Who would have guessed just a few short weeks ago that Wacky Warren’s demand to pay more taxes would become part of mainstream economic debate, not to mention presidential politics?
As things stand, if you make money with money you pay a much lower federal tax rate than if you make it with the scratch of your chalk, the strength of your back, or the “sweat of your brow.” Hence Buffett’s recent calling out of the seemingly unfair system whereby billionaire investors like him pay lower rates than their secretaries, their children’s schoolteachers, and their neighborhood sanitation workers.
Of course, the low (15%) burden on capital gains is meant to encourage investment and the resulting creation of jobs – to prime the nation’s economic engine. Does it? Evidently not in the aftermath of a deep recession, but then, those are the ups and downs of capitalism. What about historically? In the Clinton years with their higher taxes, the economy roared. Under George W. Bush, with taxes lower, it sputtered, and the low rates did nothing to prevent the economic crisis of 2008.
But there’s a deeper, more emotional appeal to calling for “fairer” taxation. Barack Obama hopes there is, anyway, as he tries to rev up his base and re-enlist the independent voters who swept him into office three years ago. Fairness is a value so fundamental to most people it’s hard to argue against, and facing down fairness is part of the Republicans’ burden as they fight the idea of making the rich “pay their fair share.” President Obama has shown a distinctive lack of backbone when it comes to standing up to right-wing positions that ought to fire up his supporters, but Candidate Obama is another matter. Will it work for the President? At this point, no one can say, but from his generally weak position “tax the rich” may be the strongest hand Obama can play at the moment.