As President Obama pontificated to the nation last month about how Stimulus II would renew our economy and restore the middle class he claims has evaporated, he made it abundantly clear that Congress should pass it “right away.” What he failed to elaborate on, despite having taken a month to release the plan in the first place, is how he would pay for it. It has since become obvious that the president is more interested in engaging the Republicans in class warfare, as evidenced by his emphasis on the “Buffett Rule” — a new tax on successful businesspeople — than actually negotiating with Congress to achieve fundamental tax reform. This demonstrates a clear failure to lead on the part of the president, as a comprehensive reform of our tax system — proposed both by Congressman Paul Ryan and the bipartisan commission on deficit reduction (Bowles-Simpson) — would not only reduce the deficit but also provide a sound foundation for economic growth.
Our national income tax system suffers from three problems: it isn’t fair, it isn’t competitive and it isn’t simple to comply with. All three of these factors create inefficiencies which stunt our economy’s ability to grow and create jobs, and all three could be solved with commonsense reform.
First, as the president and Congressman Ryan have repeatedly pointed out, the U.S. income tax code isn’t fair since it’s filled with exemptions and carve-outs — commonly known as loopholes — which allow politically connected companies to gain a competitive advantage in the marketplace. This not only puts existing companies and small businesses at a disadvantage, but it also creates another barrier to entry for new job creators. Second, our tax code is insufficiently competitive for the global economy; with an effective tax rate of nearly 40 percent, no company — not even ones that start in the U.S. — has a rational reason to remain in the United States if it could be paying the average corporate tax rate of 25 percent somewhere else. Third, the U.S. tax code creates inefficiencies simply because it currently isn’t easy to comply with — small businesses and corporations spend approximately 6.1 billion hours and $160 billion that could be spent creating jobs and wealth just trying to understand and comply with the tax code.
With all these major problems, it’s really no mystery why U.S. employers “ship jobs overseas” instead of staying in the United States. Luckily, the plans put forward by Bowles-Simpson and Ryan provide a vital solution that would simultaneously help to reinvigorate our economy and reduce our deficit. By eliminating all tax loopholes and drastically lowering corporate and individual rates, the Ryan plan would provide a strong foundation for prosperity and bring our tax code in line with the goal of economic opportunity for all. Furthermore, the Ryan plan would also help to reduce the deficit, as the closure of loopholes and the economic growth from lower rates would greatly expand the amount of taxable income.
Through his advocacy of the Buffett Rule, the president has once again offered us poor leadership and a false solution to our economic and debt woes. Luckily, we still have statesmen like Alan Simpson, Erskine Bowles and Paul Ryan offering us a real path back to prosperity. One can only hope the president will start to show the same kind of leadership.
Daily Nexus conservative columnist Jeffrey Robin didn’t say Obama cannot do anything right — just that he’s doing it all wrong.
In Response, Left Said:
Though lambasting it repeatedly, my counterpart has failed to offer a concrete definition of what the “Buffett Rule” is —it was explained once as a “new tax on successful business people” without further detail. The Buffett Rule is technically a new tax, yes; it’s a minimum tax rate for individuals making over $1 million per year. Currently, the highest tax bracket starts at just under $400,000 — a lot of money, but certainly not enough to make you a millionaire. Any income level after that pays the same exact base percentage. It’s named for Warren Buffett, an extremely successful investor who in recent news famously claimed that his secretary pays a higher tax rate than he does; she gets taxed for a paycheck, and he gets taxed at a much lower rate for his investments.
President Obama and Congressional Democrats have listened to the demands of those who claim $250,000 per year isn’t sufficiently wealthy to raise taxes on now. They have listened to the demands of the American people for a “jobs bill”, offering a real solution involving infrastructure projects, and tax cuts for middle class workers and 98 percent of businesses — while their opponents have failed to offer any concrete solutions at all. You wanted a jobs bill — here’s your jobs bill. Simply because Obama’s backing it does not mean that it’s the wrong solution. After all, to use Obama’s words, “This isn’t class warfare; it’s math.”