State of the Union
For last night’s State of the Union Address, President Obama invited Warren Buffet’s secretary, Debbie Bosanek, to sit in the First Lady’s box during the speech and specifically promised in that speech to support tax changes in order to mend the injustice Buffet claims occurs allowing him to pay the lowest tax rate of anyone in his office, including his secretary. This line of attack is doubtless partly designed to pave the way millionaire Barrack Obama to make populist attacks on multi-millionaire Mitt Romney during the upcoming presidential campaign. Romney is, after all, very, very rich, and his income comes primarily from investments.
David Leonhardt at the NY Times asks both right-leaning economist Greg Mankiw and the left leaning Center on Budget and Policy Priorities to comment on this alleged tax injustice. Mankiw makes a fairly reasonable case that the reason capital gains are lower is that investment income is based on corporate profits and corporate profits have already been taxed. Companies would have more profits to pass on to investors (either as dividends or in the form of being worth more) if they didn’t pay corporate taxes, and so the tax on investment income is set lower to avoid this “double taxation”. Chuck Marr of the Center on Budget and Policy Priorities must know the facts aren’t on his side, because instead of answering the question he provides a canned response about income inequality and how tax rates are lower than in the ’70s. The column is worth a read.
However, there’s another issue here which I think is worth pointing out. Progressives writing on this issue usually act as if billionaire investors such as Warren Buffet are all paying right around 15% (the capital gains rate) in taxes — Buffet claims that he pays 17.4% — and that “middle class Americans” are paying the top marginal income tax rate of 35%. Continue reading
Here is the State of the Union Speech that will never be delivered:
“Madam Speaker, Mr. Vice President, Members of Congress, Distinguished Guests, my fellow Americans. Each year it is a duty of the President to report on the State of the Union to the Congress. Often these speeches have been mere feel good exercises, frequently containing little of substance. Tonight is going to be different. Tonight it is time for blunt truth.
America is a great and strong nation, but in many ways the State of our Union is troubled. We have the worst economy in the last three decades. Signs of recovery are few. I could attempt to assess some responsibility for this poor economy to my predecessor, but that would be pointless. You, the American people, are not interested in blame. What you are interested in is improving the economy, and so far, under my watch, that has not happened. I, in good faith, attempted to stimulate the economy through a massive stimulus bill. Thus far the results have been meager for the amount of money spent. Time for a course correction. Beginning tomorrow I am going to hold meetings with the Democratic and Republican leaders in Congress. The economy is my number one priority, as it rightly is yours, and I am open to all ideas, from whatever source, to jumpstart the economy and return us to the path to prosperity. If taxcuts and spending cuts are necessary to get the economy moving, so be it. Whatever works is my watchword on this key issue. To quote another President from Illinois, “The dogmas of the quiet past, are inadequate to the stormy present.” I am a Democrat, by the standards of many Americans a Liberal Democrat. I’m proud of this, but I will not allow my adherence to certain beliefs to stand in the way of improving the economy. Time for us all, past time, Republicans, Democrats and Independents, to work together to get out of this recession. This is my chief concern and I will do whatever it takes to accomplish this task.