Last week the President introduced his deficit reduction plan by saying that it would start to pay down “the big pile of IOUs” the government has issued in order to pay its bills, through a combination of spending cuts and tax increases. He asserted, “We have to cut out what we can’t afford [in order] to pay for what really matters. We can’t just cut our way out of this hole. It is going to take a balanced approach.” And to make his point clear, he declared,
I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share. [Emphasis added.]
One piece of his proposal, which has been dubbed the “Buffet rule,” would not allow millionaires to pay a lesser share of their income in taxes than middle-income earners pay, such as Warren Buffet’s secretary. And that is the first of several fallacies underpinning his proposal. When all the taxes that Buffet pays are taken into account, his share is vastly larger than Buffet publicly admitted. As noted by Richard Rahn, senior fellow at the Cato Institute, “Buffet appears to prefer to take much of his compensation in the form of capital gains rather than salary….
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Photo of Warren Buffett: AP Images