A vote on the so called “Buffett Rule” which would have raised taxes on those who make over $1 million a year was defeated by a Senate filibuster on Monday. The bill was defeated 45-51. Republicans invoked a filibuster, which means that at least 60 votes are necessary to move forward with legislation. The tactic has been used more by Republicans since President Obama took office than at any time in our nation’s history.
The Buffett Rule was designed to keep the very wealthy from paying lower tax rates than middle income earners. The name comes from billionaire investor Warren Buffett who famously stated that he pays a lower tax rate than his secretary. The reason for that is Buffett makes most of his money from capital gains, which are taxed at 15%. Many of the very wealthy earn their money in this way.
Most Americans support the Buffett Rule. A CNN poll released Monday showed that 72% of the American public are in favor of the bill. This is in line with other polling that has shown most Americans want to raise taxes on the rich to help pay down the deficit along with cutting some spending. Taxes are currently at historic lows.
Republicans are going in the opposite direction. They are expected to introduce legislation next month that would cut taxes even further. The GOP believes in trickle down economics, which states that giving tax cuts to the rich will eventually lead to more jobs for all as the wealth trickles down through the system. Most economists believe that tax cuts are the least productive form of economic stimulus.
When discussing the topic of taxing the rich it is important to point out that no matter how high you raised taxes, you could never pay down the deficit with tax hikes alone. Our debt has simply grown to large. Raising taxes on the rich will barely put a dent into our fiscal problems.
Another important factor to look at is the growing income distribution gap in this country. Over the past 30+ years the poor and middle class have seen their wages stagnate, while the rich have seen their incomes sky rocket. There are likely many factors involved in this problem, but the slashing of tax rates under Ronald Reagan and the long term execution of trickle down economics appears to be the biggest one. Cutting tax rates may have generated economic growth, but the wealth did not trickle down.
The disparity in wealth in this country is not sustainable. The last time the income gap grew this large was right before the Great Depression. This disparity is at the heart of many of the nation’s financial problems. If lower and middle income families made more money they would need less government assistance. Therefore, the solution is to get better paying jobs in America, not gutting social programs while people are still on them. Tax cuts alone will not achieve this, as tax cuts do not create jobs. Demand creates jobs.
It has been a major flaw in the reasoning of the GOP that tax cuts will create jobs. If a person or business gets a tax cut, they will not immediately go out and hire someone or invest in upgrading their business. If there is not a greater demand for their product or service they will stand pat and pocket the extra income. This seems to be what has happened over the past 30 years. Only when there is a growing demand for their product or service will a business or person invest further into their business or hire more workers.
The Buffett Rule would not have solved our budget or tax problems, but it would have been a step in the right direction. If you are making over $1 million a year on capital gains, you can afford to pay a little more in taxes. At this point in time the country needs every dime it can get. It is true that the wealthy pay a large share of the taxes in this country now, but that is because they control a large portion of the wealth. If the income distribution was a little more balanced, they would not be paying a higher share.