By Braden Currey
The United States Senate recently voted to block the advancement of the “Buffet Rule,” a tax-reform measure intended to increase the minimum tax on those earning more than $1 million a year to 30%, up from the current 26%.
The death of the Buffet Rule in the Senate delivers an unfortunate blow to what would have been a fair and equitable income taxation system.
Warren Buffet, regarded as one of the most successful investors in the world and a noted philanthropist, stated earlier last year that he disagreed with the current tax structure, where the very wealthy often pay less federal taxes as a percentage of income than those in the middle class.
This is a result of the method by which Buffet and others like him make their money: they make it through investments, (the tax on capital gains is capped at 15%) as opposed to a salary. Many in the middle class are often taxed at a rate of 15 to 25%.
The Buffet rule would have affected few people (about 270,000) and provides a negligible amount of additional revenue (about $36.7 billion per year). But it is essential in principle.
Congress must restore a sense of fairness and equity to the federal taxation system; how is it at all equitable that those who have the best ability to shoulder a higher tax burden are, as Buffet puts it, “coddled by a billionaire-friendly Congress?”
In the 1950s, the few Americans who qualified for the highest tax bracket paid up to 90% of their income in federal taxes in a sense of “giving back” to the nation and the society that helped generate such obscene wealth: it is reinvested back into society through infrastructure projects or social initiatives.
Symbolic gestures like the Buffet Rule are important stepping stones back to that lost culture of education and hard work.
In the coming years, as deficit reduction becomes a necessity and austerity a national culture, creating a taxation system perceived as equitable is of the utmost importance. Deficit reduction requires sacrifice from all Americans, but this goal is hypocritical when the wealthiest Americans pay so little.
Opponents of the Buffet Rule argue that a low tax on capital gains is necessary to keep wealthy investors in the country and that an increase would negatively impact job creation and investment, but this is contrary to what statistics actually show. Even in 1976, when the tax rate on capital gains was at its highest a 39.9%, job creation and investment were still strong.
The establishment of a fair and equitable taxation system is an essential precursor to any austerity measure taken by the government, whether it is a spending cut or a tax hike.
The government has no business sheltering the super-rich, while less well-to-do people face the burden of higher taxes.