Should the 'Buffett Rule' Become Law? >
'Buffet Rule' is a Good Start
More fiscal reforms will be required to fix income inequality, but the "Buffett rule" will help share sacrifices
April 16, 2012
About Isabel Sawhill:
Isabel Sawhill is a senior fellow in economic studies at the Brookings Institution where she codirects the Budgeting for National Priorities Project.
To reduce the deficit and maintain critical investments in everything from education to infrastructure, we are going to need some new revenues along with serious spending restraint. The president is calling on those who have benefitted the most from past growth to pay their fair share of taxes. The "Buffet rule" embodies this concept of shared sacrifice. It will not, by itself, reduce the deficit very much, but it builds on the fact that many members of the middle class pay a higher effective tax rate than many of the super rich, and it sends a message to the average voter that the system will no longer so egregiously favor the wealthy.
[See a collection of political cartoons on the economy.]
The Buffet rule is being described as a new 30 percent rate for millionaires. To be clear, it is a new alternative minimum tax that phases in gradually for those with annual incomes between $1 million and $2 million a year. The only people who would be affected are the super rich, especially those with lots of income from capital gains and dividends. Over the next decade, it would bring in about $260 billion more in revenues than we are collecting now. That's not trivial but it's also not enough to reduce the deficit very much, and it leaves most of the tax code riddled with a variety of deductions and preferences that undermine economic efficiency and place unnecessary burdens on individual filers. For this reason, it's only a start on what needs to happen. We need a complete overhaul of the tax system to make it not only fairer but also simpler and more efficient.
[Read what the Buffett Rule Gets Wrong.]
In the meantime, the Buffet rule is a politically powerful way of putting the issue of shared sacrifice on the national agenda. Income inequality in the United States is at virtually unprecedented levels and intergenerational mobility is threatened by large gaps between rich and poor. The president's support for the Buffet rule contrasts sharply with Republican calls for even deeper tax cuts heavily tilted toward the wealthy combined with draconian spending cuts that fall overwhelmingly on the poor and the middle class. Put simply, the voters are being offered a stark choice between a government that looks out for the middle class versus one that favors the wealthy.
Addressing the issue of inequality along with the need for fiscal restraint and comprehensive tax reform will require a lot more than a new tax rule for the super rich. But one has to start somewhere.
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- Other Arguments
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#1344134
No — "Buffett rule" does nothing to solve long-term fiscal challenges, would raise little revenue, and is actually unfair
JASON FICHTNER, Senior Research Fellow at the Mercatus Center at George Mason University
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#29499
No — The rich already pay higher tax rates than middle-class Americans
ALAN D. VIARD, Resident Scholar at the American Enterprise Institute
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#3258264
Yes — It is a national disgrace that millionaires pay tax rates substantially lower than middle class taxpayers do
CHUCK COLLINS, Senior Scholar at the Institute for Policy Studies
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#48596
No — "The rich" already shoulder the largest share of financing government
ANDREW MOYLAN, Vice President of Government Affairs for the National Taxpayers Union
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#57497
No — The president isn't focused on solving real problems like unemployment or the deficit
JONATHAN COLLEGIO, Communications Director for American Crossroads
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#7169197
Yes — It's high time we ended a system rigged against the middle class
TAMMY BALDWIN, U.S. Representative
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#8104141
Yes — The "Buffett rule" would make our tax system fairer and better able to raise the revenue the country needs
CHUCK MARR, Director of Federal Tax Policy at the Center on Budget and Policy Priorities
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#987139
Yes — The "Buffett rule" levels the playing the field for America's middle class
TOM HARKIN, U.S. Senator
