Fact Checking Obama’s Buffett Rule Claims

AP does a FACT CHECK: Are rich taxed less than secretaries? The answer: Generally speaking, no. But it's complicated.

AP‘s Stephen Ohlemacher does a FACT CHECK: Are rich taxed less than secretaries? The answer: Generally speaking, no. But it’s complicated.

 President Barack Obama makes it sound as if there are millionaires all over America paying taxes at lower rates than their secretaries. ”Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” Obama said Monday. “That’s pretty straightforward. It’s hard to argue against that.”

The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government. There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.

[…]

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank. Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes. Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS. Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.

So, across the board, high earners are in fact paying proportionately more–indeed, a lot more–than those lower on the ladder. And these figures include all federal taxes, including the relatively regressive (because it’s capped) FICA/Social Security/payroll tax.

Warren Buffett actually does pay less as a percentage of his income than his secretary, so he’s not lying. President Obama, on the other hand, is being incredibly misleading.

Obama’s claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.

With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress’ official scorekeeper on revenue issues.

The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes. ”People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out,” said Roberton Williams, a senior fellow at the Tax Policy Center. “People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we’re getting, which is also the case.”

Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates. ”So it really depends on what is your profession, where’s the source of your income, what’s the specific circumstances you face, and the averages won’t really capture that,” Geithner said.

So, basically, the reason Buffett pays a lower rate than his secretary isn’t so much because he’s rich but because almost all of his income is “unearned” and taxed at a lower rate. But, rather than talking about whether it makes sense to treat investment income differently from wage income, or whether investment income for people who make their living making investments should be treated differently than investment income for wage earners who put money into the stock market for their retirement, we’re getting inflammatory rhetoric about “millionaires and billionaires.”

That’s probably smart politics and I really can’t blame Obama, given that his Republican opponents constantly use inflammatory, misleading language, too and have been completely unwilling to compromise to achieve goals they agree on. But good politics isn’t necessarily good for the Republic.

FILED UNDER: Economics and Business, Quick Takes, US Politics
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. john personna says:

    So, basically, the reason Buffett pays a lower rate than his secretary isn’t so much because he’s rich but because almost all of his income is “unearned” and taxed at a lower rate. But, rather than talking about whether it makes sense to treat investment income differently from wage income, or whether investment income for people who make their living making investments should be treated differently than investment income for wage earners who put money into the stock market for their retirement, we’re getting inflammatory rhetoric about “millionaires and billionaires.”

    Geez, have you not been reading our discussions?

    “Carried interest” is special, because it need not come from “investment.” A manager in Buffetts position can operate a fund of other people’s money, which is an investment for them, and reap “investment” treatment of his management share.

    Think about it. a circus manager reaps a management fee as percentage of the take. He pays straight up income tax. A fund manager reaps a management fee as percentage of the take. He gets a special “investors” break.

    Why?

  2. john personna says:

    I think it is extremely fair to limit the idea of “investment’ to things you “invest” your money in.

    Providing management is a service, an employment, which yields an income.

  3. James Joyner says:

    @john personna: I haven’t studied the history of the rule and there may be some rationale that’s not obvious to me. But it certainly sounds like a boondoggle.

    But, again, this is a problem with tax loopholes, not “millionaires and billionaires.”

  4. john personna says:

    Right, but what I see at OTB, consciously or unconsciously, is that this loophole can’t be closed because “on average millionaires pay a lot.”

    Every time it has come up, our eyes have been directed away from exactly the thing Buffett was talking about.

  5. Hey Norm says:

    Blah blah blah…
    I find it amusing that Obama’s claims on this are being scrutinized to the n-th degree…the gist of your post is that yeah it’s true Buffet pays less, but but but…yet any time the so-called republicans talk about the uncompetitive tax rates and burdening the job creators they are given a free pass.
    Bottom line…and this is immutable fact…America is an extremely low taxation nation.
    http://www.flickr.com/photos/centeronbudget/5622173530/sizes/o/in/photostream/
    So the choice we have is Obama’s plan of raising rates a little bit on people like Buffett…or Ryan’s plan of abolishing Medicare so we can cut Buffett’s rates even more.

  6. Vast Variety says:

    @James Joyner: It’s loophole that the average middle class wage earner can’t take advantage of, that’s why it becomes a problem with the Millionaires and Billionaires.

  7. James Joyner says:

    @john personna: @Hey Norm: @Vast Variety:

    I’m generally in favor of closing loopholes and making the tax system more rational. Both of these things may well disproportionally impact high earners. I’m fine with that.

    While I’m not an expert in tax law or economics, my sense is that people like Buffett–ie., those who make a lot of money in the financial sector–are probably undertaxed compared to people like Bill Gates and Steve Jobs, who make their money in more traditional industries. Absent compelling arguments for treating those differently that I’ve yet to see, I think we should fix that.

    What I object to is the broader notion that high earners are paying less than middle and low earners. In the main, as the AP story referenced above points out, that’s simply not true. It’s a specific subset of the well-off that are undertaxed, not the group as a whole.

  8. john personna says:

    I guess I’m stumped on why you did it again, and redirected our focus to averages.

    Did you want me to start arguing that, and to give the “carried interest” folks a pass?

  9. john personna says:

    (As I understand it, Obama’s proposal is not to move the average, but to catch folks who skate past it.)

  10. James Joyner says:

    @john personna: My point is that Obama is playing the class warfare game–stoking the mistaken beliefs of the middle and lower class that they’re paying more than their fair share while millionaires and billionaires are skating–when in fact what we have are some technical problems with the tax code that should be fixed. But “close the carried interest loophole” isn’t as sexy as “make the rich pay their fair share.”

  11. john personna says:

    You need to step back and read your thread(s) again.

    What you are saying is that we can’t close loopholes which specially benefit the rich, because that would be class warfare.

  12. Hey Norm says:

    “…Obama is playing the class warfare game…”

    I’m sorry…but I have to call BS on that.
    Obama’s only choice, after the Teavangelicals took the Debt Ceiling hostage, is to call the so-called republicans on their tax catechism. The Teavangelicals have forced this. The Teavangelicals have established the rules of this game.
    Obama has proven over and over he is willing to compromise, to his political detriment, and the GOP has proven over and over again it cannot…even when it is on things they have historically stood for. Given a total lack of sanity, from the extremeists on the so-called right, what choice does he have but to take the issue to the people – the majority of whom agree with him? And what choice does he have but to use the tactics of his opponents?

  13. john personna says:

    (Perhaps in the beginning OTB columnists misunderstood Buffetts claim, and the exact nature of “carried interest,” but now knowing it, it seems the theme is “dodge.”)

  14. WR says:

    @Hey Norm: But this is the great “moderate Republican” game. You see, all those Teahadists who control the Republican party? They’re nuts, we all know they’re nuts, so we can’t possibly criticize their ideas — what’s the point? But Democrats are not nuts, so they have to be perfectly accurate in every syllable they utter or they’re lying demagogues. Then we all clutch our pearls and tut tut until they apologize.

    And the conversation is dragged even further rightwards.

  15. Drew says:

    So much crap, so little time.

  16. Polaris says:

    @Hey Norm:

    “…Obama is playing the class warfare game…”

    I’m sorry…but I have to call BS on that.

    That is exactly what Obama is doing. He is trying to pass a bill by appealing to the emotions of middle-class voters to pass a bill that explicitly and only taxes the wealthy using statements that turn out to be wrong (and Obama has to know they are wrong) to do so.

    It’s lying for political gain and using class jealously to score political points. Class warefare is exactly what it is.

    -Polaris

  17. Hey Norm says:

    @ Polaris…
    Again…Bullshit.
    – Emotions? C’mon. Really? Are you sad Polaris?
    – Yes the tax increases and closing of loopholes is targeted at the upper marginal rates. If that’s class warfare then the entire tax code is class warfare.
    – I think you need to read through this thread…pretty big holes poked in your idea that he was wrong…much less lying.

  18. Boyd says:

    The President’s proposal doesn’t sound at all like a “closing of a loophole,” it sounds more like “let’s stack another complicated AMT-clone on top of a loophole instead of actually getting rid of the loophole.”

  19. Steve Verdon says:

    @john personna:

    Are you drunk or stupid? Seriously, WTF man. Let me quote James,

    I’m generally in favor of closing loopholes and making the tax system more rational. Both of these things may well disproportionally impact high earners. I’m fine with that.

    Please point to where James has said we can’t close loopholes? He did say that the carried interest loophole might…might…please step back and read that word…make some sense, but it sounds like a boondoggle–i.e. even there he is inclined to get rid of that loophole.

    Really, start reading what people write and not what you think they have written.

  20. Hey Norm says:

    This class warfare claim makes me laugh.
    The guy yelling the loudest about it is Paul Ryan, who wants to abolish Medicare and Medicaid in order to pay for more tax cuts for the rich.
    The GOP for years has worked to slash social spending to the bone, crush the rights of working americans, and has worked tirelessly to limit the rights of women. They repeatedly charachterize the poor as moochers. They constantly claim in the face of all evidence that un-employment insurance only encourages the un-employed to stay un-employed.
    And yet a itsy-bitsy-teeny-weenie increase to the top marginal tax rate is waging class warfare.
    How can you even say it with a straight face?

  21. Sam says:

    Buried in the Obama Jobs plan on page 133.

    SEC. 376. FEDERAL AND STATE IMMUNITY.

    (a) Abrogation of State Immunity- A State shall not be immune under the 11th Amendment to the Constitution from a suit brought in a Federal court of competent jurisdiction for a violation of this Act.

    A) WAIVER- A State’s receipt or use of Federal financial assistance for any program or activity of a State shall constitute a waiver of sovereign immunity, under the 11th Amendment to the Constitution or otherwise, to a suit brought by an employee or applicant for employment of that program or activity under this Act for a remedy authorized under Section 375(c) of this Act [emphasis added].

    (2) EFFECTIVE DATE- With respect to a particular program or activity, paragraph (1) applies to conduct occurring on or after the day, after the date of enactment of this Act, on which a State first receives or uses Federal financial assistance for that program or activity.

    c) Remedies Against State Officials- An official of a State may be sued in the official capacity of the official by any employee or applicant for employment who has complied with the applicable procedures of this Act, for relief that is authorized under this Act.

    (d) Remedies Against the United States and the States- Notwithstanding any other provision of this Act, in an action or administrative proceeding against the United States or a State for a violation of this Act, remedies (including remedies at law and in equity) are available for the violation to the same extent as such remedies would be available against a non-governmental entity.

    Really? Amending the US Constitution by fiat? What a good dictator this man wants to be.

    http://www.scribd.com/doc/64723281/American-Jobs-Act

  22. Sam says:

    @Hey Norm:
    Hey Norm, please post any quotes form Ryan where he says he wants to “abolish Medicare and Medicaid in order to pay for more tax cuts for the rich.”

  23. Steve Verdon says:

    @Hey Norm:

    I second Sam’s request.

    Hey Norm, please post any quotes form Ryan where he says he wants to “abolish Medicare and Medicaid in order to pay for more tax cuts for the rich.”

  24. Boyd says:

    @Sam: That’s not possible, Sam, since Rep. Ryan, like all Republicans, talks in code that you have to interpret to discover its true meaning.

    So if I may be so bold, Sam, I’d change your request of Norm to point to where Ryan’s coded message really means he wants to abolish Medicare and Medicaid, even though he uses different words to say it.

  25. Sam says:

    @Boyd:

    Don;t matter how you put it, we wont get those quotes.

  26. john personna says:

    Steve V tries the ad hominem, while Drew is smart enough to only squawk, and offer nothing that can be discussed.

    Let’s recap:

    Buffet said “people like me” are taxed at a lower rate using the “carried interest” rule.

    Someone uninformed or dishonest said “look, Buffett is doing class warfare.”

    I’d say James and Doug fell for that meme hook, line, and sinker. That’s what their “fact checks” have been about. The meme. Not the loophole.

  27. john personna says:

    @Boyd:

    I’d be fine with making “carried interest” straight income, and separating that with actual “investment” of principal.

    But do you see the right accepting that? Ye gods, we are dealing a total meme war to hide what this is really about. This isn’t about the specifics. It is “class warfare.”

  28. john personna says:

    (I don’t suppose you are going to ban Steve, lol.)

  29. Hey Norm says:

    Ryans plan does away with Medicare, a social insurance plan administered by the government and replaces it with an intentionally under-funded voucher system predicated on Private Sector participation. This new voucher program is called Medicare, but in no way resembles the current Medicare program, in spite of fallacious claims of similarity to Medicare Part D.
    Today’s Medicare exists because Seniors had trouble getting Private Market Insurance due to a pre-existing condition…they were old. Ryan’s version gives the elderly a chit, that is specifically designed not to keep pace with Health Care Inflation, and turns them back into the Private Market that refused to insure them in the first place.
    Ryan’s proposed budget then uses the savings created by shifting cost onto the backs of the old and the sick and the poor to cover regressive tax cuts for the upper tax brackets. Ryan dodges that point in the rare instances when he is pressed on it.
    This is just like ’95 all over again. Then like now so-called Republicans insisted the debt constituted an existential threat. They proposed to “save” Medicare by privatizing it. Clinton pointed out that their plan cut Medicare in order to finance a regressive tax cut. He won because Medicare is highly popular and tax cuts for the rich aren’t.
    If Obama sticks to his guns he will win this argument too.

  30. samwide says:

    @Sam:

    Really? Amending the US Constitution by fiat? What a good dictator this man wants to be.

    It’s not a novel doctrine.

    Abrogation doctrine

    The doctrine was first announced by the Supreme Court in a unanimous decision written by then-Associate Justice William Rehnquist, Fitzpatrick v. Bitzer, 427 U.S. 445 (1976). Bitzer “continued the line of reasoning that Rehnquist had acknowledged in Fry v. United States … that cases involving Congress’ authority under Section 5 [of the 14th Amendment] present different problems than cases involving the Congress’s Commerce Clause authority.”[2] The doctrine has since developed a number of nuances and limitations. In particular, later cases explained that the Court would not infer Congressional intent to abrogate sovereign immunity, but would only uphold abrogations where the Congress has “unequivocally express[ed] its intention to abrogate the Eleventh Amendment bar to suits against states in federal court.” In order to do this, the Congress must “mak[e] its intention unmistakably clear in the language of the statute.” Atascadero State Hospital v. Scanlon, 473 U.S. 234 (1985).

  31. James Joyner says:

    @john personna: You’re just wrong here. We’re criticizing Obama’s Buffett Rule, not Buffett or his argument. For over a month, since Buffett’s op-ed came out, I’ve argued for closing the loophole that treats churn as a long-term investment. What I’m criticizing is Obama’s claim that millionaires and billionaires generally speaking pay less taxes than the middle class. It just ain’t true.

  32. john personna says:

    Simple question:

    Does the “Buffett rule” move the top marginal rate higher?

    Or is it just a trip-wire to make sure no one skates too far under?

  33. Sam says:

    @Hey Norm:

    So, no quotes? Just a copy of what you read somewhere?

  34. Sam says:

    @samwide:

    Thanks but the source is questionable. It seems that this type of thing is slid in under the radar by those writing the law and not only messes with the 11th but the 10th as well. i guess we will never know for sure since the bill will not pass and never make it to those tasked with ruling on its legality.

  35. Anonne says:

    @James Joyner: It all depends on how you define “pay less.” In raw numbers, of course not. As a proportion of income, generally speaking, hell no.

  36. Sam says:

    @john personna:

    I have heard it is to “replace” the AMT.

  37. samwide says:

    @Sam:

    Thanks but the source is questionable

    A unanimous SCOTUS decision is questionable?

  38. john personna says:

    @Sam:

    It does seem a sort of AMT, but as long as it is below the marginal rate for affected individuals, I’d say it is a “catch up” and that it does not move the marginal tax rate higher.

    As I say to Boyd, I’m fine with doing it the other way, just closing all the loopholes. Do we have your vote on that?

  39. Hey Norm says:

    Sam…you are really looking for quotes from Ryan about how his plan abolishes Medicare in order to pay for taxes? Are you f’ing daft?
    Look at the facts. It’s crystal clear.

  40. Sam says:

    @samwide:

    No, not that, but wiki.

  41. Sam says:

    @Hey Norm:
    Nothing today is crystal clear. Especially those who make false claims and then cannot support them.

    If you are saying that MC/MA/SS are fine as they are and need nothing done for the future recipients than there is no clarity in that mindset.

  42. samwide says:

    @Sam:

    No, not that, but wiki.

    One ought not to impugn a source without first reading it…

  43. Steve Verdon says:

    @john personna:

    Of course not, if anybody is likely to get a banning it is you for your continuous spamming of comments that are misleading, incoherent and not even grounded in facts.

    Can you point to anything that James has written where he says, “We can’t close that loophole because millionaires already pay lots of taxes”?

    If not, SFTU and GTO.

    Oh and Buffet is a huge hypocrite, his company is currently fighting tooth and nail over a $1 billion dollar tax bill. They can more than afford to pay it, but they don’t.

    Warren Buffett’s Berkshire Hathaway Owes Taxes Going Back To 2002

    And here as well.

    “Mr. Buffett’s company has not fully settled its tax bills from 2002-2009. Yet he says he’d happily pay more. Except the IRS has apparently been asking him to pay more going on nine years,” says Americans for Limited Government researcher Richard McCarty.

    And more here.

    According to page 56 of the company report, “At December 31, 2010… net unrecognized tax benefits were $1,005 million”, or about $1 billion. McCarty explained, “Unrecognized tax benefits represent the company’s potential future obligation to the IRS and other taxing authorities. They have to be recorded in the company’s financial statements.”

    He added, “The notation means that Berkshire Hathaway’s own auditors have probably said that $1 billion is more likely than not owed to the government.”

    $1 billion is not an insignificant chunk of change, even for Buffett, representing about 0.2 percent of the company’s $372 billion in total assets.

    Clearly an example of do as I say, not as I do.

  44. Hey Norm says:

    @ Sam…

    “…MC/MA/SS are fine as they are and need nothing done for the future recipients…”

    Where did I say that?
    Classic moving the goalposts crap.
    Changing a Government administered program of gauranteed benefits to a Private Sector Voucher program that does not keep pace with cost increases is about as cut and dried as it gets.
    Look…the choice the country has to make is clear…raise taxes a little bit on the upper brackets and make minor adjustments to the payouts to providers of Medicare…or abolish Medicare and shift the costs to the elderly in order to lower historically low effective tax rates even lower…where you stand is clear.

  45. Steve Verdon says:

    @Hey Norm:

    A little bit? Man, talk about a disconnect from reality.

  46. dude says:

    So, basically, the reason Buffett pays a lower rate than his secretary isn’t so much because he’s rich but because almost all of his income is “unearned” and taxed at a lower rate. But, rather than talking about whether it makes sense to treat investment income differently from wage income, or whether investment income for people who make their living making investments should be treated differently than investment income for wage earners who put money into the stock market for their retirement, we’re getting inflammatory rhetoric about “millionaires and billionaires.”

    Thank you for putting forth facts.

    I guess I don’t see the Buffet rule as inflammatory rhetoric as explained by Obama and others. Sounds to me like a politician advocating for policy. If you view that as inflammatory, I’m not sure what type of political rhetoric isn’t inflammatory.

    Seems like knee-jerk nit-picking to me.

  47. Hey Norm says:

    @ SV…
    Expiring the Bush tax cuts as designed represents $3.7T in revenue.
    Simpson/Bowles was at just over 2% revenue increases.
    Obama’s latest plan is around $1.5T.
    We are not talking about Eisenhower or even Reagan type tax rates.
    But I’m glad to see the GOP talking points have won you over. I think Bill O’Reilly as talking about 50% rates. Go with that.

  48. James Joyner says:

    @dude: He’s intentionally misleading the public, giving the impression that “millionaires and billionaires” aren’t paying their “fair share.” In reality, it’s a narrow category of people.

    How about just saying, “Warren Buffett admits that it’s not fair that he pays a smaller share of his earnings in taxes than does his secretary. Let’s close the loophole that treats fund managers as if they were investors taking risks rather than salesmen earning a commission. That’s not only fair, but it would generate billions in needed revenue to pay down the deficit.”

  49. dude says:

    I’m fine with your rephrasing, James.

    Although, why limit it to just fund managers… all investment income is taxed at the capital gains rate (15%). Why not remove the entire capital gains rate loophole? That’s not only fair, but it would generate billions in needed revenue to pay down the deficit.

    I realize that I am taking the argument one step further in regards to the fairness of having a lower rate for capital gains.

  50. Tlaloc says:

    He’s intentionally misleading the public, giving the impression that “millionaires and billionaires” aren’t paying their “fair share.” In reality, it’s a narrow category of people.

    Because they aren’t. Even if they were paying the tax rate on all of their income (whether it’s income or “income”) they;d still be paying way too little. The proper measure for taxation is wealth inequality. So long as that increases the system is ipso facto not progressive enough. The whole point is to encourage stability and you do not do that by allowing such a tall thin tower of economic prosperity.

  51. Steve Verdon says:

    @Hey Norm:

    Great, Social Security is in the hole for around $10 trillion, and Medicare is several times larger than that.

    Sorry Norm our fiscal problems are considerably larger than just a few trillion.

    @Tlaloc:

    Wealth inequality is a relatively unknown idea in the taxation literature. The notions of vertical and horizontal equity on the other hand are not. Still, even so there is no idealized level of inequality, IMO. Sure zero might be nice, but there are incentive problems with that. So, the appeal to wealth inequality really doesn’t get us to where we want to go.

    I think the point of all this is that the claim that the rich and super rich pay rates below those of typical Americans (i.e., median income households) are not generally the case. There are some rich and super rich who manage to avoid paying taxes to varying degrees due to tax loopholes and those should be eliminated.

  52. Steve Verdon says:

    @dude:

    Although, why limit it to just fund managers… all investment income is taxed at the capital gains rate (15%). Why not remove the entire capital gains rate loophole?

    Because it isn’t a loophole? It is a tax on capital gains income vs. a tax on labor income. Maybe those two taxes should be the same, but I’m not convinced automatically. Optimal tax theory makes my initial reaction say, “No, they shouldn’t necessarily be set equal,” as a general position. That is, that might work with respect to reducing the distortionary impacts of taxes, but overall, I don’t think that would be a general result.

  53. john personna says:

    @Steve Verdon:

    Because it isn’t a loophole? It is a tax on capital gains income vs. a tax on labor income.

    Ye gods, after all your spittle, you get this wrong. It is not capital gains, it is “carried interest.”

    (and for the meta, yeah the arc at OTB has been that we should ignore this for … an amusing cavalcade of reasons now.)

  54. James Joyner says:

    @john personna: For the dozenth time, I’m not saying we should ignore it. Indeed, this looks on the surface like something we should fix. I just think Obama is deliberately confusing and inflaming the issue by focusing on “millionaires and billionaires” rather than a specific unfair and unproductive tax policy. Presumably, not everyone subject to the carried interest rule are millionaires and billionaires. And the vast bulk of millionaires and billionaires don’t benefit much if at all from the rule.

  55. rodney dill says:

    @john personna:

    (I don’t suppose you are going to ban Steve, lol.)

    …maybe Steve is just being dismissive.

  56. john personna says:

    @James Joyner:

    We’ve come a long ways. Remember, you started with something that was factually wrong:

    But, rather than talking about whether it makes sense to treat investment income differently from wage income, or whether investment income for people who make their living making investments should be treated differently than investment income for wage earners who put money into the stock market for their retirement,

    This was not about investment income. It took a bit of hammering to even get that across..

    So … as much as you say we could talk about that, it was a pretty hard fight.

    And in the end you don’t care. If Obama is mean to rich people, then that is the focus.

  57. James Joyner says:

    @john personna: I didn’t know the carried interest rule existed until the other day. But here’s the thing: I didn’t learn it from Obama. That people sympathetic to his aims strongly object to his messaging is a failure of leadership on his part.

  58. john personna says:

    @James Joyner:

    And part of my frustration is that I have been explaining “carried interest” in these threads for a week or two.

    Maybe Obama thought people got it back when Buffett made his editorial .. something covered by this site, I’ll note.

    So really you see the arc (I seem to like the word, “arc”) of my frustration. You may fault Obama’s rhetoric, but we’ve seen the “memeorandum bunch” counter-attacking with their own rhetoric, also detached from the actual policy.

  59. Steve Verdon says:

    @john personna:

    Oh FFS…

    The comment mentioned specifically removing the entire capital gains tax.. While in some instances that may make sense, having a blanket removal does not. You do know what the word, “all” means right, you idiot. Let me quote the comment again, this time have somebody else, who has a reading comprehension beyond 3rd grade, explain it to you.

    Although, why limit it to just fund managers… all investment income is taxed at the capital gains rate (15%). Why not remove the entire capital gains rate loophole?

    The capital gains tax is not a loophole. Arguing that carried interest is a capital gain and should be taxed at that rate may very well amount to a loophole, but to go from that specific claim that we should set the capital gains tax at the rate of income tax across the board is too sweeping.

    @john personna:

    We’ve come a long ways.

    How magnanimous of you. You are such an insulting and misleading little twerp. James has never held the position you have ascribed to him. He has questioned the general veracity of Buffets claims, but that is not what you are getting him on. You then go after my response to a question about setting the capital gains tax to be equivalent to the income tax as if I were responding to just the carried interest issue.

    Seriously, learn to fvcking read. Really.

  60. john personna says:

    Heh, too bad I made my point, eh?

  61. john personna says:

    FWIW, if you want to pull back in the “captial gains” portion, this is what Buffett himself said:

    While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

    It is ridiculous that, under current law, a 10 minute hold is judged in part at “long term” rates.

    Can you defend 10 minutes as “long term” without your typical ad hominem?

  62. Boyd says:

    @john personna:

    Can you defend 10 minutes as “long term” without your typical ad hominem?

    Now that’s some pretty hilarious irony right there! You were making an excellent point, then you tossed in an insult, jp. And you didn’t even tell us to whom you addressed it (although I’d guess it was Steve, but it’s still just a guess).

  63. john personna says:

    @Boyd:

    Dude. Why did you not respond to “You are such an insulting and misleading little twerp.”

    But then respond to ” without your typical ad hominem?”

    Do you need to go fvck yourself?

  64. Boyd says:

    @john personna: Because he wasn’t accusing you of ad hominem while doing it himself.

    And in answer to your last question, no, I don’t. Have you been taking a belligerence pill or something this week? You seem much more combative than usual.

  65. john personna says:

    @Boyd:

    OK, let me ask you this straight up:

    Are you telling me that calling out an ad hominem is an ad hominem?

    You quoted this:

    Can you defend 10 minutes as “long term” without your typical ad hominem?

    You can also review this thread and see where “fvck” entered our vernacular, and then who you chose to take it up with.

  66. Boyd says:

    @john personna: Okay, jp. I was wrong. I apologize. Just calm the fvck down.

  67. john personna says:

    @Boyd:

    Ah. Normally I let Steve chew the carpet and enjoy the fact that it is a choice for me, I don’t have to do it every time.

    I guess I still reserve the right to do it now and then.

  68. Bauer says:

    The issue is how are we going to pay for the $1.5 trillion deficit. We are already carrying a $14 trillion in debt. Raising the taxes on 237,000 households is a joke. Even if these millionaires or billionaires paid 35% or 65% or 75% or 95% of their earned wages it is a drop in the bucket. If they increased the capital gains tax to 30% or 40%, it doesn’t matter…it is not enough to balance the budget. Any 5th grader could figure this out. The most alarming thing to me about this article is that there were only 237,000 wage earners reporting income over $1,000,000.

  69. Steve Verdon says:

    @john personna:

    There is no point, you are factually wrong. I was responding to the idea of a complete elimination of the capital gains tax.

    FWIW, if you want to pull back in the “captial gains” portion, this is what Buffett himself said:

    I wasn’t addressing what Buffet said or wrote, I was addressing another commenter.

    Do you get it? I doubt it. You keep pretending I was addressing Buffet, but I wasn’t, I was addressing a commenter here.

    You were wrong with James, you were wrong with me, but you sit there insisting you are right.

    It is pretty clear what I was referring too, but you keep right on insisting that your fantasy version is actually the truth.

    @Boyd:

    And in answer to your last question, no, I don’t. Have you been taking a belligerence pill or something this week? You seem much more combative than usual.

    It is what he does when he is wrong, he goes a bit berserk.