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Thursday, August 25, 2011

Cato Institutes Jeffrey A. Myron on Why Warren Buffet is Wrong

I agree with much of what Mr. Myron writes, however I don't feel as secure about not taxing corporations their fair share. Let's not forget, the income tax rate was 91% under IKE, 70% under JFK, and Carter, and 50% under Reagan until 1986, when his decision to lower the rate to 28%? caused an immediate recession. Besides, can Mr. Myron show us the jobs the wealthy corporations are creating with their billions earned? They have 1.3 trillion dollars sitting offshore waiting for a tax holiday?
The first problem with Buffett's view is that the number of super-rich is too small for higher rates to make much difference to our budget problems.

In 2009, the income earned by the 236,833 taxpayers with more than $1 million in adjusted gross income was about $727 billion. Imposing a 10% surcharge on this income would generate at most $73 billion in new revenue — only about 2% of federal spending. And $73 billion is optimistic; the super-rich will avoid or evade much of the surcharge, significantly lowering its yield.

Bad government policies play a major role in generating inappropriately high incomes, but singling out the super-rich is misguided.

Focusing on the super-rich also fosters a counterproductive attitude toward material success. The way to promote a hard-working, entrepreneurial and innovative society is to celebrate great wealth so long as it has been earned by legitimate means. When this is not the case, policy should target the wrongdoing directly, not demonize everyone who hits it big.

Most importantly, singling out the super-rich distracts from the real problem: the myriad policies that make no sense in the first place because they inhibit economic growth and that simultaneously redistribute from low-income households to the middle and upper classes.

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