As of now, I am in control here, in the White House

Warren and Barack’s Gift to America

One of the more sickening aspects of the ongoing budget debate has been the griping of millionaires and billionaires that they’re not paying enough taxes. As if they can’t fork over more because Treasury won’t take their check.

One in particular, Warren Buffett, says he pays taxes at a lower rate than his secretary. This has become a cherished anecdote for President Obama, which the president uses to make his pitch for soaking the rich some more.

And it has led to the egregious and misnamed “Buffet Rule,” which is actually the “Buffet tax.”

Under the Buffett tax, people making $1 million or more a year would have to pay taxes at the same rate or more as those in the middle class.

Now, as you might expect, this would put a significant dent in our federal deficit.

If by “dent” you mean ERASABLE PAINT SCRATCH.

That this is a political stunt and class warfare at its finest is evident from a piece in the New York Times – no foe of Obama’s – which states that the Buffett tax will collect about $13 billion over ten years.

The Obama administration expects the ten-year deficit accumulation to total $9 trillion.

But the Buffett tax will have real world NEGATIVE effects.

Many well off people, even those far poorer than Mr. Buffett, earn much of their income from capital gains, which is taxed at 15 percent, below the “middle class” income tax rate. That’s why the Oracle of Omaha is taxed at a lower rate than his secretary. Who, BTW, probably makes more than you or I do. I’d like to be Warren Buffett’s secretary, as a matter of fact.

Now, Obama speaks often about how this country needs innovation, that new businesses are the future, and blah blah blah.

Who does he think invests in startups? Venture capitalists who make a high risk investment hoping to recoup a Facebook-style reward one day. Start threatening to tax their hoped-for capital gains at the top income rates of 28-35 percent – or up to nearly 40 percent if Obama gets to do away with the Bush tax cuts – and watch investors put their money instead in safe bets like, you know, Berkshire Hathaway.

A recent piece in the Washington Post makes the point about now this would particularly harm high-tech startups.

The “Buffett Rule” is effectively an increase in the capital gains tax rate that early stage tech investors would pay when one of their investments hits it big. And this is bad news for tech start-ups for several reasons:

It guarantees that investors will have a lower rate of return. A capital gains tax increase automatically lowers how much an investor can hope to make from the handful of winners in their portfolio. Given how risky tech investments are already, this makes the asset class relatively less attractive.

Technology is one of the few bright areas of our moribund economy. Why lessen this advantage with taxes that chip away at start-up capital?

Why?

Because Obama needs to stoke the fires of class resentment to get himself reelected. It’s already too late for him to try to improve the economy significantly before Election Day.

That’s why.

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32 Responses to Warren and Barack’s Gift to America

  1. Anyone want to place a small bet that investors who put their capital into “green” industries (ie Solyndra, etc) will gain an exemption from these higher tax rates from the Obama administration? Anything that benefits his bundlers and Nancy Pelosi’s relatives…

  2. He must know that this has no chance of getting through the House. He’s reverting to his Alinsky inspired community organizing. Ridicule (the rich) is a powerful tool. Dis-organize before you organize. Class warfare has and will backfire this time and the consequences will be severe for the entire Democratic party.

    • This has no chance of getting through the SENATE, let alone the house. It seems the house is waiting for it to fail in Olosers Democratice Senate. Durbin says they do not have the votes. Oil state senators won’t vote for it, nor will Senators up for re-election already worried about being relected because they are Dems. Voting for tax increases would be their death knell and they know it.

  3. Great article Keith. Glad you are back.

    This is more of the same Chicago Way and Sal Alynski’s Rules for Radical stuff. Barry wonders why he is polling so low and can not get his numbers back up, it is because more and more people are seeing him for what he is. Some tried to get the word out back in ’08, such as Joe the Plumber, but obviously it didn’t work.

    Today is different. More and more people, even the MSM have discovered that Kenyan economics does not work and Barry is a big tax, big spending guy.

    He is toast and he knows it. The only cards he has left to play are the race card and class envy.

    Good luck to Barry and ta-ta.

    Hey, I see that Michelle went shopping at Target. I am sure she scrubbed herself good after mingling with the common folk.

  4. And those of us who are building a retirement so we won’t have to use the soon-to-fail Social Security system will have to put off retirement or accept a lower standard of living. Thanks, Warren.

    • Feel your pain William. I retired in early 2008 — before the stock market crash and before the anointment of Obama. Our family is learning to live a lot more frugally than we had planned, but we are determined to make it without depending on Social Security.

  5. Agree – makes you wonder why all the folks in Silicon Valley support giving up more of their blood, sweat and tears to an inefficient federal government. Is it guilt, ignorance or social pressure?

  6. MrO’s tax-th e-rich campaign is a prime example of the clueless and amateur people running his re-election bid. There’s a reason why his poll numbers keep dropping as he makes his class warfare speeches; there is only one multi-millionaire that that public resents and that’s MrO, himself.

    Americans don’t begrudge MrBuffet or MrTrump for their successful investments, don’t have issues with entertainers or sports figures who earn great salaries, or even with the business community leaders who are paid figures we can only dream about.
    It’s Mr and MrsO that the public resents for their priviledged lifestyle, their extravagance, and their lack of empathy for the miserable economy that’s tearing families apart.

  7. Excellent analysis Keith. His plan is nothing but smoke and mirrors. The projected savings of $13 billion over 10 years equals $1.3 billion per year. It is a pittance when you realize the government spends $4 billion per day.

    Durbin blew the whistle on the whole campaign ploy yesterday when he admitted Obama’s plan doesn’t have the votes in the Senate. It is sitting in the Senate with Dingy Harry as the only sponsor. The bill hasn’t even been introduced in the House, which is where revenue bills must originate. With 20 Dem senate seats up for re-election in 2012, there is no way they will put their neck on the chopping block by raising taxes.

    Obama is just a flimflam man waving his phony bill around as he travels the country begging for money and instigating divisiveness. Nothing but bread and circuses for the masses, while they steal us blind with their big green money-laundering scheme.

  8. >>Because Obama needs to stoke the fires of class resentment to get himself reelected. It’s already too late for him to try to improve the economy significantly before Election Day.

    Bravo, Keith!

  9. I have not heard of any other billionaires marching in lock step with Warren Buffet, wanting to show the government more love by giving them more of their money. Little Barry and WB are shredding the ozone layer with all the hot iar they are spewing.

    • Only those with an agenda. Bill Gates III’s father, Bill Gates Jr., the elderly man that he is, fully supports more taxes on the rich.
      Why wouldn’t he? He has almost all of his investments and wealth sheltered in untaxed holdings, including the Bill & Melinda Gates Foundation.

  10. Keith,

    Has anyone done an analysis of how much money US companies have off shore in lower tax sheltered countries? I’m sure they have, I just can’t seem to find the dollar amounts.

    If the DC Dem drones really wanted to add a stimulus to the economy wouldn’t it make sense to have a massive “tax amnesty” and allow US companies the opportunity to bring back their profits to the US without an excessive hit? Allow them to bring back these profits at say a 5 or 10 percent tax rate, and then lower the corporate tax rate for companies that do return their profits to the US to levels that are comparable to Ireland, Iceland or some other low tax rate country.

    Since taxes are not paid by a company, but rather by the consumer, the drop in tax burden should be reflected in a drop in costs to the consumer, thereby giving the company more sales due to lower prices.

    The influx of capital back onto US soil would allow companies to expand and invest back into the US economy. A very positive stimulus that would not cost billions of uncovered liabilities to the taxpayer.

    I’m not an economist, but it makes sense to me to encourage companies to bring their profits back into the country.

  11. What is really scary is the tax on dividends that are headed our way. That will be ~40%.

    So, where do you put your money. CD’s or bonds? Nope, interest rates are below 2%. Dividend paying stocks like utilities? Nope, gonna tax those dividends right out of your mind. Capital gains? Nope.

    I swear, you couldn’t design in grad school a method of destruction this good.

    barkleypontree.blogspot.com

  12. I got to thinking this week when Newt released his plan for American. He made a comment…”these are solutions…not slogans”. I can not recall Obama publishing his written plans It is all about hope and change and generalities. I’d like for him to write down how much and what method he is going to tax the wealthy and how he is going to spend it. The wealthy are in a position that no matter what they say it will be twisted to make them look bad. They remain silent. I am not jealous of them. I enjoy one of the highest living standards in the world even thought I don’t have that much. One thing about America is one can start off poor and not end up that way.

    If Obama gets his way the people who do will stop trying because what ever they earn will be taken away from them and given to those who expect a free ride. And the free riders will end up thinking why should they put forth any effort because the government is going to give it to them anyway.

    As Paul Harvey, the late radio broadcaster, use to say…”We start having problems when more people ride the wagon than those pulling it”.