Already a Bloomberg.com user?
Sign in with the same account.
Let’s start with the Buffett Rule. Do you think it’s unfair, as the president said, for Governor Romney to have $21 million in income and pay only 13.9 percent in tax while most Americans pay a much higher rate?
The Buffett Rule makes for good politics, but it doesn’t make for good economics. And here’s why: 80 percent of American businesses file their taxes as individuals, as S corporations, partnerships, LLCs. So when you impose an alternative minimum tax like the Buffett Rule, for every one Warren Buffett you get, you get so many more successful small businesses, which are our job creators.
So what if you separated them from those who are paying only 15 percent because of income from dividends or investment income?
Then a slightly different but similar argument arises. We’ve always thought that the best tax policy—we’ve had bipartisan consensus on this—was tax capital income at a lower rate than ordinary income. Why is that? Ordinary income is guaranteed income. If you get a job that pays a salary, you’re going to get paid that salary. Capital income is risk-based income. Capital income is income you may not get because you’re taking a risk, you’re gambling on a business. If you tax capital at the rate of ordinary income, you’ll lower the return on risk and make it harder to take a risk. And what creates jobs is people taking risks.
The second point I would make is, in many instances it’s already money that’s been taxed once before, such as dividends or capital gains. That money was taxed at 35 percent first, and then it’s taxed a second time around. … More to the point, this doesn’t raise much money at all. In fact, the president, as he iterates the Buffett Rule, it only pays for 6 percent of his deficit spending. He’s not even talking about doing this to close deficits. They’re talking about taking this money from risk-takers, from entrepreneurs, to spend in Washington.
Is fairness a principle that appeals to you?
Here’s where it appeals to me. Let’s take away their tax shelters. Let’s take away the loopholes. Let’s make it so that the top 1 percent, which parks, on average, over $300,000 per filer in a tax shelter, let’s take away those tax shelters so that all of their income is subject to taxation, so that they can’t shelter most of their income from taxation. That, to me, is a better way to go because that gives us the ability to lower rates for everybody.
Will you list the particular deductions and shelters you’d like to see eliminated in your budget plan?
You can’t put that in a budget because—this gets a little technical and jurisdictional—budget resolutions aren’t the actual bill that goes into law. They’re the architectural framework of budget fiscal policy. So the Ways and Means Committee, it’s their job to write that. It is their job to decide what deductions and loopholes go, which ones stay.
But after all your hard work, wouldn’t you like to explain to the American people how you’ll lower their taxes in a revenue-neutral way?
I don’t want to get ahead of Ways and Means, and I want to see the research they come up with. They’re going to do a bunch of hearings. They’re going to have a lot of listening sessions on this. I think there’s more to learn about that before making such a declarative judgment.
I’ve been watching the debate heat up. The president calls your budget a Trojan horse, a radical vision, thinly veiled social Darwinism.
I think he’s bringing us toward a debt crisis. Our budget says increase annual federal spending from $3.6 trillion to $4.9 trillion over the next 10 years, instead of going to $5.5 trillion, which he proposes. The difference in that is social Darwinism? Give me a break. He’s using over-the-top, petulant rhetoric to cover up for the fact that he literally is not leading and posing a solution to our fiscal problem. In the past week he lashed out on us, against the Supreme Court, against anybody who doesn’t share his view of a government without limits.
Some critics say you’re hiding behind the rhetoric of deficit reduction in order to dismantle the government.
It’s projection. What are we proposing? We’re saying means-test these programs so the wealthy don’t get subsidized. We’re saying get rid of cronyism and corporate welfare, stop subsidizing corporations. Reform these welfare programs so that they’re sustainable and so that they actually get people off of welfare and back to work. Poverty is the highest it’s been in America in a generation. The president’s reforms aren’t working because we have more people in poverty.
Watch Charlie Rose on Bloomberg TV weeknights at 7 p.m. and 10 p.m. ET.