The tax proposal is dubbed the Buffett Rule, named for its main backer, billionaire Warren Buffett, who says it is unfair that he pays a lower effective tax rate than his secretary. The Buffett Rule ensures millionaires and billionaires do not pay lower percentages of their income than middle-class citizens.
U.S. President Barack Obama, on a campaign fund raising trip, spoke in favor of the Buffett Rule yesterday (Tuesday) in Florida. Democrats are now working on a bill that would incorporate the Buffett Rule into the current tax code, with support from the White House.
The proposal is set for a vote next week in the Senate, and the president has made it a principal element of his plan for deficit reduction.
The White House says the Buffett Rule would make it more difficult for the nation's wealthiest to lower their tax bills and would ultimately make the tax code fairer for everyone.
Critics, however, say it is nothing more than a political ploy in the months leading up to the 2012 presidential election.
The Buffett Rule: Key Campaign Tool in Election 2012 The Buffett Rule is a key theme in President Obama's re-election campaign.
Republicans object to the Buffet Rule as a punitive tax hike on rich that will have little impact on the federal deficit. If the GOP succeeds in blocking passage of the Buffett Rule, the president can paint the Republicans as advocates of an unfair tax policy that benefits only the country's most prosperous citizens.
White House officials acknowledged Monday that the controversial Buffett Rule would yield just $47 billion in additional tax revenue over a decade. That amounts to a paltry 0.6% of the $7 trillion in federal deficits projected for that 10-year period.
But Jason Furman, principal deputy director of the National Economic Council at the White House, said in a statement, "We think it's a meaningful amount of money," adding that more important to the administration, it addresses "a basic principal of tax fairness," CBS News reports.
According to the White House report issued Tuesday, "The situation is the result of decades of the tax system being tilted in favor of high-income households at the expense of the middle class."
Key arguments in the reports include:
- The average tax rate paid by the very highest income American has fallen to nearly the lowest rate in over 50 years.
- In 2009, 22,000 households making more than $1 million annually paid less than 15% of their income in taxes.
- Many high income Americans pay less in taxes than do middle class Americans ("fundamentally unfair," the report notes).
Since President Obama's Jan. 24 State of the Union address, the president has delivered 19 speeches in which he has made his pitch for the Buffett Rule. Ten of those speeches were at campaign fundraisers.
The president's speech Tuesday plugging passage of the Buffett Rule was delivered at Florida Atlantic University in Boca Raton. It was sandwiched between re-election fundraisers in the Sunshine State's cities of Palm Beach Gardens, Hollywood and Golden Beach.
Republicans' Buffett Rule Opposition
Opponents of the Buffett Rule point out that many high-income earners pay a lower effective tax rate because their capital gains are taxed at a lower rate than earned income. Furthermore, many affluent people amass a great deal more from capital gains than they accumulate in salary.
The wealthiest have and continue to be a major catalyst in stoking the ailing economy. Congress intentionally lowered the capital gains tax rate as part of the Bush tax cuts in an effort to encourage America's rich to plow money in the U.S. economy by hiring more workers, creating jobs and spending money across all struggling sectors.
Republicans say the Buffett Rule will discourage the rich from spending, which will hurt the economy. They oppose the rule, saying it won't make even a small dent in the mammoth deficit, but it would adversely affect small businesses, effectively bleeding them dry, The Washington Post points out.
Rep. Paul Ryan, R-WI, chairman of the House Budget Committee, called the rule "pixie dust," that would cover just 6% of Obama's proposed deficit spending.
GOP presidential hopeful Mitt Romney said in a statement that Obama is "the first president in history to openly campaign for re-election on a platform of higher taxes."
"He has already raised taxes on millions of Americans, but he won't stop there," the Romney campaign said. "He wants to raise taxes on millions more by taxing small businesses and job creators. We appreciate the Obama campaign reinforcing Mitt Romney's platform of lowering tax rates across the board in order to jumpstart this bad Obama economy."
The fate of the Buffett Rule may be decided by the 2012 election, but in any case will be a major campaign issue for both sides.
Until then, perhaps former President Ronald Reagan, who upheld that he didn't trust "a government that protects us from ourselves," said it best regarding taxes: "Government's view of the economy could be summed up in a few short phrases: if it moves, tax it; if it keeps moving regulate it. And, if it stops moving, subsidize it."
Related Articles and News:
- Money Morning:
President Obama's Corporate Tax Rate Plan Won't Get Anywhere in 2012
- Money Morning:
President Obama's 2013 Budget: Five Things You Should Know
- Money Morning:
The Mitt Romney Tax Plan: Trying to Please Everyone
- The Washington Post:
Buffet Rule no silver bullet
- CBS News:
White House pushes Buffett rule on taxes
- International Business Times:
Obama Pushes 'Buffett Rule': Raise Taxes On Rich To At Least 30%
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