If you have any doubt that the Obama presidency has morphed into a campaign for re-election, the latest email from Obama.Barack.com should clear up that question.
It officially comes from Jim Messina, who is heading the president's 2012 effort, and has the words "Class Warfare" in the subject line. If I were a GOP candidate, hoping to debate the president in a general election, I'd be reading these missives carefully:
This morning, the President proposed the "Buffett Rule," which would require those earning more than $1 million a year to pay the same share of their income in taxes as middle-class families do.
This proposal makes sure millionaires and billionaires share the responsibility for reducing the deficit. It would correct, for example, the fact that Warren Buffett's secretary currently pays taxes at a higher rate than he does….
I feel certain that the author of this email knows that the top two percent of taxpayers in this country currently pay 45 percent of the federal income tax collected. Is that not a "fair share?" But why let the facts stand in the way of a nasty dose of class warfare?
Sorry, but this is demagoguery (I can't think of a kinder, gentler word). The notion that the rich are paying less of their fair share, that is a lesser rate on their earnings, has been popularized by approval-seeking billionaire Warren Buffett. But it is not true. Noel Sheppard of NewsBusters has some good charts from the IRS.
The truth is that millionaires and billionaires–those focus-tested terms on non-endearment–already face a higher rate on their earnings than does Mr. Buffett's world-famous secretary. True,the tax on capital gains, which is a major source of income for the rich (and others who have worked and saved), is lower: 15 percent. But this money has already been taxed.
The president wants to tax it yet again. Unfortunately, this would hurt ritired people trying to live on their investments more than it will affect Warren Buffet. I've already quoted John Steele Gordon explaining why you should take what Buffet and the president say with a grain of salt. But his analysis bears being quoted again:
People with seven- and eight-figure incomes from wages already pay 35 percent on most of that income, the highest marginal rate. It is dividends and capital gains (taxed at 15 percent) that bring down their effective tax rate. But dividends are paid out of corporate profits that have already been taxed at 35 percent (ignoring various tax fiddles that bring down corporate income tax rates to an average of 25.4 percent). So dividend income is actually taxed at 50 percent already. A large portion of capital gains, likewise, derives from retained corporate income that has already been taxed.
So President Obama's latest tax proposal is just a disguised attempt to raise the dividend and capital gains taxes on those with incomes of more than $1 million to about 70 percent from the current 50 percent. The result, of course, will be a rush to avoid these taxes, using exactly the same method that Warren Buffett uses to avoid paying them: they'll shelter their wealth under a corporate umbrella.
Warren Buffett's Berkshire Hathaway Corporation paid $5.6 billion in corporate taxes last year on income of $19 billion, a 29 percent rate. (By the way, its tax form ran to 14,097 pages; just imagine what its tax compliance costs must have been.) Warren Buffett owns about 30 percent of Berkshire Hathaway, so he, in a very real sense, paid not just the $6 million in federal taxes he claimed in his Times article, but $1.68 billion more in the form of corporate taxes. But Berkshire Hathaway pays no dividend and I doubt that Buffett has sold any of his stock in the company. Thus he has no capital gains to report from his Berkshire Hathaway holdings.
So while he paid, roughly, the same effective tax rate as his secretary if you count his share of the corporate taxes paid (and you should), he would not owe much more under President Obama's stick-it-to-the rich plan. Most of his billionaire friends wouldn't either. Those most affected would be the upper middle class, as usual, who don't control the corporations they invest in.
In other words, Obama's tax plan goes not after the fat cats but after people who are several rungs on the ladder below Mr. Buffett. But the Obama campaign notes:
The other side is already saying it's "class warfare" — that's their rhetorical smokescreen for providing millionaires and billionaires special treatment.
Larry Kudlow responds to the president's plan:
It could almost make your head spin. With an economy on the front end of another recession, President Obama's tax attack on the folks who are most likely to succeed, invest, start new businesses, and create jobs is nothing short of staggering. Only liberal-left class-warfare ideology can explain this.
I think that the term for what the campaign is trying to do is Crass Warfare; it is an unworthy effort to use falsehood and slurs to turn us against each other and to stigmatize success.
It should disrurb that the word "class" crops up frequently. Class-based politics almost always involve demaguguery.