Tuesday, September 20, 2011

Warren Buffett and a Fair Share

Lately the idea that the rich need to pay their fair share has been a mantra of the left. The tax rate for normal income for the rich is higher than that of their secretaries, contrary to Warren Buffett's claims.

What they're talking about is capital gains tax, or tax on investment income. One example is when you sell a stock (that you purchased with income that has already been taxed) that has increased in value. You'll pay 15% tax on that increase. Why isn't that 30-something percent? Because it's not advantageous for anybody. Historically, people invest less if you do that and the government actually takes in less money. That's right, tax revenue goes down. So raising the rate helps no one. This is the Laffer curve at work, and the Left is fully aware of the historical data.

In fact, during a debate moderated by Charlie Gibson then Candidate Obama admitted that he was aware of this (video below):
GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28%. It's now 15%. That's almost a doubling, if you went to 28%.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15%.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.
Why in the world would anyone enact a tax rate that discourages investment and decreases tax revenue in a difficult economy? That's not fair, that's just stupid.

Notice the inanity of candidate Obama's response. "Though raising capital gains tax will bring in less money, it's to make the rich pay their fair share and we need to fund all these great programs." If you bring in less revenue due to a tax policy that brings in less revenue, then you're actually reducing funding for all those great programs, Mr. Obama.

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