About This Blog
Our President, the Great Prevaricator, likes to mislead people. I suppose that shouldn't be a surprise. That's what prevaricators do, they mislead. Obama's statements about who pays their "fair share" of taxes have received lots of press, as have Obama's statements about billionaire Warren Buffett paying less in taxes than his secretary. Let's examine these claims.
According to 2010 tax data, the top 1% of earners made about 24% of the national income (if you include capital gains) and paid nearly 40% of the income taxes. Thus the rich, as a group, are paying nearly double their "fair share" according to the data. The Great Prevaricator conveniently forgets to tell us that part.
Here's Sen. Rand Paul (R-KY) to elaborate on the point:
"We have to start with the facts on whether the rich are paying their fair share. We hear that over and over again, 'the rich are not paying their fair share,'" Paul said on CNN's "State of the Union." “The top 1 percent, the millionaires in our country, pay on average 29 percent of their income. That's what they pay on average. The average carpenter who makes $50,000 to $75,000 a year pays between 15 percent and 18 percent. The top 50 percent of wage earners pay 96 percent of the income tax."
These numbers are known as "facts", something the Great Prevaricator would prefer you not know. Instead of dealing with the actual facts, the Great Prevaricator talks about individuals, whose tax burdens can vary widely. That's why Warren Buffett and his secretary become the Obama talking point regardless of the facts. If we're dealing with facts, our tax code is progressive. The rich pay more.
But I'll indulge the Great Prevaricator. Let's talk about Buffett and his secretary for a minute.
First of all, Warren Buffett pays a LOT more in taxes than his secretary does. Let's have no confusion there. On Warren Buffett's 2010 tax return, he paid nearly $7 million in federal income tax. Unless Buffett's secretary is the highest paid secretary in the history of the universe, I guarantee you she pays nothing close to that amount.
The part of Buffett's tax bill Obama wants you to concentrate on is the percetage of taxes paid compared to income. For Buffett in 2010, that came to 17.4% of his income. This is where Obama and liberals become outraged. Obama wants it to be a minimum of 30% for those earning a million bucks or more, and I imagine most Americans would agree with that.
But there are other considerations. If Warren Buffett's earnings were taxed as regular income, he'd pay at a 35% rate (maybe 30% after deductions). I haven't pored through Buffett's tax return, but I'm going to guess a substantial amount of his earnings come from long term capital gains, which are taxed at a rate of 15%. There are reasons why capital gains are taxed at a lower rate. Here are some of those reasons:
The term “capital” refers to produced goods used to produce future goods. Even a corner lemonade stand could not exist without capital; the lemons and the stand are the essential capital that makes the enterprise operate. A recent study by Dale Jorgenson of Harvard University discovered that almost half of the growth of the American economy between 1948 and 1980 was directly attributable to the increase in U.S. capital formation (with most of the rest a result of increases and improvements in the labor force).
Investment (capital) is what fuels our economy. The more capital we invest, the more economic growth we will have. In a free country (which stands in contrast to the centralized Obamacracy the President described in his State Of The Union speech), that capital comes from and is invested in the private sector. Why would we want to discourage it by taxing it and sending that money to the federal government ?
Next, liberals like Obama make the same economic mistake over and over again, by thinking capital only makes rich people rich. That's crazy thinking, because capital investment benefits everyone via job creation and a rising standard of living:
Between 1900 and 2000, real wages in the United States quintupled from around fifteen cents an hour (worth three dollars in 2000 dollars) to more than fifteen dollars an hour. In other words, a worker in 2000 earned as much, adjusted for inflation, in twelve minutes as a worker in 1900 earned in an hour. That surge in the living standard of the American worker is explained, in part, by the increase in capital over that period. The main reason U.S. farmers and manufacturing workers are more productive, and their real wages higher, than those of most other industrial nations is that America has one of the highest ratios of capital to worker in the world.
If capital investment wanes, so does our standard of living, and so does the middle class.
The third reason long term capital gains are taxed at a lower rate is inflation:
capital gains are not indexed for inflation: the seller pays tax not only on the real gain in purchasing power, but also on the illusory gain attributable to inflation. The inflation penalty is one reason that, historically, capital gains have been taxed at lower rates than ordinary income. In fact, Alan Blinder, a former member of the Federal Reserve Board, noted in 1980 that, up until that time, “most capital gains were not gains of real purchasing power at all, but simply represented the maintenance of principal in an inflationary world.
If you bought a stock in 1990 and sold it for 50% more than you paid for it, you might have actually LOST purchasing power, and that's BEFORE the government takes it's 15%. Let's also not forget that investment is capital at risk, and if you lose a million dollars on an investment, that money is just gone. You don't get to reduce your tax burden by a million. You just bet and lost. The end.
The Great Prevaricator doesn't want you to know any of these things. Here's something else he doesn't want you to know - the government doesn't get that much revenue from capital gains taxes to begin with, and...raising the capital gains tax rate may result in LESS federal revenue. Obama's own administration has estimated that increasing the capital gains tax rate from 15% to 20% would bring in $100 billion in federal revenue over ten years. That's $10 billion per year, and that's only if the capital gains tax rate was hiked for EVERYONE. What is $10 billion per year going to accomplish when we have a $1.23 trillion deficit ? Not much, even if the Obama administrations guesstimates are correct. They could easily be incorrect, because there's another thing about capital gains taxes Obama doesn't want you to know - they are the easiest taxes in the world to avoid. When the capital gains rate goes up, you can avoid the tax by holding onto your investment, or even worse, by investing overseas, which the wealthy can do whenever they wish. Thus, a higher capital gains tax rate would have the effect of driving investment AWAY from America. Not too smart.
The Great Prevaricator conveniently forgets to tell you any of these things. He's some piece of work, that guy. We deserve a much more honest President. I can't take much more of people repeating his lies and distortions. If he wants to be an education President, he could start by not making the public dumber and more misinformed himself.
Enough about capital gains. Let's turn to Warren Buffett's secretary. Obama recently claimed she payed twice the tax rate that Buffett did, which by my calculations means she payed an income tax rate of nearly 35%. If what Obama said is true (most of what he says isn't), that would make HER one of the rich, because she'd be in the top tax tier of 35%. What is Obama complaining about ? She'd be one of the people he wants to tax, but Obama says she represents the middle class. If so, I agree with the President. 35% is way too high a federal income tax rate for a middle class person to pay. Let's cut her tax rate to 15% IMMEDIATELY. I'm FOR the middle class. How about you, Mr. President ? Why are you punishing the poor hard-working woman with such confiscatory tax rates ?
In any case, here's another question to ask yourself.
Where does Buffett's secretary get her salary from ???
Answer - It comes from Warren Buffett !!! Thus, in reality, since Buffett is paying her entire salary, he is paying her taxes too, as well as the taxes of all the employees he hires. Obama thinks we're too stupid to make the connection, but we're not all part of the Occupy movement, Mr. President.
And Warren Buffett's company, Berkshire Hathaway, pays taxes too. Obama doesn't mention that part either. If Obama was being honest, he'd say Warren Buffett is generating a tremendous amount of revenue for the federal Treasury through both direct and indirect means. But that's only if Obama was being honest, which he isn't...or maybe he's just a dunce. It seems hard to believe, but he talks like a dunce.
There's one other rather curious thing about Warren Buffett. While he pimps for more taxes for Obama by calling for "shared sacrifice" from the rich, his company, Berkshire Hathaway, owes an alleged $1 billion in back taxes to the federal government, and is threatening protracted litigation with the IRS while Buffett tries to cut a deal to pay less. I'm thinking that if Buffett really believes he should pay more, he would pay it instead of hiring attorneys, ya know ?
My final point about the Great Prevaricator's class warfare tax shuffle is this, and it's a doozy - there aren't enough millionaires in this country to come anywhere near to plugging our $1.2 trillion budget deficit. In 2009, there were 236,883 households that had an income over a million dollars, and only 8,274 made over $10 million. If we took another million bucks away from all these rich folks (which would mean we'd be taxing most of them at a tax rate near 100%), it would rake in $237 billion for the federal treasury, leaving us still with a budget deficit of a trillion dollars. According to the CBO, Obama's 30% millionaire tax proposal would bring in $453 billion over ten years. That's a deficit reduction of $45 billion per year, which would take this year's $1.23 trillion dollar deficit down to $1.78 trillion. Big fricking whoop. Nothing at all would change. Nothing. That's what all the Great Prevaricator's screaming and wailing is basically about...NOTHING. It's all phony cover for all the spending increases Obama wants.
What we really need to do is cut federal spending, like the Republicans keep saying. Spending is at a record-high, and it's why we have record deficits. The Great Prevaricator doesn't want you to know that either. Contrary to his words, Obama isn't putting together "an economy built to last". He's building an economy that cannot possibly last.
Anybody But Obama in 2012. I beg you.