The Buffet Rule, Reagan, JFK, and Tax Fairness

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

President Barack Obama beats the drum for his tax hike on the rich emphasizing the “Buffet Rule,” named for investor Warren Buffet, in which no millionaire should pay a higher tax rate that his secretary. It’s all about fairness, the president declares.

President Obama quoted former President Ronald Reagan, a Republican icon, in fighting for his tax plan.

“Some years ago,” President Obama said, “one of my predecessors traveled across the country pushing for the same concept.  He gave a speech where he talked about a letter he had received from a wealthy executive who paid lower tax rates than his secretary, and wanted to come to Washington and tell Congress that was wrong. So this president gave another speech where he said it was ‘crazy’–that’s a quote–that certain tax loopholes make it possible for multimillionaires to pay nothing, while a bus driver was paying 10 percent of his salary. That wild-eyed, socialist, tax-hiking class warrior was Ronald Reagan.”

Meanwhile, Republicans fighting higher taxes quote President John F. Kennedy, a Democratic Party icon, in support of the idea of lower taxes for economic growth.

In his oft-repeated speech to the Economic Club of New York in December 1962, Kennedy argued for tax cuts. “If Government is to retain the confidence of the people, it must not spend more than can be justified on grounds of national need or spent with maximum efficiency…The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system; and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes…”

While President Obama fashions his rhetoric of tax increases to achieve “fairness,” President Kennedy discussed tax cuts for economic growth as important for America’s security.

Counter arguments pop up whenever this kind of rhetorical jousting occurs.

To balance the Reagan quote, one can find Reagan starting one of his radio commentaries, “Brace yourself, I would like to see the rich pay more tax.” He explained that he wanted to secure more revenue from the highest tax brackets by cutting taxes.

Kennedy defenders who object to the use of his arguments for a tax cut say that he wanted to cut taxes from a 91% marginal rate to 65%. They ask: Would the Republicans like to agree to a 65% tax rate today?

In context, Kennedy was arguing for a tax cut to stimulate growth and strengthen the economy, an issue he declared was important to America’s security. “In the long run, that security will not be determined by military or diplomatic moves alone. It will be affected by the decisions of finance ministers as well as by the decisions of Secretaries of State and Secretaries of Defense; by the deployment of fiscal and monetary weapons as well as by military weapons; and above all by the strength of this Nation’s economy as well as by the strength of our defenses.”

On the contrary, President Obama says his tax plan is about fairness. Considering predictions that the revenue will do little to dent the deficit, it is also about politics.

Mitt Romney’s tax return showed he paid about 15% effective tax rate, well below the 30% floor the president wants to set for millionaires. The president, himself, at a 20% effective tax rate, pays a lower rate that his secretary.

But let’s talk fairness. The top 20% of income earners paid 70% of federal taxes in 2007, according to the most recent data available from the Congressional Budget Office. Forty-six percent of taxpayers pay no federal income tax, nor do nearly 1500 millionaires.

If fairness is the goal, a flat tax starting at a certain income mark to protect the poor, removing most of the deductions, especially those that are used almost exclusively by the high-end taxpayers, should be put in place. Then most everyone pays a relatively equal proportion of their income to sustain the government and no one gets special privileges.

Such a plan is as close to fairness as you can get with taxation and would reach toward the goals espoused by both JFK and RR.

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