Obama: Buffett Rule — Do as I say, not as I do

President Obama has made tax rates a major campaign issue.  He purports to want to see millionaires and billionaires pay their fair share (See: All You Can Eat Buffett, Pay Up!).  He believes, and has convinced many of his supporters that it is inherently unfair for “the wealthy” to pay lower tax rates than their secretaries.

What he omits about the compared earners is how their income is derived differently and how it affects their tax liability.  Warren Buffett and Mitt Romney earn their money through investments and dividend payments, it is not considered earned income.  Thus, their income is taxed as capital gains at a rate of about 15% to encourages investing and risk taking.  Investing in property or stocks and bonds is not a guarantee, investors lose money too.  But capital gains is not just for the wealthy.  Many pension plans and retirements when drawn against are taxed as capital gains.  When a home is sold for more than it was purchased, 401k’s, and many other forms of income the average American will enjoy qualify as capital gains.

But the average American family earns their living with an earned income, or salary.  This tax liability is assessed on a scale depending on your yearly income:

  • 10%on taxable income from $0 to $17,400, plus
  • 15%on taxable income over $17,400 to $70,700, plus
  • 25%on taxable income over $70,700 to $142,700, plus
  • 28%on taxable income over $142,700 to $217,450, plus
  • 33%on taxable income over $217,450 to $388,350, plus
  • 35% on taxable income over $388,350.

A few details were omitted by Buffett when he initially complained about his and his secretary’s tax situation.  First, Buffett chooses to pay himself via investment returns and dividends placing him in the capital gains tax system, he doesn’t have to and could take a salary if he chose.  But taking a salary means a higher tax rate and he knows this.  If he was concerned about his secretary’s tax liability, he could pay her the same way he pays himself that way she could take advantage of the capital gains rate.  It’s his call.  Moreover, Buffett, if he is truly in anguish about this atrocity, could simply not take advantage of all his qualifying deductions — “write-offs” are voluntary.  Buffett likely employs multiple tax accountants and attorneys in order to utilize every tax deduction he is entitled to.  Lastly, there is a system the federal government has in place an outlet for generous citizens so they can donate any amount of money to the Treasury Department to make up for the burden they wish they had.

(The White House) — Today, the President released his 2011 federal income and gift tax returns. He and the First Lady filed their income tax returns jointly and reported adjusted gross income of $789,674. About half of the first family’s income is the President’s salary; the other half is from sales proceeds of the President’s books. The Obamas paid $162,074 in total tax. … The President’s effective federal income tax rate is 20.5%.  The President believes we must reform our tax system which is why he has proposed policies like the Buffett Rule that would ask the wealthiest Americans to pay their fair share while protecting families making under $250,000 from seeing their taxes go up.

The White House released the President and Vice President’s tax returns and revealed that he and the First Lady, though lambasting the wealthy for skirting their fair tax burden, paid a tax rate 42% lower than the tax bracket for which their income requires.  It is fair to ask the President why is he not paying his fair share.  The tax code says his fair share is 35%, while he paid only 20.5%.  This is due to legal tax deductions his tax accountant and attorneys find for which he qualifies.  I don’t have a problem with this, we all utilize tax deductions in order to pay less taxes.

What makes this so distasteful is Obama paints top income earners as though they are mischievously underpaying in taxes — that they should be paying more, all the while he himself paid at a lower rate than most families earning less than he.  This do-as-I-say-not-as-I-do attitude belies his political posturing.  Not only does he want to raise taxes merely to satisfy a voting bloc (See: Tax Fairness), he is doing exactly what he chastises the evil 1% for doing: lightening their tax burden.  I would respect him much more if he practiced what he preached and put his money where is mouth is.

Comments

  1. TerranceH says:

    Reblogged this on Sibboleth Nation and commented:
    There are two main themes in this post: 1). the “Buffet Rule” is a B.S.; and 2). President Obama is a hypocrite.

    Great post.

  2. Marshall Art says:

    It really doesn’t matter to these people who pays what and how much. What is important, it to demonize the opposition, in this case as greedy people not paying their “fair share”, in order to bring to their camp the way too large percentage of the electorate that doesn’t care to pay attention. Deceitful rhetoric and imagery is far easier to employ than to egage in the tough work of proving their positions are truly superior and worthy of our votes.

  3. I don’t get why those who feel “morally obligated” to pay more taxes just don’t send the IRS a “gift” that clears their conscience??? They’ll take it!

  4. Especially since an incredibly optomistic estimate suggests that the Buffet Rule wil bring in less than 5 billion dollars. Further, it still allows for tax free investments that can be used to avoid paying more.

    Also, it would appear that P-BO might be paying at a lower rate than his secratery just like Buffet.

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