The "Buffett Rule" In Perspective

Tyler Durden's picture

We have extensively discussed the Buffett Rule before (which incidentally will achieve nothing to fix America's gaping deficit problem, but will certainly succeed in driving many wealthy people away from this country). We thought this issue was closed. Apparently it wasn't, and Obama is once again warming up the class divide wagon - remember: the number one rule in politics when electioneering is keep everyone as divided as possible - under the guise of tax reform. So here is a reminder on same simple issues of perspective, courtesy of Rick Santelli.

As a reminder, as we pointed out yesterday, the US just posted the largest ever March budget deficit in history of nearly $200 billion, which followed the single largest monthly budget deficit on record of $232 billion. Keep those numbers in mind, because they frame, in a very, very, very aggressive case, the bottom and top range of what the entire Buffett Rule would offset in terms of gained revenue. As rick explains, assuming one taxes an upper estimate of those eligible for the Buffett Rule (indicatively 225,000 people but realistically far less) an incremental $1 million, the offset would be $225 billion over the proposal's life. Which is not enough to even plug one month of US deficit. And that is what all the posturing is about.

Now don't get us wrong: America has a record deficit problem, and it will require both revenue and spending decisions to fix it, but in isolation, neither will make a dent, and with the government as bloated as it is, far more spending cuts will be required to match any revenue increases.

Finally, since the Treasury already funds over half of US funding needs, and the Fed is among the biggest monetizers, pardon holders, of US paper, why not just go ahead and print the money America needs? Surely all modern economic theories will agree that the once greatest country in the world can print itself into prosperity...

From Rick Santelli:

And while Rick's example is hyperbolic to the upside (in terms of benefit), here is a different more realistic perspective on things, via the Joint Committee on Taxation, courtesy of TaxProf.

Seriously, this may work... If America taxes everyone at about 1500%.

(which incidentally is not too far off: once again we remind people of the ominous reality that the BCG study predicted last September: take our word for it - a one time tax on all assets is coming).

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Seer's picture

All the better to make your property do SOMETHING, generate income.  I think that if not for property taxes the rich would own all property.

TMT's picture

The essence of capitalism is that there will be those who succeed (and consequently acquire assets) and those who fail.  If you don't want to be part of the latter, then work harder.  If you don't like those two choices, then move to Cuba.

Death and Gravity's picture

Thats a false dichotomy; you fail to distinguish between legitimately/honestly/morally acquired assets, and those that are gotten from "befriending TPTB".

TMT's picture

I'm all for the former and hate the latter.  But as you would have it, in order to punish the latter, you would lump in the former to make yourself feel better.

Death and Gravity's picture

"But as you would have it,"

How would you know what I would have?

Besides I'm not for punishing anyone whatsoever.

LowProfile's picture


I'm all for the former and hate the latter.  But as you would have it, in order to punish the latter, you would lump in the former to make yourself feel better.

False premise...


Benjamin Glutton's picture

wake me up when we return to capitalism.

Seer's picture


And, would this "return" state function on zero/negative growth?

Paul Atreides's picture

Notice the drop of the Left Right paradigm this one uses? 40 posts on one thread defending the governments position on 9/11?

They're fucking everywhere...

Death and Gravity's picture

You're still smarting from getting your botty twacked, eh?

Death and Gravity's picture

You still can't argue your way out of a wet paper bag. Same as most conspiracy nutters i've ever come across.

Paul Atreides's picture

Why would I argue with someone who criticizes a distorted, exaggerated or otherwise misrepresented version of the argument and then claims to have refuted the original argument? It's pointless and paints you as a deceptive and arrogant person.

Death and Gravity's picture

"Why would I argue"

Why ask? You've hardly made even *an attempt* at argument/debate recently on ZH.

"It's pointless and paints you as a deceptive and arrogant person."

Be careful that you don't slip off that high horse of yours, it's a long fall down, your own previous behavior considered.

Or has that been forgotten already?

Paul Atreides's picture

That last post was ad hominem. Again you did not refute the fact that you distort, exaggerate or otherwise misrepresent arguments. You resorted to a personal attack.

P.S. I'm just here for the free popcorn.

The Alarmist's picture

BTW, the Buffet Tax is an income tax ... will Warren really end up paying more taxes on his largely dividend-based income?

hedgeless_horseman's picture



Exactly.  Warren has always prided himself on how little Berkshire pays him, and the modest home he still lives in in Omaha.

Income tax is not wealth tax.  The wealthy would never allow it.  Income tax is a work tax...a tax on workers.

Now the estate tax (minus all the trust fund loopholes) could be a different story.  Say, why isn't it a story?

LetThemEatRand's picture

If we called the 400 richest who control more wealth than almost half of every other American combined Lords and Kings and Dukes, people may start to get it.   Instead, most are lured into this ridiculous debate as you point out about tax on "income," which only serves to convince more sheep that the problem is not wealth concentration when clearly it is.  Our country is run by a few hundred super rich who are the modern day royalty without formal titles.

centerline's picture

The big difference that everyone dances around like idiots is between income tax and capital gains.  I agree that going after the rich does nothing to solve the macro problems.  But, the current tax code is a joke as well.  Two different subjects here.

Just for shits and giggles, on the other side of the argument we hear people bitch about how there are so many people who dont pay any "taxes" when what they are referring to are "income taxes."  In reality, we all pay taxes on almost everything we do.  Then there are fees, fees and more fees these days - which are just... wait for it... taxes!  In fact, the less wealthy get hurt more because the taxes on goods and services, fees, etc. are a larger percentage of income.


hedgeless_horseman's picture



We all pay the inflation tax, but too few know it.


"Anyone truly concerned about the middle class suffering from falling real wages, under-employment, a rising cost of living, and a decreasing standard of living should pay a lot more attention to monetary policy. Federal spending, deficits, and Federal Reserve mischief hurt the poor while transferring wealth to the already rich. This is the real problem, and raising taxes on those who produce wealth will only make conditions worse."


-Congressman Ron Paul, MD

penexpers's picture

"A pretty a pretty a pretty goose for you..."

Cracked me up so hard.

LawsofPhysics's picture

Precisely, I wonder how the rich would feel if infaltion was as "fair" as taxes.  I certainly wouldn't like paying 30% or more of my salary on food and another 40% on fuel.  That would piss me off.

Thamesford's picture

Warren will transfer a portion of his holdings to Treasuries and pay not tax on that!

chunkylover42's picture

Warren already gave most of his assets to the one guy richer than him, Bill Gates (well the Gates Foundation, but the point is valid).

john39's picture

communism is theory, invented to control the masses... by the same people that invented "capitalism"....     its all mind control.  i don't give a shit what you call it.  when the same people are always in control at the top, what difference does it make?

GoinFawr's picture

Therefore Eggplants rule Warren Buffet.

Did I do that right?


LowProfile's picture


(which incidentally is not too far off: once again we remind people of the ominous reality that the BCG study predicted last September: take our word for it - a one time tax on all assets is coming).

(which incidentally is not too far off: once again we remind people of the ominous reality that the BCG study predicted last September: take our word for it - a one time tax on all assets that they know about is coming).


Fixed it.  Plan accordingly. 

...And besides which, wouldn't they have to have CASH to pay this hypothetical 30% tax on assets?  Which means somebody needs to BUY them?  Where's THAT cash coming from?!

Seems like that might be a problem.


The Alarmist's picture

So how will they get around the Constitutional questions that would seemingly bar a wealth tax? They can tax it if it changes hands or otherwise passes in the course of commerce ... are they going to simply mandate it like they plan to do with the Obamacare "must purchase" mandate?

LowProfile's picture

Even if they do manage to trample the Constitution and push through this "wealth tax", the problem is, WEALTH is not LEGAL TENDER.

The TAX has to be paid in LEGAL TENDER.  Which means the ASSETS that compose said wealth need to be SOLD.

So again, 30% of assets need to be sold for cash, but where does that cash come from?  Someone has to bid on it!  And since there's a dearth of capital, this would be a major deflationary event.

And besides which:  Which assets are sold?  Stocks?  Bonds?  Real estate?  Commodities?  Art?  Baseball card collections?

There are far to many problems with this "plan" to implement it.



TWSceptic's picture

I think we should tax charity so liars like Buffet would pay more taxes.

Sudden Debt's picture

A penny saved....

Still means your a trillion short...

taniquetil's picture

Who does Obama think he's kidding. He could literally seize all income earned this year by all people of the United States as tax (which would of course be paid to Berkshire Hathaway's government contractors) and STILL not have enough money to cover the national deficit (total income was $13T in 2011 vs $15T deficits)

ghengis86's picture

Total national debt is $15.7 trillion give or take
Current annual budget deficit is $1.3 trillion or so

Used to be an important difference debt vs deficit, but the more you think about it, none of this shut matters when BS Bernanke can just print to infinity.

GoinFawr's picture

That cartoon has some decent writers, they must read ZH

MrBoompi's picture

Come on, rich people didn't flee the country when the top tax rate was over 70%, and they aren't going to flee if they pass this law.  Where would they go?  And if they do flee, good riddance.  I hope they find everything in Costa Rica or Panama or UAE to be up to their lofty standards.

max2205's picture

Take a look at how many (75%) fewer millionaires left Maryland when those boneheads thought it would be a great idea to throw a few percent surcharge tax on them a couple years ago.
That worked so well now they want to place higher taxes on those making $100k. Maryland, home of burger flippers

TMT's picture


Just another troll who hates those who are more successful than him.  Get a job, work hard, and stop feeling sorry for yourself.

The Alarmist's picture

Yeah, you tell him about the good old days when wages were taxed at 70%!

You can fool most of the people often enough.

besnook's picture

in the old days people used to pick pennies up when they found them on the ground because something could be bought with a penny. now, only kids and i pick pennies up from the ground. in the not too distant future one dollar will be the new penny and people will start picking them up again because they will be able to buy a piece of bazooka bubble gum with it so i will have competition.

dirtbagger's picture

".....but will certainly succeed in driving many wealthy people away from this country."  

Breaks my heart to see so many wealthy people being forced to leave the US because they might have to pay a few more $$ in taxes.  I mean, it's not like their companies and the companies they invest in use the intellectual and physical infrastructure funded primarily by taxpayers.  Can you imagine, when they leave, they might even take their money with them to invest in offshore factories or WTI oil futures.  How could us serfs that remain behind possibly survive?

TWSceptic's picture

"intellectual and physical infrastructure"

lol? You mean the worthless public schools and outdated infrastructure? And by the way the majority of taxes are paid by the richest people already. In the US more than anywhere in the world.


More taxes =/ more state income. More taxes = smaller pie.

Death and Gravity's picture

Not all taxes are created equal.

Yes, the majority of taxes are paid by "the rich"; incidentally, the same rich that by far reap the most rewards of government-grant privilege; specific legal protections, economies of scale irt. large corporations; corporate personhood/immunity of shareholders, relative benefit from infrastructure investments; rights to resource extractions; patent privilege; airwaves privilege, and of course, the good 'ol reacharound with the peopel in power.

11b40's picture

Think what you like, but this country started falling apart when Reagn came to office by running against government and preaching about lower tax rates on the wealthy. 

From 1980 forward, you can pick just about anything you want to measure, draw a trend line, and what should be up is down and what should be down is up.  The whole idea of "trickle-down" econ has been a total joke - a big yellow shower for the middle class.  Trickle down and "free trade" (another totally stupid concept), and crony capitalism, and a bunch of right-wing idealouges packed on the Supreme Court have conspired to throw open the doors of the Treasury to upper-crust looters who have robbed us blind.

We could fix this over time with political will, but it won't happen.  There are too many mental midgets with big mouths spewing their ignorance, too many who have bought into the 'greed is good' claptrap spawned in the '80's.  That we have a corporate raider in contention for the Presidency speaks volumes about the horrid level our collective intelligence has reached.

Yes, bring back highly progressive tax rates and FORCE the "job creators" to plow profits back into new factories, products, equipment, and jobs....and start creating wealth in this country again.  Do the same with corporations who thinks it is fine to ship the jobs to foreign lands, and then try to blackmail us into allowing the profits to go untaxed.  Tax them anyway, UNLESS those dollars are brought home as investments in building wealth right here in the good old USA.  That should be the only way foreign profits escape taxation.  Those who make their money by skimming other people's assests (the financial industry) would be taxed the heaviest, as they are not capital or labor intensive, hence little to re-invest earnings in.....and this is as it should be.  The finacial industry of 1980 was about 15% of the economy.  When the bubble popped in 2008, it had grown like a huge cancer to be almost 40% of the economy.  And they create nothing.

Want to leave?  Fine.  If you are an individual, good luck and have a happy life in bum fuck Egypt, or wherever else you decide paradise may be.  If you are a corporation, good luck too, because the next thing that needs to be fixed are the trade laws.  American industry should never have to compete with foreign governments - and that means China, primarily, and we should have common sense tariffs to off-set the costs American companies incur doing business here.  The system we have now is dumb.  Don't think so?  Then you are dumb, too.  In the imortal words of Forest Gump - "stupid is as stupid does".


The Alarmist's picture

Yeah, right ... force me to reinvest.

Maybe I don't need to earn another marginal million dollars, so I start knocking off early. Without the extra million, I don't buy a boat. Good, you say, except for the poor average joes who work in boat building. I also cut back on servants ... good, you say, except for the average joes who might have had jobs as servants. The work I would have done if I had worked a few more hours might have involved restructuring a company or two ... good, you say, for the 300 people I would have laid off; not so good for the 3,000 who get laid off a year down the road when the companies fail.

11b40's picture

Well, pardon me for not especially wanting to become a part of your servants class.

Maybe you would like to explain why so American companies have failed?  Could it be due to unfair foreign competition?  Could it be due to gutting and over-leveraging by corporate raiders?  Or is it all about dumb management?  Did your toes get stepped on?