President Obama will finally present his deficit-reduction recommendations to the super committee this morning, and one of the proposals will reportedly be a “Buffett tax,” which will raise taxes on millionaires whose earnings come from capital gains:
The White House will propose a new tax rate for people earning more than $1 million a year to ensure they pay at least the same percentage of their earnings in taxes as middle-income Americans, a senior administration official told CNN on Sunday.
Called the Buffett Rule, the proposal will be part of a comprehensive deficit reduction plan President Barack Obama will unveil on Monday, according to the official, who spoke on condition of not being identified.
What happens when the cost of risk equals the cost of relatively risk-free income? People stop taking risks and shelter their capital. When capital stops being risked in new ventures, economic growth slows and stops, jobs either never get created or start disappearing, and we get stagnation or recession. That capital doesn’t sit on the sidelines forever, either; eventually capital moves to other markets, which means that even when conditions improve, we won’t see that capital return to our markets.
Republicans have already vowed they’ll oppose tax hikes in the super committee, so Obama knows this isn’t a viable proposal. His goal on this is purely political. When the GOP opposes Obama’s plan, he’ll say they’re unwilling to trade “middle-class tax cuts” (a.k.a the ineffective payroll tax cuts) for higher taxes on the wealthy (which would suppress job creation). Ryan is right to slam this as class warfare, because that’s exactly what it is.