April 19, 2012
Vote on “Buffett Rule” fails to gain cloture in the United States Senate
On Monday, April 16, the legislation which would have imposed the so-called “Buffett Rule” requiring that households earning more than $1 million per annum face at least a 30 percent tax rate, failed to gain the 60 votes required for cloture, barring the measure from advancing. Even if the measure had gained 60 votes, it would have failed in the GOP-controlled House of Representatives.
Critics of this approach claim that it is an election-year gimmick that would do more harm than good from an economic standpoint. Based on Congressional Budget Office projections, implementation of the Buffett Rule would yield $47 billion over the course of the next decade, or less than 1 percent of the expected deficit. Increasing taxes on investment income, on the other hand, would likely lead to capital flight and less domestic investment.
Households earning in excess of $1 million a year derive a substantial amount of their earnings from investments rather than wages. Investment income is taxed at a lower rate. These households also tend to benefit from tax breaks for business expenses, which also lower their taxable income.
In order to foster growth, income derived from investing should and must be treated differently from a tax standpoint than that derived from wages. The Obama Administration and Republicans and Democrats in both the House and Senate would do well to direct their attention to taking meaningful steps toward reducing our burgeoning deficit and our greater than $15 trillion national debt.