Buffett Rule Persists (2012 May)

by Barry A. Liebling

Gardeners know that you have to pull up a weed by its roots to eradicate it. Similarly, in order to show that a bad policy is fundamentally mistaken you have to expose its faulty premises.

Warren Buffett, the fabulously wealthy investor and avid supporter of President Obama, has complained that it is unfair that he pays a lower income tax rate than his secretary. The solution according to Mr Buffett is to raise the taxes on those who make more than $1 million per year. Democratic politicians have taken his sage advice and proposed legislation that would require millionaires to pay no less than 30% of their income in taxes.

It is significant to note that Mr Buffett’s complaint reveals a complete lack of sympathy for his secretary. Neither he nor his accomplices even considered correcting the “fairness problem” by lowering the secretary’s tax burden. The leftist agenda is not to make life more comfortable for well-paid professionals. It is to turn the screws conspicuously on those who earn the most to demonstrate a commitment to even more progressive taxation.

Is it merely a coincidence that their intention is identical to that of an influential monograph published in 1848? In The Communist Manifesto Marx and Engels famously made ten demands – the second of which was to levy a heavy progressive income tax (the first was abolition of all property in lands).

It is also noteworthy that advocates of the Buffett Rule are silent on the subject of eliminating or even shrinking entitlements. To leftists the welfare state is sacred, and its insatiable hunger must be fed in perpetuity. The growth of entitlements is proof that American society is caring and humane. Conversely, thinking of reducing entitlements is a sign of depraved cruelty.

As expected the Buffett Rule generated a lot of controversy. At first Democrats attempted to sell it as a partial solution to the federal deficit. But Republicans pointed out that if it were implemented the net take for the government would be at best small and the effect would be trivial – perhaps negative – on the national debt. Undiscouraged, Democrats argued that even if it does not substantially lower the federal debt it is only “fair” for the wealthiest Americans to pay a higher proportion of their earnings to the government. The Republican counter argument was that Americans with the highest incomes are already shouldering a disproportionate share of the total tax burden. Furthermore, Republicans asserted that individuals with the largest incomes invest their money which results in new jobs. To increase taxes on the wealthiest would result in a dampening of job creation.

When it came down to a vote the Buffett Rule was defeated in the Senate. But its power to energize the Democrats and progressives endures. Republicans failed to get to the root of the issue when they opposed it. Democrats proclaim, and have a large cohort of voters agreeing, that the Buffett Rule has merit on the basis of “fairness.”

Even if the Buffett Rule, or a similar successor, is never made into law it will continue to be useful to the Democrats. When the cost of government entitlements continues to grow – as it surely will – and when social programs do not work out as they were intended Democrats will blame Republicans who protected the “super rich” by thwarting the Buffett Rule. Republicans will be preaching only to the choir when they attempt to explain that spending rather than revenues is the source of the problem.

What should Republicans do to defang the Buffett Rule? They could show that its premises are fatally flawed in at least two ways.

First, they have to explain exactly what really counts as fair. The Democrats have adopted “from each according to his abilities to each according to his needs” straight from Karl Marx (1875, Critique of the Gotha Program) as the bedrock of their welfare state aspirations. This justifies confiscatory government policies in the name of “fairness.”

Frequently, instead of rejecting the false leftist notion of fairness Republicans foolishly concede and then say that prosperity is more important than fairness. They can do better. If there must be an income tax the proper way for the government to be fair is to treat all citizens equally. Some Republicans seem to get it when they call for a flat tax where everyone pays the same rate, including those who make the least money and are now exempt from federal income tax. If you want to be gentle to citizens who are not affluent you should lower everyone’s tax rate.

Do not overlook the irony of the constant carping from Democratic politicians including our President that everyone should play by the same rules – but somehow the rich do not. The policies of American welfare state cheerleaders are exactly the opposite – harsh rules for the successful and groups that are despised coupled with lenient rules and special prizes for protected classes, the disadvantaged, and the poor.

Second, Republicans have to recognize that all citizens have a right to their own earnings. The reason to refrain from abusing the most successful is the same reason to abstain from abusing anyone. No group should be targeted for sacrifice to the state. It is true that increased taxes on the highest earners will result in a slower economy and fewer jobs. But even if a wealthy person did not invest his earnings it would be wrong to confiscate proportionately more from him than from any other citizen.

It will take considerable courage, thought, and energy for the Republicans to deliver an effective rebuttal to the Buffett Rule. The payoff is real fairness.

*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***

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