'Buffett Rule’ Affects 94,500 Taxpayers, But White House Says It Would Help Pay for Education, Innovation
(CNSNews.com) – The so-called “Buffett rule,” named for the billionaire Warren Buffett, would increase taxes on fewer than 100,000 millionaire taxpayers, according to the non-partisan Congressional Research Service.
Nevertheless, White House Press Secretary Jay Carney promoted the rule to cover the cost of “important investments that we need to pay for” such as “investments” in national security, education and innovation.
During the State of the Union address last week, President Barack Obama told a joint session of Congress, “Tax reform should follow the ‘Buffett rule.’” Obama added, “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.”
Under the tax code, the highest rate for investment income is 15 percent. The highest tax rate for wages is 35 percent. Thus, someone who makes low wage income, but is wealthy from investment income like Buffett, chairman of Berkshire Hathaway, could pay a lower percentage in federal taxes than someone who earns less in wage income.
Republican critics of using the “Buffett rule” for tax reform say it would not make a dent in the $15 trillion national debt. But in an election, Obama and Democrats seems poised to use the issue of tax rates against GOP presidential candidate Mitt Romney – a millionaire who said he paid a tax rate of about 15 percent on his investment income – if Romney is the nominee.
The Congressional Research Service report, released on Oct. 7, 2011, states that about a quarter of America’s millionaire taxpayers pay a lower rate than moderate income taxpayers. The CRS report defines moderate income taxpayers as those households earning below $100,000 annually.
“Roughly a quarter of all millionaires (about 94,500 taxpayers) face a tax rate that is lower than the tax rate faced by 10.4 million moderate income taxpayers (10% of the moderate-income taxpayers),” the CRS report says.
“Tax reforms that are consistent with the Buffett rule would likely include raising tax rates on capital gains and dividends,” the report continues. “For example, the President has proposed allowing the 2001 and 2003 Bush tax cuts to expire for high income taxpayers and taxing carried interests of hedge fund managers as ordinary income as tax reforms that observe the Buffett rule. Research suggests that these tax reforms are unlikely to affect many small businesses or to deter saving and investment.”
The CRS report did not directly address how much revenue the “Buffett rule” would raise, because at the time it was unclear the precise tax proposals that were being made. Obama has still not stated specifically what taxes he would prefer to see increased on high earners.
During the White House briefing Monday, a reporter asked Carney “Is the public going to get any details about the so-called Buffett rule before the budget or is it going to be in the budget?”
Carney responded he would not anticipate any more details until the White House releases the president’s budget proposal for fiscal year 2013.
“The Buffett rule, as you know, as the president described it in the State of the Union and as Mr. Buffett described it, is principle that would guide the president’s approach to tax reform,” Carney said. “That principle is simply, in an environment like the one we live in, where we have important investments that we need to pay for, whether it’s national security or investments in education and innovation, everyone needs to pay their fair share.”
“It is not fair to have a tax code, because of loopholes, other things within it, where you have a millionaire or a billionaire paying a lower effective tax rate than some sizable number of middle class Americans,” Carney continued.
The president’s budget will get a revenue estimate by the White House Office of Management and Budget (OMB). However, the more unbiased score is generally considered to be the non-partisan Congressional Budget Office (CBO), which could score whether increasing taxes on the 94,500 millionaires would have any meaningful impact in helping to pay the debt, while still helping to cover the cost of national security, education and innovation expenses that Carney talked about. The CBO only scores legislation.
CNSNews.com asked Carney, “Will the Buffett Rule be scored by the CBO?” He responded, “Yeah, I don’t have any more details on that for you.”