Warren Buffett is quickly becoming the face of Obama’s new “millionaires’ tax” (aka the “Buffett Rule”) and will likely play a major role in the president’s campaign messaging. But there are some potential pitfalls to this branding strategy, and it starts with the actual substance of the “Buffett Rule” – there isn’t any. The Atlantic’s Megan McArdle writes:
At least in the White House document that I read, I saw no proposal to set some sort of AMT on millionaires. Instead, it claims to do this, while rehashing a bunch of things that the administration has long proposed: allowing the Bush tax cuts to expire for those making more than $250,000; changing the treatment of carried interest income accrued from capital gains; and altering the treatment of deductions for very high earners. If all of these things were passed, guess who would still pay a lower effective tax rate than his secretary? Hint: his initials are WB, and he lives in Omaha, Nebraska.
The likely reason, as McArdle goes on to explain, is a “Buffett Rule” would be incredibly tricky to institute. “[I]t would add complexity to the tax code; it might not be possible to do in a way that would stand up even in our very IRS-friendly tax courts; it would have upsetting effects on the market for various forms of capital, particularly municipal bonds,” she wrote.
So at the moment, the administration is linking its various stale proposals with the “Buffett Rule,” including a tax hike on families making more than $250,000 a year. And considering Buffett is the third richest man in the world and is worth around $50 billion, there’s a major disconnect here. As Rich Lowry writes:
Obama clearly thinks that wielding Warren Buffett’s support for higher taxes on “millionaires and billionaires,” as Obama invariably puts it, is a rhetorical clincher.
Except what Obama supports is raising taxes on people who are paupers compared with the Sage of Omaha. Half of Obama’s tax increase consists of allowing the Bush tax cuts on upper-income taxpayers to expire. “Upper-income” includes couples making $250,000 a year.
Americans can obviously grasp the difference between Buffett and a family pulling in $250,000 a year. But Obama doesn’t just lump people making more than $250k in with Buffett; his rhetoric virtually expels them from the rest of “ordinary” society. Writes the editorial board at Bloomberg:
The Buffett Rule plays right into Obama’s unfortunate tendency to vilify people and institutions (medical-insurance companies, banks and so on). The criticism may be appropriate, but the vilification isn’t. In accusing his critics on Monday of wanting to put “all the burden for closing our deficit on ordinary Americans,” the president casually expelled the wealthy from “ordinary” society.
Buffett is set to host some fundraisers for Obama, a sure sign he’ll be a regular presence alongside the campaign. But unless Obama proposes an actual “Buffett Rule,” he might want to be careful about linking the multi-billionaire to proposed tax hikes on Americans who are a far cry from millionaires.