Some high income Americans pay a lot of tax; others do not. If you have right tax advice and if most of your income can be structured as some form of “capital gains”, your marginal rate – what you pay on the your last dollar of income – may be very low. The highest marginal income tax rate currently is 35 percent, while long-term (over a year) capital gains are taxed at 15 percent at most.
The Buffett Rule is a proposal is establish a minimum tax rate for “millionaires” – people earning more than $1 million per year – and the Senate is likely to vote on a version this week. The exact amount of revenue that this would bring in depends on the details, but there is no question that it is small relative to the country’s need to control the federal budget. (The Joint Committee on Taxation scored one version of this proposal as generating about $30 billion over ten years; the annual budget deficit will remain over $1 trillion in the near term even under the most optimistic projections.)
In the first place, let me just note that Warren Buffet is a sniveling hypocrite of the highest order if his effective tax rate is higher than that of his secretary’s. See, Buffet holds the solution to the problem right in his own hands, in that his nominal income tax rate is presumably higher than his secretary’s, and so all he needs to do to increase his effective tax rate is…stop making deductions. In fact, if he’s so concerned with increasing his tax rate, why doesn’t he forego all deductions and credits, and report all the money he makes as income (instead of reporting some of it as, say, capital gains)? What disingenuous pricks Buffet and his ilk are.
But more to the point, I think I can see a solution that would work out well for everyone. Why not allow a voluntary guilt tax for uber-wealthy liberals?
Under my plan, uber-wealthy liberals who didn’t think that the wealthy were being taxed enough could opt to have all deductions and credits eliminated on their personal tax return, and could even add points to their tax rate! This would ensure that those calling for increased taxes would get exactly what they want, and have the additional bonus of making sure that those who want lower taxes will not be forced to endure tax raises. Everyone wins!