WEALTHY AMERICANS should pay a larger share of their income in taxes than middle-class households. And any given million-dollar earner should pay about the same share of income in taxes as the next one. The “Buffett Rule” makes sense as a matter of both kinds of tax fairness.
But whatever the moral — and political — allure of President Obama’s pitch for the rule, it addresses a remarkably small problem. The version of the Buffett Rule that the Senate is expected to take up next week — and on which Mr. Obama has been focusing his reelection campaign — would essentially set an alternative minimum tax rate of 30 percent for households earning more than $1 million a year. The Tax Policy Center estimates that this version, sponsored by Sen. Sheldon Whitehouse (D-R.I.), would affect 116,000 households in 2015. Because of that small number — and because the tax would be gradually increased as income rose from $1 million to $2 million — the tax would bring in a scant $47 billion over 10 years, assuming that the Bush tax cuts for upper-income earners expire on schedule. (If the tax cuts are extended, the Buffett Rule would affect more households — 217,000 — and therefore bring in more revenue.) You read that right: $47 billion over 10 years. Less than $5 billion a year.
So writing the Buffett Rule into law is — as the administration acknowledges — no solution to the real and much larger problem of generating enough revenue to fund the government and begin to deal with the burgeoning debt. Mr. Obama on Wednesday addressed those “who are saying, ‘Well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule won’t do enough to close the deficit.’ Well, I agree. That’s not all we have to do to close the deficit. But the notion that it doesn’t solve the entire problem doesn’t mean that we shouldn’t do it at all.”
The administration has proposed a larger fix, raising additional revenue from those earning more than $250,000 a year. Administration officials contend that the campaign for the Buffett Rule will help break the Republican anti-tax fever and pave the way for farther-reaching tax hikes.
But even Mr. Obama’s original plan was inadequate; it’s not feasible to fix the nation’s fiscal problem by taxing only quarter-millionaires, either. Now his emphasis on the Buffett Rule allows him to minimize talking even about that. How much easier it is to rail against millionaires who fail to pay their fair share than to say that the pain will have to be more widely shared.
Mr. Obama still can fairly claim to be more responsible than his opposition when it comes to taxes. Presumptive Republican presidential nominee Mitt Romney’s fiscal plan would dig the nation’s hole much deeper, and his critique of the Buffett Rule as divisive is laughably inadequate. “The new source of division is to say, ‘Let’s find the very most successful in our country and say they’re bad guys. Go after ’em. And let’s divide America,’ ” Mr. Romney said. Favoring a progressive tax code is not equivalent to “going after bad guys.”
But winning reelection with a mandate only for targeting millionaires will not help Mr. Obama lead the country to a responsible debt solution.