Second, again on messaging. I’m happy to see that Greg shares my sentiment, “Don’t punch down.” And, I suppose, maybe a little “Poverty is big busines.”

If we’re looking at regressive taxes, let’s talk about the Social Security payroll tax, for which poorer workers pay a larger share than those making over $110,100. Since SSI payments help to provide a safety net for many people who would otherwise not have it, it’s in the interest of ALL people, but particularly those with the most to lose if society were to spin out of control, to keep it solvent. Somehow, though, once you cross the $110,100 barrier, you no longer take the payroll tax whack for it…the reasoning is that Social Security benefits are limited, and theoretically based on contributions that workers put into the system, but think about it — the people fortunate enough to make more than $110,100 annually would not like the consequences of a society that couldn’t pay for its own safety net. As the owners of property, they have a strong interest in maintaining order.

As for the top marginal tax rate, John Edward points out that we did quite well with 39.6 percent. One thing that’s never made sense to me are the people who say, “If marginal tax rates on income go higher, people just won’t work as much.” Huh? Most people in that top bracket are SALARIED! So if you’re taking home a six-figure annual paycheck that comes from your employer, the time you put in, the effort you exert, etc. has nothing do with the income tax code…a first-year management consultant at one of the major firms is going to work his or her tail off simply as a matter of survival, based on the company’s pyramid model. The top marginal rate could be 10%, 70%, or 90%. It would be irrelevant.

But back to capital gains. JoeS, the reason I believe you’re correct about the Buffett rule not being the right systemic fix is that going after money that’s ALREADY been taxed, and really WOULD be rediverted away from investments if taxed at an even higher rate, is a good recipe to ensure that those silly millionaires would move their money out of things that would yield long-term capital gains taxes (like equity shares in U.S. companies). A salaried worker’s incentives don’t change when the top marginal rate goes from 39.6 to 35 (all it does is worsen the deficit, as we saw with the GWB cut) but a wealthy investor’s behavior really will change when you take away the incentive to steer money towards companies that can innovate, expand, and yes, HIRE people. And hiring new workers is the best anti-poverty program I’ve ever heard of…

Even from a balancing-the-ledger point of view, the $40b+ that the Buffett Rule would yield for the Treasury over the next ten years is maybe a drop in the bucket, never mind the deleterious side effects for everyone else.

We have some serious issues to face in terms of the federal budget, and it just doesn’t seem like either party is really willing to stand up and face any of the tough truths about what will need to happen. Instead, we get worthless side-shows from the left (Buffett Rule) and demonizing/fear-mongering from the right (claiming that Pentagon cuts will hurt the troops, when in fact they won’t if they’re done right, because most of that massive chunk of the budget has nothing to do with actual troops).

Oh, and good call about the ‘non-profits.’ We hear so much griping about welfare recipients who barely eke it out at the edge of subsistence, but what about the people who really waste taxpayer dollars lavishly for no return back to the people? (I’d point to the recent Rose Kennedy Greenway revelations as an example). Who’s the bigger threat? The person collecting $1k/month in federal benefits or the person planning the GSA conference to throw away money on a scale that’s an entire order of magnitude bigger than that?

I would offer increasing revenue by eliminating certain tax breaks as an alternative to raising rates. Applying the Buffet Rule by overlaying a 30% minimum tax rate on the rich appears to be a poor alternative to correcting the tax code that allows unfair tax breaks to those who control lobbying. No one, especially a presidential candidate, should be allowed to increase his wealth by moving investment off-shore. No one, especially a presidential candidate, should be allowed to reap a low tax rate without making a productive contribution to the US economy.

But I would also offer that we need to control spending. Of course, each spending reduction will affect someone, and if done poorly would have an adverse economic effect. One area that should be attacked is how “non-profits” operate beneath the radar of public scrutiny to take significant funds from public spending. As an example, why would a group providing an occupational therapist get paid $150 per hour to work with a patient based on a doctor’s prescription, while only paying the worker about $40 per hour. Somehow the non-profit is allowed to charges a 275% premium for overhead and administration.