It’s official: the “Buffett Rule,” which would impose an additional 30% tax on individuals earning more than $1 million, or households earning more than $ 2 million in annual income, is worthless.
The Congressional Joint Committee on Taxation has officially stated that the rule, introduced in the form of a Senate bill by Sheldon Whitehouse (D-RI), would only bring in an additional $31 billion to $47 billion over the next ten years, depending on how aggressively those with million-dollar incomes are able to exploit tax shelters. That’s only $3 billion to $5 billion a year, quite a contrast to annual deficits in the $1 trillion range projected for the same period.
And yesterday, the “Buffett Rule” was defeated 22-15 by the Republican-led House Budget Committee. Rep. Heath Shuler (D-NC) joined the Republicans in voting against the proposal.
Top income earners are already bracing for the expiration of the Bush tax rates next year, which will increase the top marginal income tax rate to 39.6%, the long term capital gains tax rate to 20%, and impose standard income tax rates on ordinary dividend income. Further, top income earners will pay a new “Medicare surtax” of 3.8% on all non-compensation income including interest, dividends, and capital gains.
The “Buffett Rule” is nothing but pure politics driven by the ideal of “fairness.” Its only purpose is to make liberals feel like they are “doing something” to “punish the rich.” Its actual effect is miniscule, and probably will end up being negative when the effects of income sheltering strategies (read: cutting back earnings from investments) are factored in. As always, when money is pulled out of the economy in order to avoid taxation on potential earnings, economic growth sputters. Our economy is already suffering, so anything that would decrease investment even more is going to be a bad idea, even if its proponents call it “social justice.”