So President Obama is calling his new “millionaire’s tax” the Buffett tax. This whole campaign of his is a great illustration of how the Left thinks and acts.
Yes, it is class warfare. And while they’re reluctant to admit it, it’s a core of Obama’s belief system. Let me illustrate this by going back to the 2008 presidential campaign. In April, 2008, Charlie Gibson was moderating a debate between Barack Obama and Hillary Clinton. He asked a question about raising the capital gains tax. Here is the question and Obama’s answer, as recorded on the website of the Tax Foundation:
Charlie Gibson: “You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, ‘I certainly would not go above what existed under Bill Clinton,’ which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent.
“But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent. And George Bush has taken it down to 15 percent. And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
“So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”
Obama’s answer is totally illogical, and, by being so, it reveals his thought processes very intimately:
“Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.”
So, to Obama, the tax code is not just a means of raising revenue, but is a vehicle for achieving his government-enforced equality. This is key to understanding him. The rich are rich not because they work harder, not because they are innovators that provide useful services. No, it’s because they are lucky and greedy. Therefore, the government needs to come in and take away their money.
And then you have to understand what motivates those on the left to believe this way.
Understanding the moocher class is easy. They’re going to “get stuff” without having to work for it. But why do so many of the rich, especially the filthy rich, favor this punishing of achievement? Well, there are several reasons, but the foremost among them is guilt. They can be greedy and selfish, personally, and be absolved by their friends because of their public policy positions.
And here is where the idea of calling this millionaire’s tax the Buffett Tax gets really rich, because he’s a great illustration of how these people think. First of all, we need to understand that most of Buffett’s income is from capital gains and dividends. This is why he pays a lower rate than his secretary. Dividends and capital gains are taxed at a lower rate. The reason for that, which he conveniently leaves out, is that pursuing capital gains is a high-risk endeavor. However, putting that money at risk is also a great force for creating wealth. Therefore, it is in society’s best interest to encourage investors, hence the lower rate. And, as mentioned above, we have discovered repeatedly in our history that increasing the tax rate on capital gains beyond a certain moderate amount actually will decrease the revenue it generates.
Consider also the Irish example:
“The 1997 Budget in Ireland halved the rate of taxation of realized capital gains from 40% to 20%. The then Minister for Finance, Charlie McCreevy, was heavily criticized on the grounds that this change would reduce revenues. He countered by predicting that revenues would rise substantially as a result of the lower tax rate. He was proved entirely correct. Revenues rose considerably, almost trebling in fact, and greatly exceeded official predictions.”
Here is the chart showing how halving the tax rate actually tripled tax receipts:
Calendar Year Net receipts
1996 £ 83.7m
Source: Revenue Commission data. Published on the Adam Smith website.
So Buffett is proposing this, not because it makes sense, but because it makes him feel good.
Factor into this Warren Buffett’s feelings about his own personal behavior, and you will see a definite need for some “feel-good” input. His company, Berkshire Hathaway, is in arrears over its own taxes. Do a little search on Google on Berkshire Hathaway tax problems, and you’ll come up with a number of articles. When I searched, the first result was an article from the Huffington Post spilling the embarrassing beans – his company is fighting with the IRS over taxes owed, going back to 2002. So why isn’t he more embarrassed about making an issue of tax rates? you ask. No, no, you don’t understand. His stance on the public policy question absolves him of any guilt over his personal behavior. That is a key to understanding the Left. You have got to get that concept down.
And then, we can’t leave the subject of the Buffett tax without completing the reasoning as to why Warren Buffett is so pro-Obama. It’s a mutually beneficial relationship. Obama uses the power of the federal government to benefit Buffett’s financial ventures, and Buffett uses his business credibility to bolster Obama’s policies. Check out the network of crony capitalism relationships with the government that lend great profits to Buffett, and you’ll see what I mean. So for Buffett, it’s a win-win. He becomes a good guy – not only that, but a good, filthy rich guy.