Norman Thomas, Huey Long, and Upton Sinclair are all looking down (or perhaps up) on President Barack Obama and smiling.
They're smiling because of the ways he has embraced, even recycled their political agenda, particularly with his attacks on the so-called rich, cloaked in arguments about "fairness" that have revived the populist, anti-corporatist agenda with which Thomas, Long, and Sinclair buttered their bread.
The centerpiece of his attacks has been the so-called "Buffett Rule," an initiative that is both bad policy and bad politics. Drawing on class envy it would require millionaires and billionaires to pay at least a 30 percent tax on all the money they take in regardless of how it was earned.
Obama says it's unfair that those who are described as "the wealthiest among us" are taxed at a lower rate on the money they make from investments compared to the rate imposed on money earned as income—which means that those living off their investments pay a lower marginal rate than those who still work in the traditional sense of the word.
He neglects, purposefully, to point out that even under the current system the tax on capital gains and dividends constitutes a form of double taxation. The returns being taxed are produced by money that was already taxed when it was earned as income. The fact that it's taxed again at a lower rate is a reward for the fact that when it was invested it was put out in the marketplace at considerable risk. It is important to remember that not all investments pay off. Sometimes they go south and the money is lost. When an investment succeeds, the returns are taxed.
These taxes are not, as many have already said, a tax on the rich so much as they are a tax on those who are trying to become rich. They are a tax on the middle class, on retirees, on philanthropic institutions, and on success.
The Buffett Rule, were it to become law, would be economically damaging. As economist Richard Rahn, the chairman of the Institute for Global Economic Growth pointed out in a recent column, "Private tax economists, using dynamic models rather than government models that fail to account for all the changes in behavior, find the tax would be a big revenue loser."
The amount of revenue the Buffett Rule would raise, if it raised any at all, could probably spent by the General Services Administration on parties over the next 10 years without anyone missing it. It would, however, severely curtail the money available in the private sector for investments that create jobs and allow businesses to start or expand. Unfortunately for the president, the Democratically-controlled Senate has said "no" to the Buffett Rule.
On Monday it rejected a proposal that would have changed the tax code so that, as Politico reported, "People earning more than $2 million would pay a minimum 30 percent tax rate on all of their income. For those who earn between $1 million and $2 million, the tax would be phased in—meaning those taxpayers would pay whatever amount of extra taxes that gets them to an effective 30 percent tax rate."
It's good that they did, even if the vote was essentially meaningless since the measure could never pass in the Republican-controlled House of Representatives. What the Senate's action does is take the president off message, denying him the opportunity to spend tax week ginning up class resentments against the so-called rich among the middle class. Not that he'll let facts get in the way. "The president and his allies," Rahn continued, "have largely switched their argument to one of 'fairness' and reducing the disparity in income distribution. They are never willing to define why 30 percent or any other number is 'fair,' nor are they able to explain why people who work harder and contribute more should be taxed at a higher rate."
Rahn makes a good point. Raising questions of "fairness" amplify resentment while redirecting the nation's attention away from real problems like government overspending and joblessness. Rather than talk about the need to create a rising economic tide that will lift all boats, Obama wants to talk about how it's important to torpedo the big boats without ever having to explain how that will do nothing to help the rest of the boats still afloat, many of which are still taking on water. "Fairness," he has said on more than one occasion, should be more important than whether or not the tax code encourages economic growth, productivity, and job creation. In that Obama reveals himself to be the great equalizer, more concerned with outcomes than with opportunity. That's not the American way.
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