Larry Summers Opposed The Buffett Rule, Thought It Was 'Gimmicky,' Says Geithner

Former US Tresury Secretary Larry Summers addresses the Wall Street Journal CEO Council on November 19, 2013 in Washington,DC
Former US Tresury Secretary Larry Summers addresses the Wall Street Journal CEO Council on November 19, 2013 in Washington,DC. The Wall Street Journal CEO Council annual meeting brings together the worlds most powerful chief executives to address the most pressing public policy and business issues of the day. AFP PHOTO/Nicholas KAMM (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)

WASHINGTON -- It is unfair, in many respects, to expect a uniformity of viewpoints on economic policy from any White House. Officials are bound to have differing opinions on such things as taxes, government stimulus and regulation.

But the most illuminating way for an outsider to find the fault lines is often the post-mortem accounts that top officials write after leaving the administration

Former Treasury Secretary Tim Geithner's new book, Stress Test, includes several revelations about internal disagreements. As reported in Monday's Politico Playbook, a dispute arose over how firmly the administration should have cracked down on the banking system in the immediate aftermath of the financial crisis. There was also disagreement over the administration's acceptance of deficit-reduction following the Republican takeover of the House in 2010.

And buried deep in Geithner's book comes the revelation that Geithner and Larry Summers, head of President Barack Obama's National Economic Council, differed on one of the president's signature tax policies.

Geithner supported the so-called Buffett Rule, which applied a 30 percent minimum tax on individuals making more than $1 million a year. Summers, Geithner writes, opposed the measure.

Larry let me know he thought this was a gimmicky appeal to populism, letting Republicans portray the President as an anti-success tax hiker. I thought the Buffett Rule was perfectly sensible, especially as an illustration of the need for broader tax reforms.

The line was a throwaway in the book, possibly befitting the actual significance it had as a legislative item. (Despite being proposed as pay-fors for other policy priorities, the measure never passed.)

"Summers has consistently advocated for more progressive taxation and closing loopholes, like carried interest. His concern was that the Buffett Rule would not fix the primary way billionaires avoid taxation, such as unrealized capital gains and stepped up basis,” a spokesperson for Summers said.

It's worth noting that Summers appears to have kept a low profile on the Buffett Rule. While the White House often championed the idea, the public record has few, if any, comments from Summers on the tax named after the Nebraska-born investing icon. The closest Summers came was in an interview with Chrystia Freeland (then at Reuters) in 2012. Freeland never actually asked Summers about the Buffett Rule specifically, but the concept of tax policy on "people at the top." Summers answered in a manner that sort of suggested he supported the Buffett Rule in theory.

I would put the question this way: during a period when the top 1 percent have done far, far better than the bottom 99 percent, do you want the taxes of the top 1 percent to keep track with their progress and their incomes? Or do you want the taxes on the top 1 percent to lag behind the growth of their incomes? Do you want the taxes on the 99 percent to grow faster then their incomes or to grow slower? And it seems to me on almost any theory there is something perverse about the taxes of the top 1 percent lagging their income growth and the taxes on the bottom 99 percent running ahead of their income growth?

"It isn't class warfare to say that high-income people should see their taxes rise with incomes just like low and middle-income people," Summers added later. "That is just elementary fairness."

This article has been updated to include Summers' response.



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