April 16, 2012
About Isabel Sawhill:
Isabel Sawhill is a fellow at the Brookings Institution and co-directs the Budgeting for National Priorities Project.
To reduce the deficit and maintain critical investments in everything from education to infrastructure, we are going to need some new revenues along with serious spending restraint. The president is calling on those who have benefitted the most from past growth to pay their fair share of taxes. The "Buffet rule" embodies this concept of shared sacrifice. It will not, by itself, reduce the deficit very much, but it builds on the fact that many members of the middle class pay a higher effective tax rate than many of the super rich, and it sends a message to the average voter that the system will no longer so egregiously favor the wealthy.
[See a collection of political cartoons on the economy.]
The Buffet rule is being described as a new 30 percent rate for millionaires. To be clear, it is a new alternative minimum tax that phases in gradually for those with annual incomes between $1 million and $2 million a year. The only people who would be affected are the super rich, especially those with lots of income from capital gains and dividends. Over the next decade, it would bring in about $260 billion more in revenues than we are collecting now. That's not trivial but it's also not enough to reduce the deficit very much, and it leaves most of the tax code riddled with a variety of deductions and preferences that undermine economic efficiency and place unnecessary burdens on individual filers. For this reason, it's only a start on what needs to happen. We need a complete overhaul of the tax system to make it not only fairer but also simpler and more efficient.
[Read what the Buffett Rule Gets Wrong.]
In the meantime, the Buffet rule is a politically powerful way of putting the issue of shared sacrifice on the national agenda. Income inequality in the United States is at virtually unprecedented levels and intergenerational mobility is threatened by large gaps between rich and poor. The president's support for the Buffet rule contrasts sharply with Republican calls for even deeper tax cuts heavily tilted toward the wealthy combined with draconian spending cuts that fall overwhelmingly on the poor and the middle class. Put simply, the voters are being offered a stark choice between a government that looks out for the middle class versus one that favors the wealthy.
Addressing the issue of inequality along with the need for fiscal restraint and comprehensive tax reform will require a lot more than a new tax rule for the super rich. But one has to start somewhere.
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Advertisement Cartoons See cartoons on the GOP 2012 hopefuls. See cartoons on the European debt crisis. See cartoons on Barack Obama. Thomas Jefferson Street Blog
Whoever dreamed the phrase "stay-at-home mom" to update "just a housewife" had a passive-aggressive streak.
Mitt Romney's seemingly contradictory statements on motherhood and the "dignity of work" are not as big a deal as Ezra Klein thinks.
It's not healthy to elect presidents who win because they have come out ahead in a mathematical equation that divides the country along gender and racial lines.
Obama's "Buffett rule" would hurt the women he to whom is trying to pander.
What I learned at George Washington's distillery
Subsidiarity is not a synonym for federalism, as Ryan has it, and it should never be conflated with economic libertarianism or individualism.
Invoking the Kochs is a misdirection that allows the campaign to talk about secretive right-wing conspiracies rather than confronting the truth.
Mitt Romney should talk about creating the kind of economic growth that allows all women choice in terms of work-life balance.
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