Buffett Rule Revenue
Critics of the Buffett Rule often argue that the idea is hardly worth the trouble since it would raise taxes on less than a tenth of one percent of Americans and generate less than $5 billion a year. With annual deficits projected at 100 times that amount over the next decade, the additional revenue is little more than rounding error, they say.
But that $5 billion revenue estimate assumes a reality that most critics of the Buffett tax reject. If you think the 2001/2003/2010 tax cuts should be extended—an idea most opponents of the millionaire tax support—revenues would increase by a much more significant $162 billion over the decade. And that’s hardly the chump change they imply.
As usual, it is all about the baseline. The Joint Committee on Taxation (JCT) says that the Buffett Rule as proposed by Senator Sheldon Whitehouse (D-CT) would increase revenues by $47 billion over the coming decade, assuming that the 2001-2010 tax cuts expire as scheduled. Why? If those tax cuts disappeared, more millionaires would pay higher taxes and thus be exempt from the Buffett Rule’s minimum tax.
But those who oppose the Buffett Rule also demand that Congress make permanent most, if not all, of the expiring tax cuts. The resulting lower tax bills would make more millionaires subject to the Buffett Rule, boosting the revenue gain to $162 billion over the decade according to JCT, more than three times the increase under the expiration scenario. The problem is that extending the tax cuts pumps up the deficit too—more than tripling its size in 2022, according to the Congressional Budget Office. In effect, the Buffett tax would make a very bad fiscal situation slightly less awful.
Politicians can argue all they want about how and how quickly we should close the deficit. That’s their job. But they should be consistent in the bases for their arguments. Using different assumptions depending on the point they want to make weakens everything they say.