The Editors of National Review responds to the President’s call for fairness in Buffetted by Taxes, 4/11/12
The Buffett Rule would function as a secondary alternative-minimum tax, putatively to accomplish what the primary alternative-minimum tax has failed to do: sock it to billionaires (“billionaires” here being defined in some instances as “individuals making $250,000 a year,” which is mathematically suspect). The case for the Buffett Rule is built upon a myth cultivated by President Obama, by Warren Buffett, and by many of their supporters and admirers: that high-income Americans pay lower tax rates than middle-class Americans. This is a falsehood, one that has been amply documented with data from the tax experts at the IRS and by the nonpartisan Congressional Research Service.
Legend has it that Mr. Buffett, most of whose income is taxed at the 15-percent long-term capital-gains rate, pays a lower percentage of his income in taxes than does his modestly paid secretary. This is almost certainly untrue. Even if Mr. Buffett were paying half that 15-percent rate — 7.5 percent — he still would be paying a higher rate than does the typical family in the $40,000-$50,000 range, whose effective rate is just 3.2 percent, according to the Tax Policy Center. Wealthy investors such as Mitt Romney and private-equity managers typically pay a rate of about 15 percent, since most or all of their income is derived from investments, which are treated preferentially. But even so, 80 percent of U.S. households pay a rate that is less than 15 percent, and about half of U.S. households pay no federal income tax at all.
In absolute terms, high-income Americans pay practically all of the federal income taxes, and they pay a higher percentage of their incomes than do typical middle-class Americans. These facts are indisputable.
Like so many bad policies this is also based on unsound assumptions. Anecdotal extremes are not the basis for good policy decisions.
Besides, the math does not add up. Trying to cover this record deficit with increased taxes on a small group of rich people is like rearranging the deck chairs on the Titanic. It is a ruse to avoid confronting the real problem.
The editors appropriately noted that call for fairness is:
a non-solution to a non-problem intended mainly to distract from the administration’s non-solutions to real problems.