast, thinks the Buffett Rule is “a silly agenda item that will disappear in 2013, even if Obama is reelected.”

Who is right? Green’s analysis seems more on target. The Buffett Rule polls well -- as many as 72 percent of Americans favor the idea -- and every Republican vote against the proposal this week will provide fodder for Democratic campaigns in the fall. Good politics this is, Yoda might say. Good policy too, but not quite for the reason Obama is emphasizing, and not as a stand-alone proposal. (Read on.)   

What is the President’s plan for taxpayers earning between $250,000 and $1 million a year?

Note the lacuna in this passage from Obama’s White House comments on April 11:

Now next week members of Congress are going to have a chance to vote on what we call the Buffett Rule and it’s simple. If you make more than $1 million a year...you should pay at least the same percentage of your income in taxes as middle class families do. If, on the other hand, you make less than $250,000 a year, like 98% of American families do, your taxes shouldn’t go up.

What about the slice of the population earning between $250,000 and $1 million? So far this month, nary a word.

It seems that the President’s big-picture goal remains unchanged from 2008, when he campaigned on keeping the Bush tax cuts for the middle class and letting them expire for everyone making over $250,000. This time around he may be laying a cornerstone for that proposal by taking on the millionaires first.

What is the administration’s real motivation behind the Buffett Rule?  

In his White House announcement last week, Obama focused on the economic benefits of the plan:

I want to emphasize...this is not simply an issue of redistributing wealth. That’s what you’ll hear from those who object to a tax plan that is fair. This is not just about fairness. This is also about growth. This is also about being able to make the investments we need to succeed and it’s about we, as a country, being willing to pay for those investments and closing our deficits. That’s what this is about.

While the Buffett Rule would raise tax revenues, the savings are rather modest at $47 billion over ten years. This will take just a nick out of the nation’s $1.3 trillion deficit.

The real benefit of the Buffett Rule is what it symbolizes: a first step toward repairing the injustice of a tax code that has helped create staggering levels of income and wealth inequality. It might be a baby step, and it certainly does not obviate the need for comprehensive tax reform, but it turns us in the right direction. The disparities of income in the United States are as great as they have been at any time since just before the stock market crash of 1929. In the words of heralded French economist Thomas Piketty, “the United States is becoming like Old Europe,” where excessive concentration of wealth fueled abuses of power, political oppression and ultimately revolution.  

Not to be confused with Big Thinker Will Wilkinson, who argues that income inequality shouldn’t really trouble us, Richard Wilkinson and Kate Pickett have shown that inequality produces a range of negative effects on society:

These include physical and mental illness, violence, low math and literacy scores among young people, lower levels of trust and weaker community life, poorer child well-being, more drug abuse, lower social mobility and higher rates of imprisonment and teenage births.

The levels of inequality pose a moral crisis as well. In an influential paper from the 1990s, Harvard philosopher T.M. Scanlon suggests that those on the bottom of an economically polarized society may suffer “stigmatizing differences in status” even if they do not wallow in abject poverty. Scanlon argues that these dignitary harms can pile atop other forms of disadvantage in political clout and economic success and belie the claim that “equality of opportunity” is an operative ideal. Where is equal opportunity in a system in which someone born into a family in the bottom income bracket has virtually no chance of moving into the top quintile, and where middle class Americans are increasingly losing ground to those at the top?

President Obama apparently thinks the safer way to justify higher taxes on the rich is to pitch the proposal based on its deficit-reduction potential. But if he wants to get the ball rolling for meaningful tax reform, Obama will summon his rhetorical powers to explain how the Buffett Rule could help reduce the nation's massive and destructive wealth inequality. When Fox News analysts, Rush Limbaugh and Mitt Romney inevitably decry this as “socialism,” Obama can tell them why they’re wrong. And he can defend the first step of a tax policy that is fairer for all Americans.

Follow Steven Mazie on Twitter: @stevenmazie

 

 

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