President Obama says that no millionaire should ever pay a lower effective tax rate than any middle class family. He has a reason for this policy. And if you find it unpersuasive, just be patient -- he'll come up with another reason soon.
When Obama first introduced his Buffett Rule back in September, he claimed it would "stabilize our debt and deficits for the next decade." But after Congress's official tax scorekeepers released a report showing the Buffett Rule would raise a paltry $47 billion over 11 years, Obama economic adviser Jason Furman was forced to change his tune. He admitted that the Buffett Rule was never designed "to bring the deficit down and get the debt under control."
White House spokesman Jay Carney later claimed that the Buffett Rule "would simplify the tax code." But the Buffett Rule does not close a single tax loophole or eliminate a single tax break. All it does is add another layer of complexity to the tax code, much like its predecessor, the Alternative Minimum Tax.
Last Saturday, cornered by these facts, Obama offered yet another justification. "This is not just about fairness," he said. "This is also about growth." This is even harder to swallow. As National Journal's Jim Tankersley has reported, the Buffett Rule neither stimulates aggregate demand by increasing spending nor encourages business investment by cutting taxes.
Another oft-cited justification for the Buffett Rule is "fairness," and to that end the White House website declares that "no household making more than a $1 million should pay a smaller share of their income in taxes than middle-class families pay." But as the Washington Post's Ezra Klein has reported, the Buffett Rule fails here too. The version rejected by the Senate on Monday does not touch a taxpayer's first million in earnings at all, and it would only phase in gradually after that. So even if the Buffett Rule became law, someone who earned $1,000,001 from investments in 2013 would still pay about a 15 percent effective tax rate, well below the 35.8 percent rate that Warren Buffett claims his secretary pays.
Every justification the White House has put forward to support the Buffett Rule has been shot down. The proposal does not reduce the deficit, nor does it simplify the tax code, nor does it spur economic growth. In fact, it doesn't even prevent the rich from paying lower tax rates than the middle class.
So why has Obama made this gimmick into a policy centerpiece in recent weeks? Because it polls well. By making scapegoats out of wealthier Americans, he can exploit the common misconception that there is an easy solution to the nation's debt crisis, while simultaneously escaping responsibility for his own failure to do anything about it.