Warren Buffett explained the secret to addressing a lot of the economic challenges facing the United States during President Obama’s first term. In a short commentary written for The New York Times—headline: “Stop Coddling the Super-Rich”—Buffett explained, “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
President Obama was always cautious when it came to taking Buffett’s advice.
But as Obama enters what he refers to as “the fourth quarter” of his presidency, he has begun to embrace a proper, if still judicious, populism.
With an eye toward addressing income inequality, the president will use his State of the Union Address to propose new taxes and fees on very rich people and very big banks. In any historical context, the tax hikes and fees are “modest.” But after a period of absurd austerity and slow-growth economics (in which all the sacrifices were made by working families, while all the advantages accrued to very rich families and very big banks), Obama’s move is as important as it is necessary.
At a point when there is broadening recognition of the social and economic perils posed by income inequality, the president is talking about taking simple steps in the right direction. Congress is unlikely go along with him, but the American people will—Gallup polling finds that 67 percent of likely voters are dissatisfied with income and wealth distribution in the United States. And as this country prepares for the critical presidential and congressional elections of 2016, the president’s clarifying of the terms of debate on taxes becomes vital.
According to Obama aides, the president will on Tuesday propose to alter a “trust-fund loophole” provision that, according to The New York Times, “shields hundreds of billions of dollars from taxation each year.” Obama also wants to raise the highest capital-gains tax rate from 23.8 percent to 28 percent for couples with incomes above $500,000 annually.
The president will, in addition, propose a new fee on huge financial firms—those with more than $50 billion in assets—in order to discourage risky borrowing. Under the plan, a fee of seven basis points would be imposed on the liabilities of the biggest banks.
The White House calculus says these initiatives would raise roughly $320 billion over the next ten years. Most of the money would be used to provide tax breaks and benefits for working families: a $500 credit for families with two working spouses, improved structures for retirement saving, a tripling of the tax credit for childcare to $3,000 per child. In addition, the revenues would cover costs associated with the president’s recently-announced plan for free tuition at community colleges.