As if to officially confirm that the Obama administration's Buffett Rule is not intended as a serious policy proposal, but instead is designed almost entirely to make a political issue of rival presidential contender Mitt Romney's wealth, Vice President Joe Biden yesterday declared it was time for a "Romney Rule" designed to further increase taxes on a small subset of high earners. Via The New York Times:
Vice President Joseph R. Biden Jr. sought on Thursday to tie Mitt Romney directly to Republican opposition to higher taxes on millionaires, saying they want a “Romney Rule” that doubles down on tax cuts for the wealthy.
Speaking at an event in New Hampshire, Mr. Biden lashed out at Mr. Romney and Republicans in Congress as the impediments to Democratic efforts to pass what they call the “Buffett Rule” for people who make more than $1 million a year.
“Wealthy people are just as patriotic as middle-class people, as poor people, and they know they should be doing more,” Mr. Biden said. “We’re not supposed to have a system with one set of rules for the wealthy and one set of rules for everyone else.”
And yet Biden's policy would help create exactly the sort of system he says he opposes.
Here's what's happening: Democrats are not happy that capital gains are taxed at a lower rate than individual income. Now, it's true that most capital gains earnings are claimed by the wealthy. But it's also true that the same cap gains tax rate would apply to anyone who gets income from capital gains, regardless of overall income level. Biden, on the other hand, is proposing a special tax rule that would single out and apply to only the wealthy — explicitly creating "one set of rules for the wealthy and one set of rules for everyone else."
There's a lot of room for productive discussion about reforming the tax code, which really is a mess. You can even make an argument that, given current deficit levels, we need a system that raises additional revenue: Better to spend and pay for it now than spend, borrow, and be on the hook for the bill plus interest later. But selectively targeting the ultra wealthy for special tax treatment solves no problem: It does not meaningfully reduce the deficit. And it does not contribute to making the tax code simpler and more manageable.
We know this in part because we've tried the target-the-top approach before with the alternative minimum tax, which was originally designed to hit just 155 high earners. The result? A messier tax code, unintended consequences as an increasing number of middle-class earners get hit, and new deficit management difficulties stemming from perpetual temporary "fixes" to the policy.
Maybe that's overthinking things. The administration's Buffett Rule push isn't about better policy, or even about starting a conversation about tax reform. It's an obvious election year gimmick targeted mostly at Romney and his wealth, a politician's version of a nudge and a whisper: Did you hear how rich that guy is?
The president's staff isn't even trying to pretend it's not primarily intended as an election-year political attack. Back to the NYT:
But aides to Mr. Obama are hoping that Mr. Biden’s speech will begin to shift the debate about taxes on the wealthy from an abstraction to one that focuses directly on Mr. Romney.
Mr. Obama’s aides hope to achieve that by using the term “Romney Rule,” which they believe will force Mr. Romney to acknowledge that opposing the president’s proposals would benefit him personally.
Obama and Biden, on the other hand, only hope to benefit politically.