Scott Brown Must Decide: Romney v. Buffett

I have to very awkwardly preface this by saying that I'm glad that our junior Senator and his wife were unhurt in the car accident. We wish him electoral misfortune, but only health and prosperity otherwise. Now back to politics. - promoted by charley-on-the-mta

[Cross-posted from the ProgressMass blog.  Like ProgressMass on Facebook and follow on Twitter.]

Our Republican junior Senator, Scott Brown, has a very simple decision before him: raise taxes on lower-income Americans and give the wealthiest Americans even more tax cuts (the Romney Plan), or increase tax fairness and make sure that millionaires and billionaires pay their fair share (the Buffett Rule).

As a reminder, this is the impact of the Romney Plan:

Mitt Romney’s new tax plan strongly favors the wealthiest Americans, offering earners in the top 20 percent an average tax cut of more than $16,000 while raising taxes on the bottom 20 percent of earners, according to an analysis from a non-partisan Washington think tank.

The analysis out Thursday from the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution think tanks, finds that under Romney’s plan the bottom 20 percent would see their average federal tax rate increase $149, or 1.3 percent.

The top 20 percent, meanwhile, would see an average tax cut of $16,134 — a 5.4 percent reduction in their tax rate. The top one percent of earners would see their average tax rate fall by nearly $150,000 per year, and the top 0.1 percent would see a reduction of more than $725,000.

Again, to make it crystal clear, the tax plan laid out by the candidate for President endorsed by Scott Brown actually raises taxes on lower-income Americans.

An alternative tax structure to Mitt Romney’s is the Buffett Rule.  As a refresher, here is the clear and simple explanation of the Buffett rule:

President Obama sought Wednesday to expand his push for the so-called Buffett Rule by highlighting its support among corporate chieftains and even Republicans.

Flanked by a group of millionaires and their secretaries, Obama hit for another consecutive day on themes of fairness and the need for this rule, which would see million dollar household subjected to a minimum effective tax rate of 30 percent.

“Most Americans agree with me, so do most millionaires.  One survey found that two-thirds of millionaires support this idea.  So do nearly half of all Republicans across America,” Obama said, speaking to an audience of millionaires and their secretaries, intended to personify Warren Buffett’s contention that millionaires should pay at least the same tax rates as their secretaries.

The Buffett rule, plainly and simply, makes sure that millionaires and billionaires pay a 30% tax rate.  I can understand that perturbing Mitt Romney, since he only paid a tax rate of 13.9%, probably a lower rate than you paid.  The bottom line is that the Buffett Rule would most definitely increase tax fairness.

That’s the decision Scott Brown has to make when the U.S. Senate votes on the Buffett Rule this Monday.  Will he side with Mitt Romney’s tax plan, raising taxes on lower-income Americans and further slashing taxes for the wealthiest Americans; or, will he vote for the Buffett Rule to make our tax system fairer and have millionaires and billionaires pay their fair share?

The early indications are that Scott Brown will side with Mitt Romney.  After all, it was Scott Brown who said at the 2010 Conservative Political Action Conference, “Let me give you a piece of advice.  And it’s something that I think of regularly when I think of my challenges here in Washington.  If you want to fix something that’s broken, especially dealing with economic policies, you have to listen to Governor Mitt Romney.”

Further, it was Scott Brown who told CNN’s Piers Morgan less than a month ago, on March 19, “I know that when it comes to dealing with the economic issues, there’s no one I would trust more than Governor Romney.”

Scott Brown has made it very clear that he will side with Mitt Romney on economic policy up and down the line, even if it means raising taxes on lower-income Americans.

American Bridge 21st Century puts it succinctly:

Scott Brown ignores Massachusetts families to express concern for the wealthy, like hedge fund managers and Wall Street executives, once again. It is the same thing he did when he weakened Wall Street reform, helping out his buddies at the expense of American families.

As such, if Scott Brown votes with his Republican colleagues against the Buffett Rule – or, more likely, votes with his Republican colleagues to filibuster the Buffett Rule and obstruct it from even getting an up-or-down vote – then Scott Brown will have cast a vote against tax fairness and once again supported raising taxes on lower-income Americans via the Romney Plan.


12 Comments . Leave a comment below.
  1. Grover

    has already decided that.

  2. Given that the US already has the most progressive tax system of all industrialized countries (According to the OECD) I am not sure how doubling the tax rate on capital gains and dividends promotes the idea of fairness. I believe we should have a tax code that promotes growth and opportunity.

    Before people jump on me about the fact that while 47% of wage earners pay no Federal income tax they do pay FICA and Social Security taxes, those taxes are included in the OECD calculations.

    Nowhere is the political debate over income inequality more detached from reality than the call for the top 1% of American income earners to pay their “fair share.” The Organization for Economic Cooperation and Development (OECD) data on the ratio of the share of income taxes paid by the richest taxpayers relative to their share of income show that the U.S. has the world’s most progressive tax burden.

    The top 10% of earners in the U.S. pay 35% more of the income tax burden than in Sweden and 22% more than in France. These figures—from the 2008 OECD publication “Growing Unequal?”—include all household taxes imposed on income at the federal, state and local level, including social insurance taxes.

    You can read the entire article HERE.

    The primary reason our tax code is the most progressive is because unlike here in most other industrialized countries, the poor and middle class actually do pay income taxes and everyone pays a national sales tax or VAT.

    Another interesting factoid (at least to me) is that when people are asked what the top tax rate for high income people should be, the vast majority give a number that is actually lower than current rates.

    One of the things that Warren Buffett fails to mention when he says he pays a lower rate than his secretary is that he also pays himself a lower salary than he pays his secretary. While a CEO of a company like Berkshire Hathaway would clearly command a salary of anywhere between $2 million to $10 million a year (equivalent to a mediocre left-handed relief pitcher) Buffett chooses to only pay himself $100,000 per year. If he wasn’t manipulating his salary because of the tax code he would pay a far higher percentage.

    That, I believe speaks to a broader point and that is the need to simplify the tax code by lowering tax rates while eliminating deductions and special tax treatments. First on my list of special tax treatments to be eliminated would be “carried interest” for hedge funds and private equity. It is income plain and simple and should be treated as such.

    • That's a dumb metric

      Let’s say we have the following 10 people in stomvstan:

      stomv: income $1 gajillion dollars
      9 schlubs: combined income, $9 dollars

      Now given our tax rate, stomv pays $1 million dollars in taxes, and the schlubs nothing.

      Check it out! stomvstan has the most progressive tax system! You know what else it has? A remarkably terrible income distribution system. In stomvstan, stomv lives like a king and the schlubs are dirt poor. What the OECD system ignores is that, in America, we overpay the top 1% remarkably high and we underpay the bottom 30%.

      The reason our tax system looks progressive under the OECD metric is because our high wage earners earn far more than the high wage earners in other western countries, and our low wage earners earn less than in other western countries. If we payed executives $2M instead of $20M or $200M, and if we paid waitresses more than $2.13 an hour, our OECD results would show that our tax system isn’t nearly as progressive as you make it out to be.

    • So much handwaving

      Sorry, but your hands are waving so quickly that they’ve blurred whatever point you were trying to make. Let me try and slow you down a bit.

      1. Anybody in the wealth class of Warren Buffet can choose to compensate themselves with income not classed as “salary” and thus evade the narrow category that the rest of us schlubs must pay taxes on. If we, for example, define “personal income” to be the difference between total personal net worth today versus total personal net worth a year ago, I suspect that this “personal income” of Mr. Buffer would be somewhat higher than the cited $100K.

      2. I don’t know how much you pay YOUR secretary, but I don’t know any secretaries or “administrative assistants” who make $100K/year. I guess I travel in the wrong circles.

      3. The proposals from the various GOP candidates for “simplifying the tax code” all boil down to eliminating the capital gains tax and eliminating the estate/gift tax. These are the ONLY two tax vehicles left that primarily target the very wealthy. Are you advising your candidate to separate himself from these mainstays of current and proposed GOP tax policy?

      One of the better proposals I’ve read this year is to implement a tax policy on the very wealthy pegged at maintaining the GINI coefficient at some agreed-on value. This squarely addresses the real issue that stomv highlights below — the absurdly imbalanced wealth distribution that currently hobbles our economy.

  3. As a 53%'er bradm

    You know that about one seventh of the country pays no payroll taxes or federal income taxes, because of deductions and working benefits. But when you zoom out to 30,000 feet, you see that even the poorest 20 percent of taxpayers fork over about 1/20th of their income to the IRS through all federal taxes, including payroll, income, and excise. The next 20 percent hands over about 1/8th. With each quintile, the effective tax rate increases.

  4. As a 53%'er bradm

    You know that about one seventh of the country pays no payroll taxes or federal income taxes, because of deductions and working benefits. But when you zoom out to 30,000 feet, you see that even the poorest 20 percent of taxpayers fork over about 1/20th of their income to the IRS through all federal taxes, including payroll, income, and excise. The next 20 percent hands over about 1/8th. With each quintile, the effective tax rate increases.

  5. It was early...

    So I cut and pasted this morning – badly.
    But now I’m awake and am asking bradm if he seriously expects us to consider Buffet’s annual salary of $100K (if true) and ignore his $62,855,038 earnings in 2010?
    Also, since we are manipulating numbers for tax reasons, consider that 79% of that evil 47% earn less than $30K/ year. 7,000 millionaires paid no incomes taxes last year and well, we all know about GE… Reform the tax code so it is truly progressive, not less so. The final straw was to tax unemployment benefits. Really.
    I don’t care if the top 10% pay 99% of the taxes in this country. A loaf of bread, a gallon of heating oil, a college education, etc all cost what they cost no matter who buys them. 39 percent of $1 million still leaves $610,000 for the bills with a little left over for dinner and a movie.

  6. If as is mentioned above, Warren Buffett made $62.855 million in 2010 and he paid as he claims a 17.4% tax rate then he paid nearly $11,000,000 in taxes. I would hardly call that being ignored.

    Someone also mentioned above that our tax code only appears progressive because high income earners in the US make more than those in other countries. While clearly not an exhaustive analysis, of the 10 richest people in the world, only three are US Citizens.

    Here is my source on
    Warren Buffett’s salary.

    As for the claim that 7,000 millionaires I would be curious as to where you get your numbers. The latest figures I saw put the number between 1400 and 4000.

    Of course you are mixing apples and oranges. Income taxes are levied on income while millionaire or billionaire is a measure of wealth. A retiree could be worth a $1,000,000 have it invested in bonds that pay 4% interest and their income would only be $40,000. Why should this “millionaire” pay some higher income tax rate than someone who has a zero net worth but earns $75,000 from a job?

    And finally to someone’s point about our tax code only being progressive because of a greater income differential, the answer is no. It is because other countries tax their poor and middle class more as the OECD report clearly shows. Yes a loaf of bread and a gallon of heating oil costs the same regardless of who buys them. Do we really want to add 19% – 25% to those costs via a VAT as our European friends do?

    • Strawmen

      I don’t think anyone here has proposed adding a VAT, so why bring it up?

      Similarly, I don’t think that anyone proposed that a retiree whose income was $40K should pay a higher tax rate than a worker with no savings and a $75K income.

      Coming back to Mr. Buffet, the source you cited describes his 2009 compensation as $175K (who knows what the “other” 75K is). His portfolio, meanwhile, is $39,659,863,166. That is, in essence, $39B. When his portfolio ticks up by ONE POINT, he gains THREE HUNDRED NINETY MILLION DOLLARS. That can happen in a single day. Do you REALLY dispute that there’s something wrong with a tax system that taxes his secretary at a higher rate than Mr. Buffet?

      Perhaps you might also consider Lawrence J. Ellison, of Oracle. He received a base salary of $250,001. He also received options worth $61M, a cash bonus of $6.4M, and “other” income of $1.5M. Meanwhile, his net worth is $26.3B. What do you think is a fair tax rate for Mr. Ellison, especially in comparison to — for example — your worker with zero net worth and a salary of $75K?

      • Why bring up the VAT?

        I brought up the VAT because I cited an OECD study that points out that one f the prime reasons that the US has the most progressive tax code in the industrialized world is that other countries tax their poor and working class so heavily via the VAT.

        As to Mr. Buffett’s $39 Billion portfolio ticking up one point, it’s not a taxable event unless he sells it for a profit. Then he would pay a 15% capital gains tax of $58.5 million. If he doesn’t sell it he has a higher net worth but no additional income. Are you advocating that he should pay income tax on no additional income?

        As for Mr. Ellison, every item you mention is income and totals roughly $71 million. His tax rate on that should be 35%. Do you have information that it wasn’t? Now if the options he received appreciate by 10% appreciate by 10% and he sells them, then he should pay the 15% capitol gains rate.

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