I’ll keep this short because I know that some of you get bored when I start writing or talking about the psychology of taxes, but as a psychologist, I’m always fascinated by how ideology sometimes prevents people from even seeing, let alone objectively assessing, alternative viewpoints. In that vein, I’ve been amazed at how singularly-focused the President and the media have seemed to be this week on just one side of what seems to me like a two-sided coin.
Billionaire Warren Buffet has loudly complained lately about paying taxes at a rate that’s lower than his secretary’s tax rate, and President Obama has repeatedly referred to this apparent travesty in calling for a tax increase on high earners. Now forget for a moment that Buffet’s taxes are capital-gains taxes (15% taxes on profits on investments) rather than income taxes (which reportedly are 20-something percent on the secretary’s income). If one believes, as the President does, that the disparity in these two taxpayers’ tax rates isn’t fair, then it seems to me that raising Buffet’s tax rate is just one way to fix it.
It seems to me that there’s another way that nobody, even among those opposed to the President’s idea, seems to be talking about: We could also cut the secretary’s income tax rate to 15%. I’ve explained here before, from a behaviorist perspective, why it’d be better for our economy as a whole if we flattened the tax rate for every taxpayer at every level of income, so I won’t repeat that explanation here, but if the whole point of this billionaire-secretary-tax-disparity argument (flawed as it is) is to help the secretary out, then cutting her taxes seems to me like the more effective (and the more just) strategy.