Buffet Rule sounds optimistic, unless government uses it for own wants

It’s a very popular rule, with around 60 percent of Americans supporting it. Even 43 percent of Republicans support this rule. In case you haven’t heard, the “Buffet Rule” would require anyone who earns over $1 million in one year to pay at least 30 percent of it toward taxes. It seems fair. After all, the whole point of a progressive income-tax system is that it recognizes the diminishing marginal utility of income and therefore strives to be inherently more fair. In that vein, it makes sense that the more income you make, the higher your tax rate should be. But in reality, nothing is this simple.

First consider the positive aspects of this bill. It is popular, and would make Americans as a whole, happier. This is probably the most important and strongest argument in favor of passing this bill. When most people in the country are hurting, and an economic recovery seems to be so slow as to be nonexistent, the knowledge that some people are making millions can be infuriating. Therefore, the Buffet Rule would make Americans happy.

The Buffet Rule would also raise revenue for the federal government. With $15 trillion in debt, the federal government could use every penny they can get their hands on. Unfortunately, only about 0.3 percent of American taxpayers earn enough money to fall into this category, and thus the revenue raised by this measure over the next 10 years will be only $47 billion. To put this in perspective, that is less than 1 percent of the total national debt.

Of course, this assumes that the federal government would use the increase in tax revenue to pay off debt. It is equally likely that this revenue will be used to justify borrowing even further, which could make the national deficit an even bigger problem.

But if the economy doesn’t start picking up speed and growing again, no change in the tax code is going to help us. You can raise taxes on the rich to 100 percent and it won’t change the underlying reality that the economy is not growing fast enough.

So the question really boils down to whether the economy is better off with that $47 billion being in the hands of the government or the hands of America’s super-rich. Conservatives will say that the super-rich invest their money, which makes the money available for businesses to borrow it for capital and labor investment. More investment in capital will increase wages and more investment in labor will increase employment. Liberals, however, would argue that the super-rich would invest their money in other countries or place their money in assets that do not increase capital or labor investment. Therefore, it is better for the government to take that money and use it as they see fit to best address the country’s issues such as unemployment. Inevitably, a conservative would shoot back that the government is the last entity that should be trusted with people’s money, since its track record for successfully creating economic activity is questionable.

The debate could go on forever, with both sides giving examples of when government programs have both succeeded and failed. Both sides give examples of how the super-rich have helped and hurt our economy.

I can’t begin to end the questions in this debate, but if you want to talk about this issue make sure you are asking the right questions. Since there is no definitive answer as to whether this money is better off with the super-rich or the government, what should we default to? Should we adopt a utilitarian philosophy that says that since most Americans will be happy about it, we should do it? Does this lead to a slippery slope where we can morally justify taxing 100 percent of the income of 49.9 percent of the population and give it all to the other 50.1 percent of the population? At what number do we set the arbitrary limits to what is just and unjust? Can we trust politicians to find that number? If those questions can be answered satisfactorily, I would completely support the Buffet Rule.