Warren Buffett has long contended, and Barack Obama and Liberals have parroted, that our tax system is "unfair" when it allows a billionaire like Buffett to pay a lower tax rate than an honest, hardworking person like his secretary, who most of America learned this week is Debbie Bosanek, since the President elected to invite her to his box for his State of the Union address as symbol number 1 in his class warfare project.
Of course, they are referring to the fact the many of the super rich derive nearly all their income from investment income, which is taxed at the capital gains rate of 15%, vice the highest income tax rates of 36%. It's an apples to oranges comparison, but to the ignoramuses who make up most of the American electorate, the distinction between taxing capital, and taxing income, is lost on them. It's the tactic of the typical class warrior (i.e. any Liberal), because their response to address this does nothing to address the fundamental "unfairness" but only serves to address what really is their game, the redistribution of wealth to address income "inequality." I'll point out that their answer to the inequality issue is not to do the things necessary in the economy to increase Mrs. Bosanek's income, but, rather, to decrease Mr. Buffett's. What they also want you to believe is that the super rich (like Buffett) are only paying 17% on billions in income because they have the money and wherewithal to find the tax loopholes to reduce their payment from what should be 30-odd percent down to 17%. They don't say that, because it's largely untrue, and even PolitiFact would call them on it, but they want you to believe it, and they nearly always include "eliminating loopholes" in their talking points.
In their world, and what Obama has proposed again and again using this example, as the answer to the fairness issue is to repeal the Bush tax cuts on those making over $250k/year, and return them to the Cinton-era tax rates. For those making $250k-$400k, their top income tax rate would go from 33 to 36% and for those over $400k it would go from 33 to% to 39.6%. Those are significant increases, 10-20%.
Many analysts have tried to figure out just how much money Mrs. Bosanek makes. Forbes blogger Paul Broderick estimated she rakes in between $250-$500k/year, but I find that fairly unrealistic, except if you believe Mr. Buffett, who says she paid an effective 35.8% of her income in taxes (versus his own 17%), she had to rake in a 6 figure salary to pay that much (note the 35.8% includes the ~15% for social security and medicare). Here's where I agree with Buffett that the issue really isn't what Mrs. Bosanek makes.
The Dems want to frame this issue as about fairness, yet, again, their prescription for fairness is to raise Mr. Buffett's taxes and all those others who make their living off investment income (like Mitt Romney) by increasing their income tax rates. Do you see the problem here? Not even Liberals are stupid enough to suggest raising the capital gains rate to 35%, since they realize that would be a huge disincentive to investors and result in the tanking of this tenuous recovery and the seat of every Democrat who supported it and Barack Obama. So, they propose a faux comparison, suggest a fix that won't address the fake comparison and get by with it because no one says anything.
The money shot here is we could increase Mr.Buffett's income taxes just as BHO suggests, and because Buffett draws a $100k salary, his income taxes will be unaffected. Because not even these Liberals are proposing a cap gains tax increase to address the fairness issue. So, when all is said and done, the net in their own example, is absolutely nothing.
Nothing. Nada. Zip.
If they were really serious about fairness, they would instead be proposing we lower the marginal rates for Ms. Bosanek down to something closer to the 15% cap gains rate. But, they're not doing that.
What they want to do is increase taxes on those who actually have incomes above $250k, not from investments, and collect the money. If you listened to BHO's speech, you also know he is disinterested in using that money to actually reduce the deficit, he has a laundry list of "investments' the government is only too happy to make (with our money).
They're dishonest, and they want your money, your freedom, and your life.
Don't give it to them.