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Obama Needs to Drop the Phony "Fairness" Issue

Obama needs to drop this phony "fairness" issue and get serious about real issues of debt, economy, and entitlement reform.

President Obama proposed the new “Buffett Rule” in his state of the Union Address, which was a minimum tax of 30% for everyone making over a million dollars.

This is a ridiculous idea, but I have not heard conservative politicians attacking this proposal head on the way it should be. The first problem is if we are going to change the tax code we should look to making it simpler not more complex. If Obama feels taxes are too low, as he clearly does, he should have the courage to discuss the reasons some people who make more money pay a lower effective rate than others with the same family situation. There are three obvious ones, capital gains tax rates, deductions, and exclusions for municipal bonds. I plan to examine these here.

Before we start, let’s look a little at the reason given for this new rule “fairness.” The implication was that Buffett or Romney pays a much lower rate than average people. This is clearly not true since 47% pay no taxes or even have a negative tax rate. This is the biggest “fairness issue” and it is bad to have so many that pay nothing, not that I think that should be changed now. According to 2009 tax data 87% of tax filers paid a lower percentage of their income in taxes than Romney. So without even looking any further the bottom 85% would have no fairness issue to complain about.

Next we need to look at the major reason for the lower rate for people like Buffett or Romney, which is the lower rate on capital gains of 15% for people with high incomes. It is important to note that Democrats have cut capital gains taxes. Bill Clinton cut them in 1997 and Barrack Obama proposed a capital gains tax cut for small businesses.

Thus, it is recognized by both parties that lower capital gains tax rates are good for the economy. Next, we should note that without any changes the capital gains tax rate goes to 20% next year under current law. Since Harry Reid and the do-nothing Democrat Senate are unlikely to accept any reasonable deal this year, we should not worry about “fixing” anything for just this year.

Again, looking at 2009 tax data, 95% of all tax filers would have a tax rate of less than 20%. Based on that data, only the richest 5% of income earners have a right to complain. However, this forgets that the capital gains tax is part of a double tax and only half of the story. The corporations Romney invested in paid corporate taxes before Romney collected his gain. Tax rates average around 25% for all corporations.

After considering the double taxation issue, there is no “tax fairness” issue at all for Romney or Buffett. Even the study that I saw that suggested increasing capital gains taxes suggested doing so in small increments to avoid a significant drop in revenues - not doubling them. In addition, many studies indicate that raising capital gains taxes will collect the same or lower amounts of money, after the negative effects on the economy are considered. I do not think it is smart to raise taxes to chase some misguided sense of “fairness” to only collect less in revenues. Obama clearly does think that way.

For the case of municipal bonds, it is not so much a break for rich taxpayers as it is a subsidy on borrowing for local governments. High income people chose to take a lower interest rate to save money on their taxes. Both get a benefit. With many local governments in debt and struggling, I do not think it is a good time to remove this subsidy on their borrowing. If we did this it should be phased in over time and done when there is a solid recovery.

As for deductions and credits, I think in general many should be eliminated for all. These are common ways for politicians to give gifts to donors or favorite constituencies. Most should be eliminated except a few like home mortgage interest, charitable contributions, and other taxes paid. For rich people the charitable contributions deduction is the one that results in the lowering of their taxes paid. If this concerns Obama he should propose capping the amount that can be deducted and lower the top tax rates.

Obama knows all this, so I have to assume he is just another dishonest politician. I heard all of his tax increases don’t come close to paying for his suggested spending increases. He has been claiming that the 30% rate is what people paid under Reagan which is inaccurate. After Reagan was finished the top rate was 28%, so nobody averaged 30% in income taxes paid.

Again, this is part of his class warfare reelection strategy. Use people’s emotions of envy and greed to get them to forget he has no solutions for any of our real issues, and to forget his miserable record. He also is not serious about working to change anything this year due to the second part of his strategy of running against Congress. Harry Reid and the do nothing Democrat Senate has gone over 1000 days without passing a budget. Reid will only bring items that have to be done or ones they have the votes to shoot down.

They will not vote on many items the house passes or will pass, that many Democrats would feel they should vote for. That is why Obama chooses the ridiculous number of 30% and moronic way of dealing with what he thinks is the issue. He does not really want to fix it, just complain about it. So let drop the divisive class warfare rhetoric, phony “fairness issue”, and get serious about the important issues.

1) http://newsbusters.org/blogs/noel-sheppard/2012/01/19/media-myth-debunked-97-percent-americans-pay-less-romneys-15-percent

 

2) http://www.heritage.org/research/reports/2010/03/obamas-capital-gains-tax-hike-unlikely-to-increase-revenues

 

3) http://www.youtube.com/watch?v=JkUCeYgEWAM&sns=em

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Craig February 09, 2012 at 09:59 PM
Survival of the fittest goes on in nature and in human life. Natural selection isn't a terrible thing, it is what makes any species stronger. I never really wanted to be wealthy like the 1%, I just wanted to be comfortable. Being human makes us desire more, learning to accept less than 'everything' is a learned quality. I can remember my dad when I was a kid saying look at that fool: all his money and all his expensive glitzy toys, and he hates the world...crabby SOB.
Lyle Ruble February 09, 2012 at 10:21 PM
@Craig...Although it might not seem like it, but I'm not picking on you specifically. I fully understand your position, but why should you or children or me and my children be blessed with more opportunity than anyone else? The idea of natural selection based on opportunity just bothers me. I feel like the least we can do is to make sure everyone can at least have food, shelter, clothing, an education, healthcare and an opportunity to work. If it means that I have less, then so be it. It's the least I can do to help mitigate the fact that not all have an equal and fair opportunity.
Craig February 09, 2012 at 10:33 PM
I understand Lyle, and maybe I went on too long with my explaination. Those without a disability in my opinion, ARE able to climb the ladder. Maybe not get to the top, but a rung or two is an improvement. When my kid was little, she used to say how much she liked her friend's mansions (some were quite nice), my answer to her was this: It is okay to like something others have, or even dream of it for yourself one day. But make sure you put yourself in the position to earn it on your own. Don't hope to win the lottery, marry a rich man, or inherit the means to get it- you have to do it yourself. I am not in favor of putting the sick and old out with the trash at night to die, we should take care of them.
Jeff Christensen February 09, 2012 at 11:11 PM
How am I supposed to take anything Bryant writes seriously when he provides three links at the end of his "editorial" and they are: 1. A link to a Newsbusters story. Newsbusters is a project of the discredited Media Research Center, which is run by Brent Bozell. Bozell has a history of racially insensitive comments including his calling President Obama a "skinny ghetto crackhead". 2. A link to the Heritage Foundation. The Heritage Foundation is a conservative think tank which is funded by every dog-whistle conservative funder in the nation including the Bradley Foundation, the Coors Family, the DeVos family and yes...the famous Koch Brothers. 3. A link to a Paul Ryan interview on Fox News. A fluff piece of unchecked opinions from a biased news organization. Here's the deal, if you want to have a serious discussion like a grown-up, let's use some serious sources. Until then, your submissions are nothing more than bad opinion pieces that have zero merit.
Bryant Divelbiss February 10, 2012 at 01:28 AM
First of all news sources are biased, FOX is right of center, but most are far left. The main point of my article that I took from Newsbusters was a table from the IRS which I used differently and notice I did not quote their 97% figure. I noticed the same thing from liberals like Nancy and you, is that you have no argument on the points I make. Honestly, if Obama wants to increase Capital Gains Taxes make that argument instead of the moronic Buffett rule. We both know that is because he is not trying to make serious solutions, just create distractions.

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