The so-called "Buffett Rule" provides a clear indication that President Obama and Senator Whitehouse are mounting an attack on the wealthy yet are clueless when it comes to corporate decision making.
According to an article in Forbes, the Buffett rule doesn't amend the current tax code. No, it raises taxes on capital gains which, for the nation's wealthy provide a major source of income. That's the pinata the President and Senator are hammering. And it is class warfare.
But, that's not the important point.
The Buffett Rule leads to 3 objective outcomes:
- By failing to treat corporate equity and corporate debt equally, corporations will be encouraged to overleverage their positions because taxing debt interest once and profits twice pressures corporations to take on more debt than is wise. Why? The lower effective tax rate on interest payments makes it wise to do so.
- The capital gains tax rate would lower investment because the risk/reward factor would be narrowed. Why pay a high capital gains tax rate when one could save the money and pay a lower income tax rate? Every G7 nation as well as the European Union knows that and, when compared to the United States, has a lower capital gains than ordinary income tax rate.
- Not indexing taxation on capital gains with increases in inflation, not only discourages investment but also engenders a climate where invests wan interest rates kept low, even if artificially low. Were the Fed to raise interest rates in this climate, investors would react and those who are invested in the stock market---like Americans who have IRAs and 401k plans---would see their investments whithering before their eyes.
The Motley Monk would humbly suggest that those listening to the siren song titled "The Buffett Rule" had better think twice before they find themselves seduced into a foolish taxation plan that is guaranteed to hurt the 99%.
Let the discussion begin...
To read the Forbes article, click on the following link:
http://www.forbes.com/sites/joshbarro/2012/01/27/whats-wrong-with-the-buffett-rule/
Why doesn't anyone ask Buffet, his buddy Bill Gates or Jeff Immelt why their companies have expanded production facilities outside of the US?
ReplyDeleteHow do they justify keeping 10's of millions of dollars of corporate profit, offshore?
Why are companies like Berkshire, Microsoft, Google, GE, etc working, behind the scenes to legislate an amnesty for corporations to bring profits back into the US - tax-free or at a substantially lower tax rate?
If they expanded in the US, created jobs in the US and paid taxes on ALL their profits - the deficit would be reduced.
OH but wait... they think it is ok for every citizen, especially the big, rich, 1% to pay more BUT don/t go after THEIR business investments.
The sad part is, most lemmings in this country think these men care about them and the US. They think the Government is run by intelligent people who put service to the US at the top of their priority list. They think the Dems and Unions are for them and any Conservative is against them.
Big Business, Big Labor, Big Money have bought and paid for Big Government.