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The “Buffet Rule”

May 15, 2012

What is the “Buffet Rule”?

The amount of coverage given to the “Buffet Rule” over the last couple of months has been amazing.  Basically, the “Buffet Rule” is President Obama’s attempt to set a flat tax rate for Americans making 1 million or more annually.  He has repeatedly stated that Warren Buffet, a wealthy investor, pays a lower rate of taxes than his personal secretary.  His plan would set a minimum tax of 30 percent for those making 1 million or more.

Arguments for the “Buffet Rule” – is there a problem?

Warren Buffet himself, namesake for the “Buffet Rule,” agreed that those who are wealthy should pay the same rate of personal taxes as the middle-class American.  Although he has been very vocal about the difference in taxes between Warren Buffet and his secretary, President Obama has neglected to mention that he personally is paying about 21 percent in taxes.  This too is far below the average American and the President’s personal secretary.

Arguments against the “Buffet Rule”

The biggest difference is that there is a different tax rate on “capital gains.”  In other words, you pay lower taxes on investments and their growth than you do on income from your job.  This difference in tax rate is intentional.  The intended purpose is to encourage entrepreneurs to invest and create in our economy.  It is supposed to offset the inherent risks of investing in new or unproven ventures.

Another factor to consider is the level of corporate tax affecting the very wealthy among us.  According to a recent article by CNN, the United States now has the dubious distinction of taxing business more than any other developed nation.  If corporations cannot make a profit to share with investors, there must be some other incentive for people to risk their resources.  This necessity has been met in the past by the lower tax rate on capital gains.

My opinion on the “Buffet Rule”

While I understand the surface appearance of unfairness with the current tax system, I cannot believe that the President’s plan would be a better alternative.  The combination of increased personal taxes and exorbitant corporate taxes would stifle whatever economic recovery we may be enjoying.  The success and rapid growth of the United States historically is due in part to the favorable conditions for investors and business.

If we tax our jobs out of existence, we should not complain if they are taken over-seas.

Thanks for taking the time to read my ramblings,

Dave

Food for thought – There is an established (and legal) way of taking money from the rich.  It’s called a “JOB.”
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