Obama has been out promoting fairness with his "Buffet Rule". It has been very hard to listen to his dribble, but I know a lot of stupid voters out there are eating this up. The problem that I have and do most of the conservatives is that our simple minded voters can or will not understand the folly of the Buffet Rule. I have been looking for some simple way to show our "average" voter the facts and that Obama's Buffet Rule would actually make things "worse". I think that I just might have stumbled onto a "simple" argument that the average voter may be able to understand. Here goes.
Over the years, our government in Washington DC has passed tax laws that promote the greater good for our society. If they had not been doing that, I think that we are all smart enough to have noticed and would have voted them out of office. The point here is, exactly what is "in the greater good of our society"? I think a couple of examples will make this clear. Keep your eye on the ball here and ask if it is "good" for the general society or not.
First, let's take tax free municipal bonds. We have passed tax laws that allow state and local governments to sell bonds to build schools and that sort of thing where the buyer does "not" have to pay income tax on the interest. By doing this, state and local governments can sell bonds or borrow money to build schools and such at interest rates much lower than that paid by private companies like General Electric. If this tax law did not exist, state and local governments would have to pay the same high interest rates that big corporations like GE have to pay. I think that you can see that this is clearly in the greater social interest. With me so far? Now the Obama Buffet Rule.
If a person were to buy some of these tax free state and local government bonds and the person was a "millionaire", Obama with the Buffet Rule would tax the person at minimum of 30%. If that were the case, I ask you. Why would anyone buy the tax free state and local government bonds? No one would buy them and the cost of building schools would go up significantly. You have to follow that simple example. Here is another.
We have a tax law that deals with capital gain (and losses) that allows them to be taxed at a lower rate than normal income. When the tax law was passed, most of us felt and still do that it was in the public interest because it encouraged private citizens to make investments today that they hoped would pay off in the future. It was felt at the time that these investments would create jobs and wealth for the general society while compensating the individual investor for his risk. It was clear to people that this was a good idea at the time and is still a good idea today.
Now, what the Obama Buffet Rule would do is to cancel this law and make the capital gain made from the investment subject to as much as a 30% tax. I don't know how many big long term investments that you have made, but I can tell you from experience that a very small change in the profit margin can make it a good or bad investment. Many investments that would have been made under current tax laws would never be made if the Buffet Rule went into affect. There is a lot less fat in most investments than most people realize. Getting people to make investments in the future and create jobs is clearly in the greater social interest.
There are many other tax laws and accounting conventions that are in the public or social interest that could be sited that would significantly change if the Buffet Rule were adopted. If anything like the Buffet Rule has merit, it should be debated one tax law at a time and if that were done, I feel that it would be clear to most "average" voters that most of our tax laws are "good" and in the greater social interest. It is a little like the goose that laid golden eggs. You can get a few more golden eggs to day, but you would be killing the goose in the process. Even little kids can understand that one, so why not the "average" voter?
PS------
The tax law for "ordinary" income has a graduated tax where the more you make, the higher the tax rate. Ordinary income is where you work for someone else on a job and get paid for the work you do. This is how most people earn money. Buffet did not have a job working for someone else and did not get a regular pay check, so he had "no" ordinary income to be taxed at one of the graduated rates. He earned his income from investments that yielded capital gains (and losses) plus tax free bonds. Buffet paid the full taxes that he owed based on the tax laws that were in the public interest and tax laws that we felt were socially responsible. If the reason that we removed capital gains and interest on tax free bonds from ordinary income tax rates was to be socially responsible, wouldn't putting them back under ordinary income be "irresponsible"? Isn't what Obama is proposing with the Buffet law "irresponsible"?
