It's official. A major campaign plank of President Barack Obama's re-election effort is tax fairness.
Specifically, the president is hitting the road to discuss the Buffett Rule, a proposal to institute a 30 percent minimum tax rate for individuals who make $1 million or more.
Named after Warren Buffett, the Omaha, Neb.-born financier who famously revealed that under the current tax system his effective tax rate was lower than his secretary's, the White House says its proposed millionaires' tax is a basic rule of tax fairness that should be a part of any tax reform measure.
In an effort to pre-empt expected criticism that taxing higher wage earners won't do much to reduce the federal deficit, White House economic advisers on April 9 acknowledged that their own estimates show the Buffett Rule would produce just $47 billion in additional federal revenue over 10 years. But that's not the point, said White House spokesmen Tuesday during a press conference to discuss the administration's special report on the tax proposal.
"We think $47 billion is a meaningful amount of money, to us and most Americans," said Jason Furman, principal deputy director of the National Economic Council at the White House. But more important to the administration, it addresses "a basic principle of tax fairness."
The Buffett Rule, Furman added, never was designed to bring the deficit down -- "We have an entire budget to do that." Rather, he said, reiterating the report's title, "This is a basic principal of fairness."
To bolster that tax policy position, the report offered a series of tax data points, including the following.
- Since 1979,the average after-tax income of the top 1 percent of U.S. earners has risen nearly fourfold. Over the same period, the middle 60 percent of Americans saw their incomes rise just 40 percent. The typical CEO who used to earn about 30 times more than his or her employees now earns 110 times more.
- Of millionaires in 2009, IRS records show a full 22,000 households making more than $1 million annually paid less than 15 percent of their income in income taxes and almost 1,500 paid no federal income taxes on their incomes of more than $1 million.
- The average tax rate, including Federal income and payroll taxes, for the top 0.1 percent of U.S. taxpayers (that's the highest‐income earners one out of every thousand American households) has dropped by 50 percent over the last 50 years, from 51 percent to 26 percent.
- Meanwhile, the average tax rate assessed middle-class taxpayers has remained roughly the same, or increased slightly, over that same time frame, going from 14 percent in 1960 to 16 percent in 2010.
Implementing the Buffett Rule also would make the current tax system more efficient, said Alan Krueger, chairman of the White House Council of Economic Advisers.
"The tax code is more efficient when it is broader based and applies to more of people's income," said Krueger. "That helps prevent distortions through income restucturings that distort the economy."
The White House report cited economic research showing that taxes are more efficient when taxpayers have fewer opportunities to avoid them. The Buffett Rule would increase tax efficiency, argues the administration, because it would limit the extent to which America's wealthiest taxpayers could take advantage of tax shelters or accounting mechanisms to avoid paying taxes.
"Fairness and economic efficiency make for very good tax policy at a time when the market is driving more income into the hands of the wealthiest and when the federal government needs more income," said Krueger.
Obama already has mentioned the Buffett Rule in this year's State of the Union address and the preface of his fiscal year 2013 budget. As the November election nears, expect to hear him focus on the millionaires' minimum tax proposal, starting with a speech April 10 at Florida Atlantic University in Boca Raton, Fla.
Do you begrudge the rich their ability to maneuver their earnings, for example, getting more of their income from lower-taxed (15 percent rate) capital gains instead of ordinary income (35 percent maximum rate), so that they pay lower tax rates than many of us? Or do you agree that there should be a specific tax rate for the wealthiest?
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