Obama Pitches "Buffett Rule" Tax Hike

By:  Ralph R. Reiland
04/18/2012
       
Obama Pitches "Buffett Rule" Tax Hike

Campaigning to make economic “fairness” the central theme of his reelection campaign, President Obama on April 10 pitched his “Buffett Rule” tax hike to a student audience at Florida Atlantic University in Boca Raton.

 
 

Campaigning to make economic “fairness” the central theme of his reelection campaign, President Obama on April 10 pitched his “Buffett Rule” tax hike to a student audience at Florida Atlantic University in Boca Raton.

 
Aimed at those who earn the bulk of their income from capital gains, the plan would double the tax rate on capital gains from 15 percent to 30 percent.
 
Mr. Obama didn’t tell the students that taxes on capital gains aren’t adjusted for inflation. He didn’t explain how the 15 percent tax rate on capital gains is actually a 30 percent rate on real, inflation-adjusted gains if price increases have wiped out half the purchasing power of reported gains.
 
As Wall Street Journal reporter E. S. Browning explained in “Adjusted for Inflation, Dow’s Gains Are Puny,” reporting on the calculations of money manager Garrett Thornburgan, the impact of inflation on reducing the real value long term capital gains is substantial: “Nominally, a dollar invested in stocks of the Standard & Poor’s 500-stock index at the end of 1978 had blossomed to $22.88 at the end of 2008, including dividends, a sweet gain even after the 2008 meltdown. But once estimates of inflation, taxes, and costs are removed, he figures, the investment was worth $3.76.”
 
Mr. Obama also didn’t tell the students at Florida Atlantic University that the U.S. tax code imposes taxation on capital gains and dividends on top of a corporate tax rate of 35 percent — a tax rate on corporate profits that became the highest in the world on April 1 after Japan cut its corporate tax rate and moved the United States from second to first place.
 
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Professor Ralph R. Reiland (photo)
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