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Even if Buffett Tax Passes, Middle Class Could Still Get Hit

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Even if Buffett Tax Passes, Middle Class Could Still Get Hit On Monday, billionaire investor Warren Buffett appeared on CNBC's Squawk Box to discuss the so-called "Buffett Rule," a proposal to increase taxes on America's richest households.

Buffett's plan, as he outlined it, would largely affect the top 1% of families. For those who make $1 million or more, he has proposed a tax rate of 30%, including payroll taxes, while those who make $10 million or more would pay 35%. But even if Buffett's plan passes -- a long shot, given the Republican Party's refusal to consider tax increases on the rich -- experts say that balanced budgets will still require sacrifices across the board.




The Buffett Rule would increase taxes for households that make most of their money from investments. The billionaire's own tax return is a fair example: In 2010, he paid just 17.4% of his income in federal taxes, largely because most of his income was taxed at the 15% dividend and capital gains rate. In other words, the Buffett proposal would more than double his tax rate, increasing it to 35%.

Filling a Big Gap

But Buffett's proposal, while significant, wouldn't fill the hole in the federal budget. According to Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, to do that will require increasing taxes on the middle class. "There aren't enough really rich people to generate the kind of money we need," Williams notes. "To cut the deficit in half, we would need to levy a 90% tax on everyone who makes more than $250,000 per year."

So where can the rest of the money come from? In a recent article in The New York Times, Adam Davidson noted that increasing middle class taxes by 8% "would actually have a bigger impact than taxing millionaires at 100 percent." But middle class tax increases are staggeringly unpopular, especially in light of continued high unemployment and wage stagnation. Not surprisingly, many politicians have focused on cutting the federal budget rather than trying to increase tax revenue.

Democrats have responded by trying to create a direct link between middle class jobs and upper class taxes. The most explicit version of this argument was presented by Vice President Biden: Defending the "Teachers and First Responders Back to Work Act," a proposal to levy a 0.5% tax on all millionaires, he argued that the relatively minor increase in taxes would put "400,000 school teachers back in classrooms ...18,000 cops back on the street, and 7,000 firefighters back into firehouses."

Ultimately, there is no painless way to balance the budget: Doing so will require some combination of spending cuts, middle class tax increases and tax hikes on the wealthy. The solution, whatever it is, will leave everybody somewhat unhappy.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Fred

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November 16 2011 at 11:02 PM Report abuse rate up rate down Reply
Richard Nuttall

There is a relatively simple way to both create jobs and balance our budget that is totally within our own control. The only problem is that it would require the large multinational Corporations to cut back on their near term profits which they are not going to do -- and since they control our Government it’s not going to happen. But in truth all that needs to be done is to enforce a Balance of Trade. Simple, just do not allow any more imports from a country than they will import from us -- i.e. Balance.

With respect to jobs the mathematics is straightforward. The trade deficit is more than $500 Billion per year; a job pays $25 to $50K per year; $500B ÷ 50K = 10 Million. Multiply by at least 2 for the jobs multiplication factor = 20 Million more U.S. jobs.

With respect to our national debt: The debt has gone up over $9 Trillion since 1999 (from $5T to $14T). Our Balance of Trade deficit over this same period has been about $6T. Therefore if we had been enforcing a Balance of Trade over this same period our debt increase would have been only $3T instead of $9T, a direct decrease of $6T. Including the Multiplication Effect and other secondary factors like increased tax revenues and less unemployment insurance it is likely that we would have had no increase in debt at all but actually would have had a yearly surplus.

Doesn’t anyone in Wall Street or Washington care about our Country? Or are they all just too corrupt?

November 16 2011 at 10:08 PM Report abuse rate up rate down Reply
Dr. Nancy

All that is happening
in the economy
is predictable, as

there are 7 stages that every
major economy goes through.

Those who know how it works
profit & massive wealth
is transferred to them.

Several months ago
I learned this information
from a millionaire

whose site I found
& am sharing it with

everyone I know.

His free video-

"How To Create Wealth in Today's Economic Crisis"

is at:

http://theelevationgroup.net/presentation/register.php?a_aid=160667&a_bid=290b868b&chan=y

Hope this helps everyone
as much as it has me.

Dr. Nancy

November 16 2011 at 7:19 PM Report abuse +1 rate up rate down Reply
Dr. Nancy

All that's happening
in the economy
is predictable, as

there are 7 stages that every
major economy goes through.

Those who know how it works
profit & massive wealth
is transferred to them.

Several months ago
I learned this information
from a millionaire

whose site I found
& am sharing it with

everyone I know.

His free video-

"How To Create Wealth in Today's Economic Crisis"

is at:

http://theelevationgroup.net/presentation/register.php?a_aid=160667&a_bid=290b868b&chan=y

Hope this helps everyone
as much as it has me.

Dr. Nancy

November 16 2011 at 7:17 PM Report abuse rate up rate down Reply
rini1946

IF buffet really cared about the USA he would take his money and put it in to manufacturing and cut the middle man out (the goverment )because all they will do is spend it and want more. If you people want to help all you have to do is one car pool stop the money going to a foriegn country. Second for christmas go to group on or any of the other discount palces and buy coupons for dinners, sporting item(like golf) body masages, hair cuts etc as long as it is an american business. This way you will keep americans working and the money will not go out of the country. Then like I do I had to buy an item that was made in the USA but it was not made there any more so I emailed the company and said I am displeased with this item not being made here any more and will not buy it and didn't . You can get of things made in the USA by going to made in the USA . they will give you a list of things made in the USA. remember the job you save may be your own.

November 16 2011 at 1:18 AM Report abuse +1 rate up rate down Reply
rellvz

Ready for the truth? What if I told you that the entire market is a scam and doesn't really trade? But rather is controlled by a computer? Well it's true, they control the market with a computer in advance, and I know what the computer "code" is. What this does is allow you to know in advance what gold will do before it does it, allowing you to take trades on gold and get them right, making a tremendous amount of money per day. You can visit our website, just google gold trading academy.

November 16 2011 at 12:40 AM Report abuse rate up rate down Reply
rellvz

Ready for the truth? What if I told you that the entire market is a scam and doesn't really trade? But rather is controlled by a computer? Well it's true, they control the market with a computer in advance, and I know what the computer "code" is. What this does is allow you to know in advance what gold will do before it does it, allowing you to take trades on gold and get them right, making a tremendous amount of money per day. You can visit our website, just google gold trading academy.

November 16 2011 at 12:35 AM Report abuse rate up rate down Reply
savemycountry911

That taker evan must be lurking.

November 15 2011 at 8:21 PM Report abuse rate up rate down Reply
savemycountry911

A democracy can only last until the takers learn that they can vote themselves anything they want. They know that now.

November 15 2011 at 8:01 PM Report abuse -2 rate up rate down Reply
1 reply to savemycountry911's comment
savemycountry911

evan, is that you?

November 15 2011 at 8:19 PM Report abuse rate up rate down Reply
capenv

I'm 54, I feel so sorry for the mess we're leaving our children and grand children. Our generation sucked everything we could out of America by our excessive barrowing. Not just the government but our own personal finances leaving our children and grand childrento deal with our mess. I hope that new BMW, Disney vacations, and excessively large homes were worth it. Every morning we should thank our kids because they're the ones that are unltimately going to pay for it all. Then when we can't afford to pay for our spending, we expect a bail out from the government. What we need is a good old fashion depression. All us soft snotty American's need to feel some real pain like our parents and grand parents felt to put their lifestyles in perspective.

November 15 2011 at 3:31 PM Report abuse +2 rate up rate down Reply