Jerry Brown, California’s reborn Governor Moonbeam, defines his “millionaire’s tax” as applying to anybody who earns more than $250,000 a year. “Anybody who makes $250,000 becomes a millionaire very quickly,” he explained. “You just need four years.” This may be the simplest wealth-creation advice since Bob Hope was asked to respond back in 1967 to reports that he was worth half a billion dollars. “Anyone can do it,” said Hope. “All you have to do is save a million dollars a year for 500 years.”Why stop there? After all, someone earning $100,000 a year is just 10 years away from being a millionaire? Why not tax that individual at the millionaire's rate? With math skilz like these, the possibilities are endless.
It’s that easy, folks! Like President Obama says, all you have to do to pay off his 2011 deficit is save $3.2 billion a year for 500 years.
Joking aside, this is what always happens with taxes on so-called millionaires. They run out of millionaires and then have to increase taxes on the middle class. Think of the AMT and its history of expanding the tax to all sorts of people never contemplated in the original tax. Remember how when the 16th Amendment was passed it was only supposed to be for federal income taxes on the super wealth of 1913? How has that worked out?
Remember how President Obama lectured us about the Buffett tax, "This isn't politics, this is math." Well, now it turns out that the Democrats are pretending that passing the Buffett Rule will somehow offset repealing the AMT. Yet, the math doesn't quite work out.
Now we learn that the Buffett tax the Senate is expected to vote on early next week will make the deficit worse. That's because both Mr. Obama and Senate Democrats have made it clear that their new "fairness" tax is to offset the revenue loss from another provision related to the Alternative Minimum Tax.And there you have it, ladies and gentlemen, Math for Democrats.
That measure would exempt more than 20 million middle class Americans with incomes as low as $80,000 a year from getting nailed by the AMT. This year's Obama budget clearly describes their intent: "The Buffett Rule should replace the Alternative Minimum Tax, which now burdens middle-class Americans rather than stopping the richest Americans from paying too little as was originally intended."
The Joint Tax Committee—the official scoring referee on tax bills—calculates that the combination of AMT repeal for the middle class and the Buffett tax would add $793.3 billion to the debt over the next decade. As Mr. Obama has said, "This isn't politics, this is math."
The Buffett tax is losing any serious rationale by the day. Mr. Obama's position now is that we need a new fairness tax, because the old AMT fairness tax that was targeted at millionaires and billionaires isn't raising much money from the Warren Buffetts of the world. Instead it's siphoning income out of more and more nonmillionaires. So they argue it's time for a new Buffett rule, that is almost identical to the old Buffett rule, and no doubt in time will have the same unintended consequences.
The Buffett rule itself may die, but the name will live on as a metaphor for pointless public policy.