Okay, I’ll take the bait. In addressing our fiscal challenges, we need to raise revenues and reduce expenditures. I’d like the wealthy to pay at least the same percentage as I pay. But is a 30% minimum tax on the wealthy really wise? Aren’t we essentially talking about doubling the capital gains/dividend rate on the wealthy from 15% to 30%?

What does this do to economic activity? How large is the effect? What have professional economists said? I’m open-minded, but classical economic theory strongly suggests that when you raise taxes on investment, productive activity goes down. If I’m an investor and I have the opportunity to invest $1,000 today in a risky project to get a five year, $300/yr stream of payments and I want a 5% after-tax rate of return, I would make the investment if the capital gains rate is 15%. I wouldn’t make the investment if the capital gains rate was 30%.

President Obama and the Democrats need to explain why the classical theory is wrong and why this tax increase makes economic sense (i.e., what is the cost?)? It might make sense, but I’m not getting the feeling that they are grappling with this question in any kind of intellectual way. Just because it feels good doesn’t mean it is good policy.

The Democrats have weighed some costs in formulating this policy. For example, they have exempted some forms of income, like municipal bond income, from the Buffet Rule because of the cost of higher borrowing rates for cities and states if the rule passed. Of course, if the Buffet Rule passed, we would see a flood of money going into municipal bonds and municipal rates falling – does this make sense as a way of allocating capital and generating economic activity?

In fairness to the Democrats, Simpson Bowles also calls for capital gains/dividends to be taxed at much higher (ordinary) rates, although they acknowledge that perhaps increasing the top marginal rate while maintaining some cap gains/dividend preference might make more sense.

Moreover, perhaps as we cut spending and raise taxes (i.e., the United States delevers), we are just going to have to accept some very negative short-term economic consequences in exchange for long-run solvency – perhaps that is the “new normal.”

The Buffet Rule is a distraction! (It would provide only 4-5 billion dollars per year). However, while you were sleeping last night, the US DEBT ADDED by Barack Obama surpassed FIVE TRILLION DOLLARS (UNPREDENTED in world history - in a mere 39 months)! And with the aid of Democrats Duckworth, Schneider, and Foster, Obama can do even greater damage. The USA is insolvent. CUTTING every agency, commission, and bureau in Washinton just 10% could reverse this insanity. Vote Republican for your children's sake.

Buffet rule a distraction? How about how the new right wing Republican Southern Agenda makes social issues a cover for ending the middle class. Fear! That's how they hope to get votes. Voting Republican won't bring freedom to your children. If you value healthcare for your children, a future with a safety net for them, prospects that life for them will be better than your own, the right for them to choose who to love, if they are female that they can choose what to do with their own bodies, the ability to go to college, and hope they are not drafted by social class to fight in another endless war.....then reconsider that vote for Republican's....they don't have a clue how to protect freedom. Sure, they say many of these rights they want to take away are in the name of freedom or states rights or what our founding 'fathers' wanted..(they wanted slavery, by the way)...and Corporations are people and money is freedom of speech. Welcome to the battle for real freedom, keep Mr. Obama in office and allow him Govern. geeez talk about distractions.....the party of No is one big distraction.

RB - I've seen your comments on this site many times and you are very predictable. You through out countless liberal/statist points of view without addressing the question at hand. That's a true example of distracting and avoidance. Back to the question...how will raising taxes help us out of this economic downturn?

Stop coddling Warren Buffett:

http://washingtonexaminer.com/article/784591

http://reason.com/archives/2011/10/03/stop-coddling-warren-buffett

Bill Clinton Doesn't think raising Taxes now is a good idea.

Get rid of all the Bush tax cuts. You do that then you will have some Real Revenue

The problem with our government is that they don't understand the meaning of the word "temporary". That goes for both sides of the aisle and for taxes as well as spending. Neither party has the ability to allow temporary spending measures or tax cuts expire. The result is never ending increases in budgets and never ending decreases in tax rates. The ultimate outcome is where we are right now.

Where is the logic in raising taxes on rich people? Rich people buy more expensive homes, cars, boats, planes, clothes, food, and other things. They make up the lion's share of total consumption. More consumption means more productivity which leads to more investment which leads to more jobs, logical? So buy taking more of their money, please tell me how that improves our economy?

"Get rid of all the Bush tax cuts. You do that then you will have some Real Revenue" First, how do you get from raising taxes = Some Real Revenue? The economy will go further in the tank, leading to more people sitting at home waiting for their Link cards, and resulting in No Revenue. As for the rich people, more money gets shipped overseas in tax shelters. You and Barack need an Econ 101 class.

I'll ask again, since you never seem to stay on point. By the government taking money out of private hands, how does that improve the economy so that less people are sitting at home waiting for Link cards?

Trickle down does not work? You must have completely missed the 1980s and 90s.

Lower consumption leads to less productivity, less investment and less jobs. We need more consumption. It's really not that hard. Then people can work instead of sitting at home waiting for Link Cards.

RB, I will agree with you on one thing - the wealthy are sitting on loads of investable capital and that investment won’t pick up until demand improves and there are more worthwhile projects to invest in. I don’t think the demand issue is entirely domestic - a significant factor is growth outside the United States, the financial crisis in Europe and the slowdown in China.

I disagree with the Democrats when they demagogue issues like wealth distribution and offer silly platitudes like “the rich need to pay their fair share”. When the top 20% pay more than 50% of total taxes and nearly 50% of Americans pay no federal income tax (I know, they pay payroll tax), it’s hard to characterize increasing taxes on the rich as “making them pay their fair share.” I disagree when any political party proposes facile populist ideas – like the Buffet Rule or tax cuts for all – without completing the proper academic analysis.

While there are many reasons for our skewed income distribution, it isn’t primarily because of some conspiracy of the rich (which Elizabeth Warren and others allege) – I think it is largely because of free trade. Collectively, we are wealthier with free trade and safer when countries like China and Russia become our trading partners – but in a vast, hyper-capitalist world, unskilled and lower skilled American workers are going to suffer (despite lower prices at Wal-Mart) as are professionals whose skills can be offshored.

Smart, more intellectually honest Democrats like Obama don’t make the “fair share” argument that Nancy Pelosi and others make. Obama argues that we need to cut spending and pay more in taxes to avoid a debt crisis and that those who are most able to pay more are the wealthy – an argument I agree with. But contrary to what Bill Clinton said at the DNC Convention last night, Obama has not vocally offered any long-term deficit reduction plan ala Simpson-Bowles – perhaps he will in his speech tonight.

I'm not wealthy...not even close. But I do have some investments, and if Capital Gains taxes are doubled, that hurts the middle class more than the wealthy. I don't care that Mitt Romney only paid about 13% in taxes becasue this was tax on his investments. He probably paid much, much more when he was working and had a salary. The money he is paying the 13% on was already taxed when it was earned as income, so the capital gains tax on it is a double dip for the government. Careful what you wish for - the unintended consequences will hurt the middle class far more than the wealthy. The middle class do not have the tax shelters offshore, and they will be the ones hurting the most if capital gains go up. Does anyone really think Warren Buffet would leave his money where it is if the Capital gains tax increases? If he really wanted to give more, he would simply write a big check to the US treasury.

how about simply eliminating all these deductions that allow people to lower their effective tax rate and adjust the rates accordingly.

there are a lot of people in the top tax bracket that do not have any deductions. simply raising the tax rates only hurts them - the people with the deductions will still be able to get around the rates, no matter what they are.

we need to change the conversation to focus on the deductions.