Warren Buffett and Henry Bloch get all moralistic when they call for higher taxes on "the rich." But they're just striking a pose. The Tax Policy Blog shows how little shaking down high-earners will do to solve our federal fiscal disaster:
Mr. Buffett specifically called to raise tax rates on Americans making more than $1 million and proposed an additional increase on taxpayers whose income exceeds $10 million. Suppose Mr. Buffett got his wish and loopholes and deductions were eliminated, making it possible to tax the "super-rich" (those earning $1M - $10M per year) at an effective rate of 50%. The following table shows the effect that such a historic hike on effective rates would have on the deficit and debt:
In addition, Mr. Buffett wanted those making more than $10 million per year to pay even more. The table below exhibits the effect of imposing a 100% effective rate on these individuals:
So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation's debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation's deficit by 12 percent and the debt by 2 percent. There's simply not enough wealth in the community of the rich to erase this country's problems by waving some magic tax wand.
So The Sage of Omaha and the man who built an empire on tax complexity want credit for sacrificing others on the altar of fiscal responsibility. Yet the problem isn't that we let people who make money keep some of it. The problem is that we are spending too much. Rather than suggesting a way to spend less or pay for what we are spending, they preen their generosity with other people's money. And yet the U.S. already relies very heavily on "the rich" for its taxes. If spending doesn't go down, the rich aren't going to be able to foot the bill.
Politicians offer goodies and say someone else will pay for it. TSOO and Mr. Bloch are doing the same thing. If they are going to act like politicians, they deserve no more credit for what they say than other politicians.
Related: Warren Buffett, Tax Poseur
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