Art Laffer: 'Millionaire Surtax’ Won’t Hurt Super Rich

Former Reagan adviser and economist Arthur Laffer says that implementing a surtax on "millionaires" would hurt just about everyone but the super rich like Warren Buffett.

"In a New York Times op-ed last August, Berkshire Hathaway CEO Warren Buffett famously asked Congress to 'stop coddling the super-rich,' complaining that his effective tax rate was half that of the other people in his office," Laffer writes in The Wall Street Journal.

"He then instructed Washington to raise tax rates on millionaires and billionaires like him and retain the employee payroll tax cut on those 'who need every break they can get.'"
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Laffer notes that President Barack Obama wasted no time in proposing a surtax on millionaires called the "Buffett Rule," which would cause Buffett's income to budge hardly at all.

"What's worse, raising the highest tax rates would most likely worsen the budget deficit and lead to a further weakening of the economy," says Laffer. "Everyone would suffer."

Buffett, notes Laffer, actually credited the phenomenal growth during the Reagan-Clinton period of 1980-2000 to high taxes, despite the fact that 1980s and '90s should be used as Exhibit A for why his proposals are dead wrong.

Between 1980 and 2000, the top marginal income tax rate was slashed to 39.6 percent from 70 percent, and between 1977 and 1997 the capital gains tax rate was cut to 20 percent from 39.9 percent.

Moreover, the "Buffett Rule" would not tax the vast majority of Buffett’s shielded income, including either his unrealized capital gains, which are currently taxed at zero percent, or charitable contributions, which are tax deductible.

“Mr. Buffett's donation to the Gates Foundation goes to the heart of my critique of his public call for higher tax rates on the rich,” says Laffer. “Just look at the second contractual condition for his ongoing pledge to the Gates Foundation: ‘The foundation must continue to satisfy the legal requirements qualifying Warren's gift as charitable, exempt from gift or other taxes.’"

“In other words, if his gift weren't tax sheltered he wouldn't give it. So much for ‘shared sacrifice.’"

The San Francisco Chronicle reports that stock in Buffett’s company Berkshire Hathaway declined by 4.7 percent in 2011.