Buffett Rule

- by Mojo (Virginia )

President Obama has proposed the "Buffett Rule" which apparently would require that people making over 1 million a year in income have to pay a minimum 30% tax rate. That sounds pretty fair to me. Certainly much more fair than what we have now where a rich person often has a lower tax rate than a middle class person, sometimes even lower than a poor person.

All of that despite record wealth accumulation by the wealthy in America and record income and wealth inequality.

I'm sure the Republicans, and Mitt Romney, will oppose this. After all, it would more than double the federal taxes Romney would have to pay. They will say we need low capital gains rates and there is some justification for that as theoretically low capital gains rates encourage investment.

However, I don't think they encourage it enough to justify the tax windfall the wealthy currently enjoy. So, I'd recommend Obama's "Buffett Rule" be tweeked a bit. I would say keep the capital gains rate as it is, but phase it out for the wealthy so that once you reach 1 million in income -- you no longer get that benefit. This seems fair.

I also think that carried interest should not be treated as capital gains because it really is just the ordinary income that hedge fund and private equity fund managers earn. This is an example of injustice in taxation.

The Buffett rule is a matter of simple fairness (or justice) -- which is important both morally and economically. Rich people should pay at least as high a percent of their income in taxes as middle class and poor people. You can read more about the Buffett Rule at Buffett Rule.