January 24 2012
SOTU: You Can't Tax Away Debt and Deficits
In tonight's State of the Union address, President Obama once again used Warren Buffett's infamous secretary, who was attending the speech as a guest of the First Lady, as a prop for tax increases:
Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans. Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary.
Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else – like education and medical research; a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both.
Nevermind the fact that the different federal tax rates are likely due to Buffet's tax on capital gains (15% rate on income that is earned from funds invested after they had already been taxed at a higher rate) versus his secretary's ordinary income tax rate. After all, wealthy people tend to get a larger percentage of their income from investments.
And let's even ignore the likelihood that the actual dollar amount of money Warren Buffet pays in federal taxes is probably substantially higher than the total dollar amount of money his secretary pays in federal taxes (even though Buffet's company Berkshire Hathaway reportedly owes $1 billion in back taxes).
The bottom line is that our country has a SPENDING problem, not a tax problem. It is not that we are not taking in enough revenue, it is that we are spending way too much money--$4 trillion dollars each year, and our debt (currently $15 trillion) continues to grow.
If we took every single penny from the top 10% of income tax filers (those making $114,00 or more), we would not even have enough money to cover one year's budget.
When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet. That’s not right. Americans know it’s not right.
Mr. President, Americans also know it is not right for a President to engage in class warfare. The wealthiest 5% of Americans (those making around $155,000 or more per year) already pay 95% of federal taxes.
Any person who doesn't think he is taxed enough is entirely free to decline taking deductions and exemptions on his tax return. You can even send contributions directly to the US Treasury (here's the link). I expect President Obama to lead by example.
The bottom line is that President Obama, like many in his party, suffer from a terrible affliction: they think that the US economy is a zero sum game--that in order for one person to be rich, another person has to be poor.
That is NOT how the free market economy works.
When the rich get richer, we ALL get richer: there is more money to invest, more money to hire workers, more money to buy goods and services that in turn create more jobs and more investment.
Instead of unfairly burdening the rich with higher and higher taxes, Obama should simplify the tax code, and lower and flatten out the tax rates so that all people--even the wealthy--keep more of their own money.