James Lankford is a Republican congressman from Oklahoma and a member of the House Budget Committee
The Buffett Rule is bad tax policy.
For decades, Warren Buffett popularized the investing rule that a person should buy stock in a company they want to own and where they see efficient management. That investment philosophy is ironic considering that the new Buffett Rule encourages increased "investment" into the federal government, which many agree is poorly and inefficiently managed and which few would actually want to own and run. Tax reform typically incentivizes work or encourages private investment, but the new Buffett tax policy is specifically designed to take from one group to pay for another.
Without question, many successful people (including Warren Buffet) have spent a lifetime organizing their personal finances to take advantage of tax loopholes and ultimately pay the lowest tax rate possible on every dollar earned. In April, House Republicans voted to eliminate many of the tax loopholes in their fiscal year 2012 budget, but the administration has focused on tax increases rather than tax reform. Taxing the rich seems to have more to do with societal "fairness" than economic prosperity and job creation.
I have yet to see the correlation between increased taxation of wealth and increased job growth. The prevailing notion of the tax the rich crowd seems to be that, if wealthy people keep their money, they will create jobs in the wrong places like consumer products, traditional energy, and private business investments. If the government seizes a higher share of their money, Washington will wisely invest that money into additional unemployment benefits, solar energy companies, and bank bailouts. Washington already spends 24 percent of our nation's total GDP, and more centrally controlled spending will not solve our economic malaise.
The argument for higher taxes on the wealthy is that they no longer pay their fair share, but the math does not agree. According to the Congressional Budget Office, the top 10 percent of wage earners paid 40.7 percent of federal tax dollars in 1979. Ten years later in 1989, the top 10 percent of wage earners' federal tax payments barely changed to 42.5 percent, but it skyrocketed to 51 percent in 1999 and by 2007 it became 55 percent. By January 2013, tax rates are scheduled to increase significantly again to pay for the president's new healthcare law. Claiming that the reason we have slow job growth in America is that wealthy families get to keep too much of their money is pure fiction.
The mantra of the Buffett Rule is that the problem with America is in the biggest house on the street. If we just go down the street with our pitchforks and take what is rightfully ours (including their private jet), we will have a stronger economy. Assuming every dollar in America is the property of the federal government makes sense to the populist, but not to the average American who encourages financial freedom. Even if the president passed a 100 percent tax rate on all millionaires and billionaires every year, it would only raise approximately $938 billion per year–still well under the 2011 $1.3 trillion budget deficit.
The tax code is currently nine times longer than the Bible, and it must be simplified. Fairness in taxation should embrace stable long-term tax rates, efficient use of tax dollars, and a tax code that is consistently as low as needed—not as high as possible. Fix the tax code, but stop taking money from one person and giving it to another in the name of job creation.
Read Jason Furman of the National Economic Council: Without 'Buffett Rule,' Middle and Lower Class Will Suffer