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04/14/2012 08:01 PM
The case for the Buffett tax keeps eroding. When President Obama announced the idea, he said it would help "stabilize our debt and deficits over the next decade." Then came the inconvenient revelation that the new 30% millionaire's tax would raise only $46.7 billion over 10 years, and would leave about 99.5% of the deficit intact in 2013. It was a far cry from "stabilizing the debt."
Now we learn that the Buffett tax the Senate is expected to vote on early next week will make the deficit worse. That's because both Mr. Obama and Senate Democrats have made it clear that their new "fairness" tax is to offset the revenue loss from another provision related to the Alternative Minimum Tax.
That measure would exempt more than 20 million middle class Americans with incomes as low as $80,000 a year from getting nailed by the AMT. This year's Obama budget clearly describes their intent: "The Buffett Rule should replace the Alternative Minimum Tax, which now burdens middle-class Americans rather than stopping the richest Americans from paying too little as was originally intended."
The Joint Tax Committee—the official scoring referee on tax bills—calculates that the combination of AMT repeal for the middle class and the Buffett tax would add $793.3 billion to the debt over the next decade. As Mr. Obama has said, "This isn't politics, this is math."
The Buffett tax is losing any serious rationale by the day. Mr. Obama's position now is that we need a new fairness tax, because the old AMT fairness tax that was targeted at millionaires and billionaires isn't raising much money from the Warren Buffetts of the world. Instead it's siphoning income out of more and more nonmillionaires. So they argue it's time for a new Buffett rule, that is almost identical to the old Buffett rule, and no doubt in time will have the same unintended consequences.
The Buffett rule itself may die, but the name will live on as a metaphor for pointless public policy.
