President Obama has recently proposed a new tax plan as a part of his effort to close the deficit gap. This plan would not effect 99 percent of Americans, only those making more than a million dollars a year. My taxes would not go up, nor would yours.
In fact, this plan will make the economy more stable in the time when current Biola students will be having kids, investing, and retiring. A more stable economy will bring more jobs, a less volatile stock market, and lower interest rates.
Despite the near universal benefits of the plan, the president has since been accused of unjustly raising taxes on the wealthy, engaging in class warfare and discouraging investment amidst an economic downturn. These are nice flashy phrases, especially coming into an election season, but do they hold any truth?
Buffet Rule to close gap between mega-rich and middle tax bracket
The plan is called the Buffett Rule after super-investor Warren Buffett, a Wall Street mogul who, as the second wealthiest man in the country, has gained a reputation for generosity, square dealing, and economic brilliance. It seeks to close the tax gap between the mega-rich and the middle tax bracket.
At the current levels, people who make over one million dollars a year pay a drastically lower percentage of their income in taxes than those who make less than $250,000. The Buffett Rule seeks to remedy that by closing loopholes in the tax code. Although congressional Republicans continue to accuse the president of raising taxes, the plan actually calls for a lower, flatter tax on those making less than $250,000 a year.
As Buffett himself announced in his August New York Times op-ed, the megarich — in this case, defined as people making millions of dollars a year — often pay less than 20 percent of their taxable income. Buffet paid 17.4 percent, according to his article in the New York Times. Those in the lower income tax bracket pay, on average, 36 percent. This new plan will attempt to bring those numbers closer together.
Tension between classes
Republican congressman Paul Ryan, chair of the House Budget Committee, called the plan class warfare during an interview on Fox News Sunday. While a fun little veiled accusation of communism, it does not ring true when investigated.
For a generation, Republican tax policy has been to lower taxes on the wealthy, while calling for “shared sacrifice” for those of us making less. The shared sacrifice, in the form of higher taxes for the middle class, seems to be class warfare in the other direction. The Buffett Rule, as the president said, “is not class warfare. It’s math.”
According to congressional Republicans, the wealthy are the job creators, the ones who drive the economy. However, the megarich are currently enjoying their lowest tax rates in years while the economy flounders. At the times when their tax burden has been highest, the economy has flourished. In fact, in the first decade of the 21st century, the economy started sliding and the deficit began expanding when taxes were cut.
Ryan has also asserted that raising taxes on the wealthy would inhibit investment, thereby lowering job creation. In his op-ed, Buffett negates that claim. He argues that even in the 1980s and ‘90s, when both income taxes and capital gains taxes were at comparatively high rates, nearly 40 million jobs were created and Wall Street was wildly bullish. Buffett, the consummate expert on investment, claims that he has never met an investor who turns away from a wise investment because the taxes on that income are too high. Income is income.
Higher taxes are never fun. However, this new tax plan will work to simplify the tax code and close the budget gap without unacceptable, draconian cuts to Medicare, Social Security and defense. Sooner, rather than later, the Republican congress and the Tea Party in particular need to realize cutting spending is not a cure-all to the deficit woes. The G.O.P. should take a lesson from men like Buffett, who recognize that marginally higher taxes are an investment in the future of the country.
Plan to increase government profit, decrease deficit
This plan will result in increased income for the federal government. It will substantially lower the deficit and create equity among taxpayers. It is not class warfare. It will not inhibit investment. It will bring this country further from the brink of default, making the economy more stable for me, my fellow students, and future generations. It will be a boon for the federal budget, which will have large and long-reaching benefits for the American people.
