Senate kills Buffett Rule

Warren Buffett plays the ukelele for some reason.

Just in time for tax season, the Senate has blocked the so-called Buffett Rule, which would have required households earning more than $1 million annually to pay an effective tax rate of 30%. The vote went off at 51 for and 45 against, which means it’s dead in the new, everything-will-be-filibustered Senate. Meanwhile, the party whose ideology naturally aligns with stalemate pushed its own bill to allow business owners to deduct 20% of their income next year—a plan whose benefits would go overwhelmingly to high-income households, according to the Tax Policy Center. Also meanwhile, I paid my taxes. I gave back 29% of my income from 2011, as compared with the Obamas’ 20.5% and the Romneys’ estimated 15.4%. I am the only person in this paragraph who is not a millionaire.

I could almost get my rate down to that of the President of the United States were it not for the Self-Employment Tax. Because I live by my wits—okay, I live by a Burger King, but I freelance—I am responsible for paying Social Security and Medicare taxes for both myself and my employer, who is also me. Essentially, I pay double FICA. In theory it works out the same as for everybody else, since my theoretical employer would theoretically subtract his share of such taxes from my pre-tax wages anyway. In practice, my work generates less money for me because I don’t have a boss.

You’re only a job creator if you do it for somebody else, apparently. The functional difference between paying the Self-Employment Tax and getting a regular W-2 is almost nil, but the impression is galling. The Buffett Rule is organized around effective tax rates, and this year I paid almost twice the effective rate of the richest man ever to run for President. The President himself, another millionaire who lives in a lovely old colonial that I pay for, also gives up less of his income in taxes than I do. These two men are locked in a vicious debate over how to create jobs.

Having created my own job, I languish. It is especially troubling that I languish in Social Security tax, since pretty much everyone agrees that Social Security will look different after the largest voting bloc in American history—which happens to qualify for it now and will for the next 30 years—is dead. I won’t get Social Security. I will pay double into it now and probably for another three decades, and then when I am old enough it will cease to exist. That’s the price we pay the Baby Boomers for inventing rock and roll.

So the Self-Employment Tax provides a concentrated version of the feeling I get from paying taxes generally. I am a single, healthy man who lives alone and rarely drives. I have no children in public schools. I rent, so I receive no homebuyer credit, nor have I taken any federally backed loans. My investment bank did not get bailed out, my plan to stick solar panels over all of Ben Fowlkes’s windows while he is away remains completely unfunded, and I have yet to benefit from the Asian land wars that have defined my adulthood. I don’t like cops. In short, I pay into a system I need less than almost anyone I can think of.

That’s fine. I would not take a 28% raise to live in a country with dirt roads and old people starving alongside them. All I ask is that Mitt Romney, who is so rich that he is insulated even from knowing that he is abnormal, cough up more than me. Fact: in a Hobbesian war of all against all, I would drink grain alcohol out of Mitt Romney’s skull. It therefore follows that he benefits more from tax-funded civilization than I do. He enjoys the advantages of an orderly society according to the needs of his many cars, and he should pay according to the abilities of his many bazillions of dollars.

Is that right? Does it punish Mitt Romney for his success? Maybe, but I would like to point out that I am advocating the compromise position, here. If taxes and the government they support were to evaporate, it would be me stealing from Mitt Romney and not the other way around. There are a lot more people like me than people like him—so many that we have to employ ourselves. Romney and the other millionaires in his party should consider what they’re getting out of the social contract before we do. The tax money they would have paid under the Buffett Rule isn’t class warfare; it’s the terms of the cease-fire.

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10 Comments

  1. “I would not take a 28% raise to live in a country with dirt roads and old people starving alongside them. All I ask is that Mitt Romney, who is so rich that he is insulated even from knowing that he is abnormal, cough up more than me. Fact: in a Hobbesian war of all against all, I would drink grain alcohol out of Mitt Romney’s skull.”

    Amazing.

  2. “Romney and the other millionaires in his party should consider what they’re getting out of the social contract before we do. The tax money they would have paid under the Buffett Rule isn’t class warfare; it’s the terms of the cease-fire.”

    AAAAAAAAAAAAA

    gawdam brilliant

  3. So would support the fair tax? That is hardly an item on the democrat’s platform, but is indeed much more more “fair.” At least Barry, Warren, and Mitt would be paying a 23% tax rate (national only) on their many cars.

  4. This post only makes sense if you think millionaires are reading.

    In a discussion of how society should function, if you can’t do better than suggest eating the rich, I feel you don’t deserve to participate.

    Maybe tomorrow’s post will detail the instrument you would use to decide how much payment is “just.” At the moment I can’t see why someone with a lower income than you doesn’t get to divy your meager estate up. It looks like the larger the underclass, the more you should should pay for the cease fire, like the great state of Saudi Arabia.

  5. @Attempt:
    Dan supplies a simple and powerful rationale for higher taxes on the rich (the guide for how society can function you request) in paragraphs 5 and 6.

    That rationale is: if you make greater use of the public goods provided by government and tax dollars (financial infrastructure, roads, etc) and that greater use enriches you, you should pay higher taxes in support of said public goods.

    I agree that people arguing for higher taxes on those richer than they should reflect on their own wealth relative to the less rich. I think they (we) should do so on moral-ethical grounds and with humility.

    But that’s different than taxes, which are quantitative public policy interventions. I don’t need an instrument for determining what is just that is compatible with the reality that everyone who has anything always could give more except that of scale. People making 50 times the US poverty line should pay more in taxes than people making five times the US poverty even though the 5Xers still are better off than some people. The practical scale of material condition is all the instrument one needs.

  6. I wrote that last paragraph poorly. Here’s another shot, if it helps:

    But that’s different than taxes, which are quantitative public policy interventions. I don’t need an instrument for determining what is just other than scale. People making 50 times the US poverty line should pay more in taxes than people making five times the US poverty line. Yes, the 5Xers still are better off than some people, but that doesn’t invalidate the higher burden on the 50Xers. The practical scale of material condition is all the instrument one needs.

  7. How the fuck did Saudi Arabia get into this conversation?

    Also, using Romney as an example, you need to consider how the rich are making money. Technically Romney is unemployed and only makes money off his millions (an estimated $200 million – $250 million in 2007) being reinvested to make more millions. He made his original millions by getting other people to invest in weak companies, then laying off employees and restructuring and selling that company.

    Romney made millions by using other people’s millions to destroy jobs and businesses.

    I have no health insurance and I’m starting to wear through the sole of my work shoes. Mitt Romney and I have almost the exact same tax rate because I almost qualify for welfare. Everyday he makes about twice what I made all of last year. Attempt, if that isn’t your real name, we’re not talking about whoever has the least gets to take a bite out of the person one step above them. We’re talking about people who wrote laws so they would be taxed less on the fortunes they made from basically gambling. People with fortunes exponentially greater than anything you or I will probably ever make to support ourselves and our families. I’m not suggesting we eat the rich. I’m not even suggesting you listen to the Aerosmith song. I’m am suggesting that someone who makes more money in one day than most teachers make in a year, should probably pay a little more in taxes than those teachers.

  8. I’m conflicted on the Buffet Rule because it makes perfect sense for rich people to pay more taxes, but on the other hand I’ve always thought that the reason the capital gains tax is lower than income tax is because capital gains have already been taxed as business profits prior to being distributed to people. That seems to make sense. Am I mistaken on that? If it is true, why is it not part of this conversation? Any Combat! readers (or writer) have an explanation for that?

  9. I was thinking the capital gains tax used to be determined with the same rate as normal income tax, and then an incentive was added that if you kept the ‘capital’ for more than a year then the profit you got from selling it was then taxed at a maximum of 15% or something.

    So I don’t think it has anything to do with the money being somehow already taxed, but rather it is an incentive for investors not to move their money around too much. Unfortunately, it also allows the rich to make a lot of money for not doing a lot.

    Also Dan, my suggestion is that you have children asap, treat them well, and train them to make money (as well as fire with sticks) so they will take care of you when you’re old. That’s old timey social security.

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