By Paolo von Schirach
April 14, 2012
WASHINGTON – Sebastian Mallaby, (The Buffettt rule is a sorry excuse for tax reform, The Financial Times, April 13, 2012), correctly points out that President Obama’s insistence in pushing the idea of tax increases for the rich (the “Buffett rule”) is bogus tax reform. Surely we could and probably should make sure that rich Americans pay more taxes and that capital gains will be taxed at the same rate as regular income. Let’s do all this in the name of fairness and social justice –just as the President says.
Buffett rule is just politics
But Obama knows full well that this particular tax hike he has been talking about so passionately would raise perhaps an additional $ 5 billion a year, not even a rounding error in a federal budget of over $ 3 trillion with projected deficits still exceeding $ 1 trillion. So, if we are seriously talking about tax reform, we have to reconsider the entire system. And this should be possible. Mallaby points out that Americans overall are not overtaxed and that tax increases will have to be part of any serious plan aimed at reducing the deficit and the national debt. And, in so doing, by all means, let’s make sure that all Americans pay their fair share.
However, reaching this objective is predicated on producing a comprehensive tax reform package. And this is not what the President is proposing. Obama wants an emotionally charged issue with which to run between now and November. This way he is showing that he is not interested either in reform or in raising real revenue.
Real tax reform
All serious policy-makers and analysts know that America needs to do away with its horrendously complicated and inefficient federal tax code. We all know that, thanks to the work of armies of special interests served by Washington lobbyists, the Congress and the President, no matter who was in the majority, overtime created an unmanageable monster that can be understood only by full time professionals.
With strong presidential leadership and a true bipartisan consensus it could be possible to do away with this wasteful and unjust way of apportioning favors through the tax code that is morally indefensible, ethically wrong and in the end economically damaging as economic decisions are often skewed by tax considerations, this way discouraging a more effective allocation of scarce resources. We could raise more revenue, at the same simplifying the system and eliminating the preferences that only the well heeled know how to navigate to their advantage. This is complicated but doable, assuming bipartisan agreement largely predicated on presidential leadership.
Obama not a victim of his staff
Mallaby politely concludes that Obama is somehow forced to be a tax populist by his campaign staff, the professionals who know that issues like the ”Buffett Rule” proposal are real crowd pleasers.
I take a different view. Just as his campaign staff, the President knows exactly what he is doing. Unfortunately, now he is not governing and he is not leading. Now he is a demagogue trying to make the other side look bad using spurious issues. Between now and November Obama will not even try to engage anybody in a serious debate about tax reform, or anything else for that matter.
He is trying to get re-elected. To do so he will continue to portray the Republicans as out of touch Wall Street & Country Club greedy fat cats who want more and more and pay no taxes, while the rest of America struggles with the high cost of everything. If this is manifestly a distortion, who cares? The focus groups and the internal polls say that this manipulation is likely to produce votes.
Romney and GOP doing the same
And this manipulative approach of course goes both ways. Romney and the Republicans no doubt are doing and will do the same. They will latch on any theme, true or false, that can damage Obama. So, forget about any enlightened debate between now and November. It will be hyperbole, manipulation and demagoguery. Nothing serious about tax reform, entitlement reform, energy policy, education or sensible incentives for economic growth. This is bad and damaging. The business of the Nation is not attended to. Voters will be offered slogans, not real programs to choose from. I dare say this old democracy could do better.