Last September, President Obama announced his so-called "Buffett Rule," which would require that at least 30 percent of every millionaire's income be paid to the U.S. government. Given the massive amount of debt that continues to accumulate under his presidency, Obama presented the new tax as a substitute for the serious fiscal reforms most economists agree are essential to preventing a Greek-style debt catastrophe.
"We have to prioritize," he said. "Both parties agree that we need to reduce the deficit by the same amount - by $4 trillion. So what choices are we going to make to reach that goal? Either we ask the wealthiest Americans to pay their fair share in taxes, or we're going to have to ask seniors to pay more for Medicare. We can't afford to do both."
"This is not class warfare," he concluded. "It's math."
Not quite. It's actually a typical false choice: either we do what I want (raise taxes) or a bad thing will happen (seniors will have to pay more for Medicare).
In March, the Joint Committee on Taxation - Congress' official nonpartisan scorekeeper - examined the Buffett Rule and determined that it would reduce the deficit by all of about $1 billion. That is just 0.1 percent of our $1 trillion deficit. It is 0.007 percent of our $15.6 trillion national debt.
In short, it's just not a serious proposal. And, as The Wall Street Journal also points out: "The main point is that the average effective tax rate on the richest 1 percent is already twice as high as that of the middle class ... In any event, raising tax rates has not over time succeeded in increasing tax shares from the rich. When the top income-tax rate was as high as 70 percent in the 1970s, the top 1 percent paid about 19 percent of all federal income taxes. At the current rate of 35 percent, the top 1 percent pay just under 40 percent of all income taxes."
It also completely refutes the false choice Obama presented in his press conference - that we must choose between raising taxes on the wealthy and forcing "seniors to pay more for Medicare."
Obviously, that is not the choice we have to make; it's possible to get our budget back on track and save programs like Medicare for future generations without reducing core benefits for any current retiree, or by making seniors pay more. Indeed, the Senate will soon vote on a budget proposed by Congressman Paul Ryan that would do more than just preserve the program and lower the deficit - it would actually offer higher quality care at a lower cost. There are also proposals that would have seniors like Warren Buffett pay more for some Medicare benefits. Why is it OK to tax him more but not OK to ask him to pay more for Medicare?
But the president has already rejected these reforms. It is actually the budget President Obama released this year - a budget that relies upon the Buffett Rule as a primary funding mechanism - that experts say will eventually push Medicare into bankruptcy. As a columnist recently puts it, "The outrageous distortions about the Ryan Medicare reform plan are coming from people who are accelerating the program's path to insolvency."
Here's the truth: We have a growing debt because we're spending too much. Raising $1 billion in new taxes on people like Warren Buffett won't solve that problem. Nor is anyone proposing to solve the problem by forcing seniors to pay more for Medicare. The answers are to reduce spending and reform Medicare so that the program doesn't go bankrupt.