President Obama has dropped a hint as to how he will pay for a tiny portion, at least, of the new spending he demands from Congress. The answer is–what else?–tax the rich! The New York Times reports:
President Obama on Monday will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials. …
Mr. Obama, in a bit of political salesmanship, will call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.
No word as to what form the new tax will take, or how it will work. Those are, apparently, incidental details to an administration that is focused exclusively on politics:
Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday.
The new tax will fall on fewer than one-third of one percent of taxpayers, and will raise a minimal amount of revenue. But that, of course, is not the point.
Well-informed voters know that upper-income taxpayers pay, on average, far more than their fair share of income taxes, and that the United States already has the most progressive system of personal taxation of any developed country. But the Democrats’ appeals, as always, are not to the well-informed.
The reason why Warren Buffett pays federal taxes at a relatively low rate is that his income consists entirely of capital gains. Capital gains have always, I believe, been taxed at a lower rate than ordinary income, because they accrue over a period of years; in many eras, they represent mostly inflation; and they are the result of risk-taking–many investments lose money, and many businesses fail. I am not aware of any economist who argues that capital gains should be taxed at the same level as ordinary income, and the Obama administration apparently doesn’t propose any such radical re-write of the internal revenue code. Rather, this is a special tax designed solely to expropriate money from people who earn a capital gain in excess of $1 million in a given year. Many, perhaps most, of those taxpayers will be people who worked hard for decades in a small business, re-invested profits rather than living a prosperous lifestyle, and now, having sold their business, will enjoy the one substantial payday of their lives. But that won’t bother the Obama administration. Members of the New Class, the heart of the Democratic Party, don’t earn their wealth by owning restaurants, car dealerships or family farms.
Demagoguery always has its victims; here, predictably, a large majority of the victims will be people who wouldn’t have voted to re-elect Barack Obama anyway.