Coddling

In a recent Op-Ed piece for the New York Times, Warren Buffett, the second-wealthiest man in America with an estimated net worth of $45 billion, argued that his 2010 tax bill of just under $7 million was embarrassingly low and should have been far higher.

Buffett would prefer that his tax bill be closer to what he used to pay back in the '70s, when the capital gains tax rate was 39.9% (today this rate is 35% for short-term gains and 15% for long-term gains for those in the highest tax bracket). President Obama, while stopped in Cannon Falls, Minnesota, on his bus tour through middle America, immediately agreed with Buffett’s comments, and with good reason: it provides yet another scapegoat for his poor economic record.

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Instead of the government’s massive debt and deficit being the fault of those in Washington who spend money like drunken sailors (my apologies to drunken sailors everywhere), it’s now the fault of those dastardly super-rich who are not being taxed enough. If only they were paying their fair share, all of our economic woes would be over, and the government would be awash in cash. No more debt. No more deficit. Really? There are several problems with this idea. Let’s take a quick peek at the top five:

Problem #1: There Aren’t Enough Super Rich

In his article, Buffett considers the 400 highest-earning Americans the super rich. According to Buffett, the average income of these 400 was about $227 million. Barack Obama’s projected deficit in 2012 is $1.1 trillion. Even if we went so far as to tax the income of the super rich at 100% (in other words, if the government took every penny they earned last year), that would only bring in $91 billion. That wouldn’t even dent Obama’s deficit, let alone touch the $14.6 trillion overall federal debt. Buffett argues we should broaden our definition of rich to all those who make at least $1 million per year: “raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more … I would suggest an additional increase in rate.” The problem with this is that there are only about 200,000 households in the country in that $1 million club. In order to spread the deficit over these 200,000 families, you would have to increase their tax burden by $6 million each. You can’t pay $6 million in taxes if only you make $1 million per year, and most of those who make $1 million or more make closer to $1 million than to “or more.”

Problem #2: The Rich Aren’t Stupid

Not only is this impossible mathematically, but it’s impossible simply because the rich aren’t stupid. Mitt Romney recently said, “The problem with rich people are, many of them are smart.” He’s right. Most rich people don’t get that way by being foolish with their money. And that includes finding ways to keep as much of it as they can—just as we all do. Nobody who makes $1 million per year is going to sit idly by while the government takes 100% of his or her earnings—or even far less than that. As Donald Trump said this week in response to Buffett, “A lot of people would leave the country… I'm talking about big people, job-producing people. A lot of people will say, 'No thank you, I'm going to Switzerland. I'm going to Germany. I'm going to here, I'm going to there.'" When the government raises taxes, people respond.

Problem #3: The Super Rich are not Coddled

Buffett believes that those in government are somehow protecting the super rich from paying their “fair share” of taxes. In Buffett’s words, “It’s time for our government to get serious about shared sacrifice.” So let’s see how much of the nation’s tax burden is carried by the rich:

• The top 1% of earners pays 37% of all income taxes.
• The top 5% of earners pay 57% of all income taxes.
• The top 10% of earners pay 68% of all income taxes.
• The top 25% of earners pay 85% of all income taxes.
• The top 50% of earners pay 97% of all income taxes.

This means that the bottom half of American earners pay just 3% of all income taxes in this country. It also means that the wealthiest 1% of Americans pay 12 times as much income tax as bottom 50% combined. The super rich are hardly being coddled.

Problem #4: The Moral and Hypocrisy Factor

Morally speaking, I’m not sure where Buffett finds the justification to simply confiscate what others have earned—as if a person’s income is really the property of the government to do with as it pleases. Thomas Jefferson said, “To take from one because it is thought that his own industry and that of his father’s has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association—the guarantee to every one of a free exercise of his industry and the fruits acquired by it.” What Buffett seems to have forgotten is that this isn’t the government’s money; it belongs to those who earned it. More importantly, Warren Buffett could, this very minute, write a check to the government for any amount he wanted. It is perfectly legal for anybody to donate money to the U.S. Treasury. If Buffett is so happy to pay more in taxes, why doesn’t he simply write that check voluntarily? To borrow a tired cliché, he’s willing to talk the talk, but not to walk the walk.

Problem #5: Responsibility

The most serious problem is also its most basic: responsibility. By blaming the wealthy for the country’s debt problem, it takes the focus away from where it belongs: Washington, D.C., and specifically Barack Obama. We do not have a revenue problem in this country. We have a spending problem. In 2010, the federal government had gross revenues of $2.16 trillion dollars. That’s nearly double what it was in 1990 and four times what it was in 1980. (I wish my revenue had grown as rapidly!) The strong economic times this country has enjoyed over the past 30 years should have brought in more than enough revenue to wipe out the deficit and the debt several times over. Instead, lawmakers in Washington have spent it faster than they could bring it in. Barack Obama increased this spending to breathtaking levels. His first deficit more than tripled the previous record, to $1.4 trillion in his first year in office. And now he wants “shared sacrifice.” So let me get this right: Obama and his cohorts in Congress go through money like water, and now we all—the super rich in particular—share in the sacrifice to clean up their mess? Isn’t that sort of like your bankrupt brother-in-law demanding that you pay his bills because you married his sister? I’m all for shared sacrifice. But I think it should be shared sacrifice of those responsible for this mess in the first place. So instead of punishing the super rich, who didn’t spend us into oblivion, let’s have shared sacrifice among those responsible for this mess. I propose this:

1. Collect the name of every member of Congress—Republican or Democrat—who ever voted for a federal budget that included a deficit.
2. Determine which of these members are still living.
3. Add the names of all living presidents.
4. Increase THEIR taxes.

I propose that we tax all former members of Congress at a 50% flat tax rate. Former presidents would be taxed at a flat 75% of annual income. Finally, current members of Congress and the current president would be taxes at 100% of their annual income. Any other Americans who would like to can volunteer to join either of these groups (time to walk the walk, Warren!). These tax rates will stay in effect until the debt is erased and we have a balanced budget. How about we stop coddling those who caused this problem in the first place?