Brian Gaines and Douglas Rivers write in the Wall Street Journal 4/10/12, What’s a ‘Fair’ Tax for the Mega Millionaires?

Excerpt:

It turns out that most Americans do not think that 35% or anything close is a fair tax rate, even for bizarre windfalls such as winning a lottery. In February, the online pollster YouGov asked a representative sample of 3,500 American adults what they thought would be a “fair amount of tax” to pay on lottery winnings. The survey specified different amounts of winnings, ranging from $1 million to $100 million. (The amount shown to each respondent was selected at random from a set of seven possible values.) Respondents gave their answers in dollars, and YouGov computed the implied percentage tax that they thought was fair.

Less than a quarter of respondents chose a tax rate of 30% or higher on any level of lottery winnings. The vast majority thought that a reasonable amount to pay was much lower, with the average being only 15%. Democrats and Republicans differed only a little: The average rate preferred by Republicans was 14%, compared with 17% for Democrats.

There was no evidence that respondents thought rates should be any higher on a $100 million prize than on a $1 million prize. Differences across prize amounts were mainly too small to be regarded as statistically significant. For all of our hypothetical lottery prizes, over half the respondents chose a tax that amounted to 10% or less of the lottery winnings.

HKO comments:

The president’s case to raise taxes on the rich is a ruse to deflect attention from the irresponsible growth in spending under his leadership. Higher taxes on the rich will not reduce the deficit even 1%. How much easier it is to blame the rich rather than face the difficult choice of realizing the limitations of government resources.
Is he proposing to eliminate the tax free status of municipal bonds? That may increase the tax payment of the wealthy, but it will also increase the borrowing costs of cities and states to build the infrastructure they need.
Is he proposing to increase the taxes on capital gains? It is already slated to increase from 15% to 23.8%. A Buffet Rule of a minimum of 30% will in effect double the capital gains rate. This is a sure way to reduce the job growth that comes from capital investment, and it is a sure way to send investment capital overseas. The capital gains rate in China is 0%.
That attack on the wealthy is selective. Talk is cheap and this article unveils the lack of consensus on what is to be considered excessive. Rarely is anyone specific. When you attempt to reach clarity the argument falls apart.
Wealth serves social purposes even when it is not in the hands of the government.
High taxes begets more loopholes to keep the taxes from doing the social damage that will follow (see 2. and 3. above). We would be wiser to lower taxes and close the loopholes. This, however would prevent the destructive social tinkering and political favoritism that infects this Congress and Administration. (and many before it)
The solution to our deficit must come from economic growth. This administration’s policies and rhetoric, including this Buffet rule, greatly hinders economic growth. We must compete is a world economy where we have the highest corporate tax rates and one of the most progressive income tax rates. Yet the administration claims it is not enough.

Also in the same issue of the Wall Street Journal, The Obama Rule.

Excerpt:

The Obama Treasury’s own numbers confirm that the tax would raise at most $5 billion a year—or less than 0.5% of the $1.2 trillion fiscal 2012 budget deficit and over the next decade a mere 0.1% of the $45.43 trillion the federal government will spend. When asked about those revenue projections, White House aide Jason Furman backpedaled from Mr. Obama’s rationale by explaining that the tax was never intended “to bring the deficit down and the debt under control.”

Okay. So what is the point?

Further HKO comment:

Who made this President the King Solomon of Fairness? When two women claimed to be the mother of a child, King Solomon offered to cut the child in half and give each woman half of the child. The woman who quickly declined proved to be the mother of the child, preferring to keep the child alive even if it could not be with her. If neither woman came forward would Solomon have made good on his threat?

There is much more to social justice than fairness.

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