Fact or Fiction: THE BUFFETT RULE
May 23, 2012 -
THE BUFFETT RULE – Fact or Fiction
CLAIM: Implementing the so-called “Buffett Rule” will fix our national deficit and debt.
BACKGROUND: Named after Warren Buffett, President Obama supports implementing the so-called Buffett Rule—a second Alternative Minimum Tax on incomes over one million dollars to ensure they pay at least 30% in federal income tax.
- While all ordinary income over $170,000 is taxed well over 30%, the President is looking to increase the effective tax rate on long term capital gains and dividends, which are considered investment income.
- Levying lower tax rates on investment income has a long history dating back to the 1920s. In fact, until recently, even Mr. Obama supported the lower rates. Many economists contend that capital gains and dividends should be taxed at a lower rate because of the disproportional positive effect investments have on growing the nation’s economy.
- Some in Washington now contend that increased tax rates on investment income are necessary to address the national deficit and debt—ergo, the Buffett Rule. The revenues raised by the Buffett Rule, however, are just a drop in the ocean of debt Washington has accumulated.
THE FACTS: The non-partisan United States Congress Joint Committee on Taxation released has estimated that the Buffett Rule would raise $46.7 billion over the next 10 years, or about $4.7 billion a year. To put this in context, this year alone the federal government will run a $1.2 trillion deficit; increasing the total federal debt to over $16 trillion.
- The only way to eliminate the federal deficit and pay down our debt is to grow the economy, not to raise taxes.
- Federal Government Spending supported by Buffett Rule: 10 Hours
- Percentage of yearly deficit cut by Buffett Rule: 0.4%
- Percentage of national debt cut by Buffett Rule: 0.03%