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Treasury Notes

 The Buffett Rule: The Right Thing To Do

By: Erika Gudmundson

​Yesterday morning, Treasury Secretary Tim Geithner was on CBS' Face the Nation, ABC's This Week and NBC's Meet the Press to discuss the state of the U.S. economy, the Administration's proposal for the Buffett Rule -- a principle of fairness that ensures that millionaires and billionaires do not pay less in taxes as a share of their income than middle class families pay -- and the broader budget and tax reform debates. As he put it, the Buffett Rule is the right thing to do:


Bob Schieffer: Let's talk about the plan that the president says that anybody, the so-called Buffett rule, anybody who makes over a million dollars a year should pay at least 30 percent in income taxes. You know people on the other side, the Republicans, even one independent analyst told us that this could actually wind up hurting the economy by stifling investment and growth, that this is going to discourage people from starting up new businesses. Because basically what it is is raising the capital gains tax and raising the tax on investments. How do you respond to that?

Tim Geithner: No credible basis for that argument, in my judgment. If you just look at the economics of it, and let's talk about the substance and merits of the argument. You know, we face a lot of challenges still as a country. We have to get the economy growing, repair the damage from the crisis, get more people back to work. And we've got to make sure we put in place a balanced plan to bring down our long term deficits. As part of that we're going to have to cut spending across the government. We've already cut -- committed to cut $2 trillion in spending, but that only goes part of the way. We need to go further, do more with less across the government. But we do not see a feasible, economically sensible or fair way to do this and still preserve room for investments in education, in infrastructure, help protect the safety net, help strengthen Medicare for seniors, without asking the richest Americans to pay a somewhat larger share of their income in taxes. And we think the most effective way to do that is to limit their ability to take advantage of deductions and exclusions, and that's what this rule would do. I don't think there is a plausible path to tax reform, not a plausible path to fiscal reform that doesn't recognize the reality that we cannot afford to extend these tax cuts for the most fortunate Americans. We just can't afford to borrow to do it anymore, and we have to preserve room to these other priorities. And as part of that, again, we're going to propose to raise a modest amount of additional revenue from the most fortunate Americans.

Bob Schieffer: You know, the truth is, you and I both know, that this has absolutely no chance of passing the Senate and even less chance of passing the House. Isn't it just kind of a publicity stunt to get the Republicans on record as being against it?

Tim Geithner: I don't know. I've heard that concern. I don't understand it. I mean, just because they oppose this doesn't mean it's not the right thing to do, and we're going to keep pushing -

Bob Schieffer: I didn't say it was or wasn't the right thing to do. I'm just saying the votes aren't there in the Senate -

Tim Geithner: Remember, they fought us on the payroll tax. That was the right thing to do. They're resisting funding infrastructure. That's the right thing to do. They've resisted all the things we did to take the economy out of the crisis and restart economic growth. Those are the right things to push for. If we don't push for things that make sense, then we're not governing - that's our responsibility in this case. And again, you're going to find broad support for this across the American people because there is no other way to meet the broad challenges of the country...

Bob Schieffer: Did you actually hold out some hope that this would pass this year?

Tim Geithner: Well I certainly hope it will. But you know, I know it's a political moment, it's a tough thing to do. But you know, extending unaffordable tax cuts for the most fortunate Americans is not a popular thing to do, it's not a fiscally responsible thing to do, it's not economically necessary thing to do. So our hope is we make the case, we're going to keep pushing, yeah we're going to do that in the economy across the board even if we face continued opposition from the president's opponents. 

Erika Gudmundson is New Media Specialist at the Department of the Treasury.  

Posted in:  Tax Policy
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