Martin A. Sullivan (Tax Analysts), Busting Myths About Rich People's Taxes, 135 Tax Notes 251 (Apr. 16, 2012):
Kevin Hassett of the American Enterprise Institute [calls] the Buffett rule "the stupid rule." "It's basically just a back-door way to hike taxes on capital," he told Bloomberg News (Richard Rubin, Top Earners Pay Higher Tax Rate Without Buffett Rule, Apr. 10, 2012). To maximize growth, economists would set the tax rate on capital gains, dividends, interest, and all business profits at zero. Yet for all the agreement about the optimality of minimizing taxes on capital, the magnitude of benefits from this policy is highly uncertain.
The economic growth arguments are powerful. But economics has its limitations. It can tell you how to expand the economy. But it cannot tell you how to distribute wealth. … In the highly charged debate over the Buffett rule and extension of the Bush tax cuts for the top income brackets, many facts about income distribution and policies that would change it are getting distorted. The rest of this article tries to correct some of these distortions.
- Myth #1: The Buffett rule is largely a symbolic political ploy because it would raise only $5 billion a year. …
- Myth #2: The United States cannot raise taxes on the wealthy because "there appear to be limits in the real world as to how much tax blood can be extracted from rich turnips" and "the U.S. has the world's most progressive tax burden." …
- Myth #3: The United States has a progressive income tax.
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