FROM THE JUDGE'S CHAMBERS: The Buffett rule and 'fairness'

By William C. Whitbeck Life, former President Jimmy Carter once said, is unfair. He was right. It just isn't fair that a fortunate few are born with stratospheric IQs and make tons of money while the rest of us fall somewhere around the median and just manage to get by. It just isn't fair that Steve Jobs and Bill Gates become billionaires because, by a freak conjunction of circumstances, ability, and sheer willpower, they happened to see the ramifications of those ugly things called computers. It just isn't fair that the super-rich--of the fabled 1%--get richer while the 99% struggles to stay even or slowly falls behind. So what are we to do about all this unfairness? How about this: soak the rich. It has a nice populist ring to it. It ties in perfectly with the rhetoric of the Occupy Wall Street movement. And at least one poll shows that about 60% of voters support higher taxes on the super-rich. Specifically, there is the proposed "Buffett rule," which would effectively impose a 30 percent tax rate on millionaires. The idea is that Warren Buffett's secretary shouldn't pay at a higher tax rate than Buffett himself. And its proponents say not only that it is "fair''--note that word again--but that it could raise enough money to stabilize our debt and deficits for the next decade. Of course, this is nonsense. As Charles Krauthammer points out, the increased revenue from applying the Buffett rule would generate something like $4 billion to $5 billion per year, all other things being equal. If we were to collect this increased revenue for the next 250 years, Krauthammer says, it would not cover the federal deficit for 2011 alone. So the Buffett rule really isn't about "stabilizing" our astronomical debt or our ever-growing deficits or even about "growth" as its proponents claim. It is, in fact, a disguised attempt to raise taxes on capital gains, the lower tax rate at which Warren Buffett and lots of other rich people pay because much of their income comes from investments and not from salaries and wages. So, the Buffet rule is about attempting to raise taxes by using that wonderful word, "fairness." Confronted with the fact that raising the capital gains rate usually reduces the government's tax revenues while lowering that rate usually increases tax revenues, the Buffett rule's proponents say that they would still raise the capital gains rate, for the sake of "fairness." The Buffett Rule is also an attempt to capitalize on a perceived increasing antagonism toward the rich, by punishing them through the tax code. As Susan Estrich put it, "There's more resentment of the rich out there than I've seen in my years of politics." I think she's right and I also think that, seen through the lens of this resentment, the formula here is clear. Tinker with the tax code by making a proposal that actually accomplishes nothing but which taps into all the anger that's out there. Wrap it all up in the pink ribbon of tax reform even though what it actually does is make a monstrously long and complicated law even longer, more complicated, and more monstrous. And then call it "fairness." Is it really fair? No, we all know, deep down, that life is unfair and that a few people will get rich but that most of us won't. Would it really affect the widening gap between the rich and the rest of us? No, it actually would have little or no effect on income disparity. And it certainly isn't fair to those nasty rich people in their gated communities who already pay a disproportionately high amount of actual dollars into the federal treasury, regardless of the rate at which they are taxed. As for the rest of us, enacting the Buffet rule will not make us one bit smarter or one bit richer. So why, exactly, are we considering this? Oh, that's right, it accomplishes nothing, but it sure is "fair." ---------- Judge William C. Whitbeck is one of 28 judges on the Michigan Court of Appeals. A Kalamazoo native, he is a graduate of the Northwestern University's Medill School of Journalism and of the University of Michigan Law School. He served as chief judge of the Court of Appeals from January, 2002 to January, 2008. He is the past chairperson of the Michigan Historical Commission, a fellow of the Michigan and American Bar Foundations, and a member of the Michigan Law Revision Commission. In 2007, he won the State Bar of Michigan's short-story competition with "In the Market," a story of bootlegging and murder set in Prohibition-era Michigan. He has also completed one novel and is hard at work on a second. He and his wife Stephanie live in a completely renovated 130-year-old home in downtown Lansing. He can be reached at JudgeWhitbeck@AOL.com. Published: Fri, May 18, 2012