"The Buffet Rule" Should be Implemented by the Federal Government

How's it going Marcel "HD"! My apologies for the late response, but I appreciate you considering my position worthy of debate, and I'm honored to have my first formal debate against you. I've been watching you on YouTube for a while and I've always respected you as a thinker and an individual. I look forward to a tough and fruitful debate. The Buffett Rule has been recently touted by its supporters as a measure that will increase "Basic Fairness" and reduce "income inequality" among the different income classes of American citizens. The rule has been used to illustrate that the rich do not pay their "fair share" in American society. It has been promoted by our current administration as a solution to the 1% paying a lower tax rate than the 99%.The goal of this argument to show three things. First that it does not achieve its stated goal and second it is not in fact "fair" The primary reason the bill should not be implemented however is that it will not and cannot perform its stated goal. What is the goal of the Buffett Rule? http://www.opencongress.org... The stated purpose of the bill as seen in the first section is "To reduce the deficit by imposing a minimum effective tax rate for high-income taxpayers" Wikipedia also mentions that it is supposed to reduce the "income inequality" between the top 1% and the bottom 99% In order to examine the bill based on its stated goal we will start with the national deficit. According to USDebtClock.org, the deficit is currently sitting over 1.3 Trillion dollars and rising. The Bill, as HD pointed out, hopes to raise 47 billion dollars over the next 10 years. If we imagine that we run that same deficit for the next ten years without adding another penny to it. That means if we add up the deficit year over year we have run a deficit of 13 trillion dollars. For an illustration of what we are talking about see http://www.pagetutor.com... for visual reference. The proponents of the Buffett Rule would have you believe that every little bit counts, and if we just keep chipping away at it, we can make a real impact. However 47 billion doesn't even pretend to make a dent in this amount. This is simply not trivial, and it assumes that the money will actually be used to pay down the debt…not even HD proposes paying down the debt with it. The problem with the thought process is not that every little bit doesn't count, because it does. The problem is the idea that giving the gov't more money will somehow encourage the gov't to spend less, when the gov't has proven itself completely incapable of handling money. There is not a single business in existence that could function with a running a deficit like this, they would be eaten alive by competitors that were better at handling money. In the end, giving the gov't more money only encourages them to run bigger deficits, and sends the message that spending money we don't have is ok. Remember even my opponent has not suggested paying down any of the deficit with this new money, he suggests new spending on top of the money we are already spending and cannot afford. The Buffett Rule Conflates income with capital gains The Buffett Rule's main contention stems from the fact that Warren Buffett paid a lower percentage in taxes than his secretary. This is somewhat misleading, it sounds as if Warren's large income comes primarily from his employer, and since he's rich he gets to enjoy a lower tax rate. This however is not the case. His secretary pays income tax because her primary source of income comes from a paycheck from her employer (Warren Buffet). Whereas Warren's income primarily comes from capital gains, or money he makes from the increase in value and sale of the things he invests in. Firstly, I have a problem with taxing income AND commerce at the same time, but without going too deep into that I'll just point out the initial money used to purchase the investment has already been taxed. Sales tax in the US is generally ranges between 5-10% depending on the state, but the top sales tax being about 9% in Washington. While there isn't sales tax on stock investments, investors pay taxes on the other end through capital gains taxes. In fact they pay a higher percentage than sales tax from 10% all the way to about 40%. They also pay A LOT more in raw dollars. (http://en.wikipedia.org...) Usually people start investing with income from a pay check from which they pay taxes, and choose to spend some of that income purchasing things that appreciate in value, like stock or real estate. The issue is that most people after they get their paycheck they only are taxed again on that money if they purchase a good, once they purchase the good or service, that money is no longer taxed. An Illustration If I have a paycheck that is $1000 and the gov't takes 15% of that or $150, I bring home $850. Out of that $850 dollars I spend all my money on goods and services (let's pretend I live with my parents so I have no bills to pay, so everything I spend is on "stuff"). When I purchase products I have to pay taxes in the form of sales taxes so after purchasing my stuff at the top sales tax bracket I pay 10% or $85 in taxes, which brings me to $235 in taxes I paid for that paycheck. Without getting into the fact that the double taxing that is already going on is unjust, let's say that I have a friend named Percy and he brings home the same paycheck as I do and lives with his parents too, however with his $850 he decides to invest it all in the stock market. Now take Percy's investment of $850 dollars and he holds it in a good growth stock mutual fund for 10 years making the stock market average of around 10%. When he sells, he will end up with $ 2,204.68, of which he will have to pay 18% or ~$297.00. In the end, on the same $850, leaves him with a tax burden of $397.00 total between income and capital gains tax compared to the $235 I would have paid. So that's not a big difference, just accounting for 2 weeks pay, so let's extrapolate this data out over the entire 10 years. Percy and I both get 26 Paychecks of $850 or $22,100 net annual income. Our shared income tax burden would be $3,900 on our gross. I would pay $2,210 in sales tax, leaving me with a total tax burden of $6,110, a pretty good chuck of my income. Percy however dropped all 26 paychecks into the stock market…BOOM, and paid the same in income tax. Over that same 10 years his stocks have grown to a whopping value of $409,538.79, on which he will have to pay 18% or $73,717 in taxes. Now this is quick and easy math, and there is A LOT more nuance and calculation that could be considered On its face Percy has a MUCH bigger tax burden, and he doesn't even make the million dollar mark. I'd say he pays his "fair share, and then some" The reason long term capital gains is taxed at a lower percentage than the most income tax brackets, save the lowest, is that it encourages people to invest in the businesses that grow our economy. Businesses need capital to invest in R&D, paying employees, expansions and many other things. Without investors, things like this computer I'm typing on, the nice Galaxy Note phone I use or many of the other things that have made our life better would not be possible. We need to encourage people like Percy to continue to make those investments, because those investments don't always pan out, and it is a big risk to give your money away in hopes that you will make some return on it somewhere in the future…not every investment pans out. In the end, the rich are also already responsible for a larger tax burden, when you consider the raw dollars. Just because we can show a difference in percentage does not mean the tax difference is unfair.