How Buffett Rule critics try to dodge the 30% tax rate by referencing the marginal rate

One of Obama's proposed tax policies for 2013 is the implementation of the Buffet Rule.  This rule is fairly simple, it sets a minimum tax rate for those who make more than $1 Million at 30%.  The reason we need this rule is to plug up loopholes in the tax code that tax dividends and capital gains at 15%. These loopholes allow people who have massive amounts of assets to essentially pay a 15% tax rate on all of their income because these people can structure their income as capital gains and dividends rather than ordinary income.

The current tax system vastly favors investors over average workers by taxing pure investors at lower rates.  The Buffett rule tries to plug this loophole for those making more than a $1 million by requiring them to pay at least 30% of their income in taxes.

The tax foundation has an article in its Tax policy Blog with the inflammatory title: "Buffet Rule would Cause Marginal Tax Rate of 90%."  Before you become mislead by that title remember that the buffet rule actually sets a tax rate of 30%.  The use of the number 90% in the title is totally misleading because the actual tax rate is 30%.  So where do they get this misleading 90% tax rate?  Well for simplicity's sake let me dive in with a simpler example than they use that shows just how absurd their argument is.

Not so Simple: Flat Tax Rhetoric

You have probably all heard this years republican buzword "flat tax."  You've also probably heard the blatant misrepresentation that switching to a flat tax will simplify our tax code.  Rick Perry, Herman Cain, and Newt Gingrich have all suggested flat taxes as techniques to simplify our taxes.  But the question is: does a flat tax really simplify the tax code?