Essay on The Buffett Rule and Tax Reform

949 WordsApr 30, 20134 Pages
The Buffett Rule and Tax Reform As the tax cuts enacted by George W Bush during his presidency come to a close, the importance of reconciling spending and taxation has produced a spirited debate as to the best manner in which to solve the debt crisis. One voice in the debate is that of Warren Buffett, Chairman and CEO of the holding company Berkshire Hathaway and one of the richest men in the world. He has come out against the status quo tax policies, stating “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.” However Mr. Buffet’s analysis of the situation fundamentally assumes two things about raising the taxes on the rich: first, that…show more content…
This decrease in revenue would also be met with less workforce expansion, because, according to Princeton Economist Harvey Rosen, Business owners who received larger tax cuts expanded their hiring more. Therefore, it is clear that this tax policy would reduce the overall wealth of the populace, reduce future revenue, and constrain hiring processes. The Buffett rule may make sense even in the face of this counterevidence if it was shown to solve the debt crisis America faces. However, according to the American Enterprise Institute, the tax hike would only raise 0.7 trillion dollars over the next decade, or about .04% of annual GDP. From this it becomes clear that taxation is not the only problem. The historic relationship between spending and tax revenue as a percent of GDP has been 20.3 to 18.0 percent, respectively. However, even if the proposed tax comes into effect, by 2021 the spending to revenue relationship will be at 26.4% to 18% (Appendix A). Therefore, though it is clear that there must be something done to reconcile the debt crisis, the Buffett rule would, on balance, reduce economic efficiency and fail to account for the ballooning levels of spending, solving very little and costing very much. Appendices Appendix A: Source: Bluey, Rob. “Runaway Spending, Not Low Tax Revenue, Fueling Deficits,” Heritage Foundation, 12-4-11. Accessed 12-1-12. Available at
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