“Someone calculated that the taxes he [Obama] would raise in his Buffett Rule would pay for 11 hours of government.”
— Mitt Romney, April 16, 2012
President Obama’s proposal to add a tax surcharge to adjusted gross incomes over $1 million, named after billionaire investor Warren Buffett, has generated scorn in Republican ranks, such as the comment above by the presumptive GOP nominee and former Massachusetts governor. (Romney was borrowing an observation first made by Republican National Committee Chairman Reince Priebus.)
It would seem to be a simple math exercise to check this fact. But this is Washington…..let’s have some fun with “baselines.”
The Republican calculation is based on the fact that in 2013, the Buffett Rule would raise $5.1 billion in revenue in 2013, according to the nonpartisan Joint Committee on Taxation. (Alternatively, you can use the 10-year revenue figure of $47 billion and come up with an annual average of nearly $5 billion a year.)
The actual year-by-year score is below.
The fiscal year 2013 federal budget is projected to have $3.803 trillion in outlays. So, dividing $5 billion into that figure, you end up with the Buffett Rule covering 0.131 percent of the budget. Given that there are 8,760 hours in a year, that works out to just over 11 hours.
Of course, for Democrats, the Buffett Rule is not just about revenues, but also fairness, which is an entirely separate matter beyond the scope of this column.
Romney’s observation certainly highlights how little revenue the Buffet Rule would raise. (The impact on deficit reduction also would be minimal.)
In fact, if you look closely, you will see that it actually loses $6 billion in 2014, meaning that over the first two full years, the Buffett Rule actually raises zero dollars. (Why? It’s because investors would rush to rearrange their holdings before the law took effect, thus reducing anticipated revenue.)
Not so fast, say Democrats. They note that the $47 billion figure assumes the Bush tax cuts would expire, thus reducing the potential pot of revenue. Instead, Democrats have touted another figure — a 10-year revenue gain of $162 billion, which assumes the Bush tax cuts continue.
That alternative score is show below. (See Page 4.)
There are certain ironies here. If you read the fine print, you see that the Democrats get this higher figure not only by assuming the Bush tax cuts for the wealthy will continue (which they oppose) but also by assuming that capital gains and dividends continue to be taxed at 15 percent — even though Democrats are officially on record as wanting to boost the tax rate on such investment income.
In effect, this $162 billion figure captures a lot of the capital gains revenue that Democrats hope to raise from their other policy proposals — allowing them to essentially count it twice. So it’s really not a particularly useful figure.
Meanwhile, Republicans tend to focus on the lower, $47 billion figure, even though it assumes the expiration of the Bush tax cuts (which they oppose). To be fair to Republicans, though, the Buffett Rule is not their policy, and the $47 billion figure is the official JCT score of the actual bill advocated by Democrats. So they are on more solid ground to use it.
(UPDATE: For a defense of the $162 billion figure, read this comment on the Economy Policy Institute blog.)
Also interesting: The revenue raised in 2013 even under the Democrats’ preferred metric is just $7.7 billion. That would be 18 hours of the federal government.
The Pinocchio Test
This dispute over baselines — and how they can be manipulated — is a pretty good example of Washington dysfunction. But, within those constraints, Romney’s math adds up. One could even say he was generous, since he could have argued that the Buffett Rule would pay for no government in its first two years.
Romney gets the rare and coveted Geppetto Checkmark.
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