President Obama’s proposal for a new tax on those earning more than $1m a year echoes calls across the Western world, says David Kocieniewski in The New York Times. Britain and France have imposed new taxes on their highest earners and Italy, Spain, Greece and Japan are considering similar moves. The Republicans predictably described the move as “class warfare” and insisted that it would “fatally wound” job-creators.
It would do worse than that, says Tasha Kheiriddin in The National Post. The ‘Buffett Rule’ (named after the billionaire investor Warren Buffett who pointed out that he paid less tax than his secretary) “upends” the American social compact, which for the past 250 years has been one of “small government, low taxes and spectacular private charity”. Not only that, it will barely make a dent in the deficit: only 0.3% of taxpayers will be affected.
It’s true the numbers are likely to be small, though Obama has not said what the rate is or how much revenue it would raise, says Kocieniewski. About 450,000 of the 144 million returns filed last year had taxable income over $1m. “The Buffett Rule would affect only the subset with a lower effective tax rate than middle-class families.”
Obama’s simpler proposal to cut tax deductions would, if pushed, be a much better way of reducing the deficit, says Martin Hutchinson in The Globe and Mail. Not only would it mean no new tax, but it would in many cases “do little economic harm” and there’s “even a hint of common ground with the Republicans”.
The biggest tax deductions currently allowed, a list headed by medical insurance costs and mortgage interest, are expected to cost the Treasury some $4.5trn between 2012 and 2016. If they were cut altogether federal revenue
would rise by more than $9trn over ten years, exceeding the current forecast of a ten-year deficit of $8.5trn. It’s not feasible to “go the whole hog” – but slashing the right ones would be a start.