Towards a fairer tax policy: U.S. Senate to vote on Buffett Rule

Later this evening, the U.S. Senate will vote on the so-called Buffett Rule, an Obama Administration proposal that seeks to ensure that households earning more $1 million a year pay at least the same tax rate as middle class families.  Introduced as S.2230, “The Paying a Fair Share Act,” by Senator Sheldon Whitehouse (D-RI), this important legislation promotes tax fairness, a balanced first step to deficit reduction, and long-term economic growth.

Under the current Bush-era tax levels, individuals earning more than $1 million per year face a tax rate of 35% for wage income, yet between a range of loopholes, deductions, and preferential treatment of investment income, many of these wealthy individuals are able to shield vast portions of their earnings from Federal income tax—thus reducing their effective tax rates to levels lower than the tax rates faced by middle class families.  One recent study showed that more than one-quarter of all millionaires pay less than 26.5% of their income in federal taxes, while 10 million Americans earning less than $100,000 pay more than 26.5% in taxes.

The Buffet Rule addresses this fundamental inequity by creating a minimum 30% effective tax rate for all taxpayers earning more than $1 million in a single year.  Under this rule, no one could rely on loopholes and special tax breaks for investment income to pay less than their fair share during a time of unprecedented deficits and economic challenges.

In the face of ongoing budget deficits, the Buffett Rule is expected to raise to between $47 billion and $171 billion in new revenues.  Although this legislation will clearly not eliminate the deficit by itself, it provides an important downpayment towards closing the Federal budget shortfall.  Perhaps even more critically, it restores the long-standing bi-partisan commitment to balanced deficit reduction that includes new revenues rather than sole reliance on deep cuts to public investments that benefit those most in need.

Given these trends, the Buffet Rule makes a critical step forward in ensuring greater tax fairness, and ultimately, more widely shared prosperity.

8 Comments

  1. david esmay

    April 16, 2012 at 6:47 pm

    If we taxed the top 25 hedge fund managers at the same rate as you or I, it would raise an estimated 44 billion in revenue over the next ten years, based on their 2010 incomes. That’s just 25 people, the Urban-Brooking s institute estimates Cantor’s new tax plan would give 49%,or 46 billion in tax cuts to those whose income is over 1 million a year. Nothing provides a better view of difference between progressives and those on the right than their tax policies, and the right’s obsession with women’s health issues.

  2. Doug

    April 17, 2012 at 7:20 am

    Imagine if we got just a little from 47% of Americans who pay no income tax whatsoever.

  3. david esmay

    April 17, 2012 at 8:05 am

    Imagine if they made a living wage and could afford to broaden the tax base.

  4. Jeff S

    April 17, 2012 at 9:47 am

    Everyone pays taxes Doug.

  5. Frank Burns

    April 17, 2012 at 10:39 am

    Jeff, that is true but Doug’s statement is correct when applied to federal income taxes.

  6. david esmay

    April 17, 2012 at 1:37 pm

    @Jeff, not only do they pay taxes, they pay a greater percentage of their income on taxes. Federal income tax is less than half of federal taxes, and one fifth of taxes at all levels of government. SS, medicare, unemployment insurance are paid mostly by the bottom 90% of taxpayers. Neo-cons like to cherry pick.

  7. Frank Burns

    April 17, 2012 at 2:49 pm

    It’s the middle class that continues to get the squeeze on the taxes. In my opinion, every citizen should have to pay some level of federal income tax if they want a share of the milk and honey.

  8. Alex

    April 17, 2012 at 4:00 pm

    As usual david, you are wrong on your tax statements. Employers pay the unemployment taxes. Paying Medicare and FICA taxes is just a pre-payment of benefits the person will get back in later years usually at a larger amount than they ever paid in to the system. Average payout for both is close to $800,000.Many low -income folks pay no property taxes if they are renting, but still use the state and local services. Incomes over $50,000 pay 75 % of property taxes.