What the 'Buffett rule' reveals about Obama tax reform plans

“In addition to fairness, in fact it’s a step in the direction of economic efficiency,” said Alan Krueger, chairman of the Council of Economic Advisors. The Buffett rule allows people to "devote more effort what their focus should be, which is to their jobs and job creation … rather than restructuring their income to minimize their taxes.”

Second, the proposed rule would in effect raise taxes on dividends and capital gains income, funds currently taxed below the 35 percent statutory rate for ordinary income over $1 million.

“It’s just saying, in effect, you can’t run the tables and take advantage of all the different tax breaks,” said Jason Furman, principal deputy director of the National Economic Council, on a call with reporters Monday.

Mr. Furman would no doubt argue there are some who are “running the tables.” One in 4 of millionaires in America (94,500 taxpayers) pays at a tax rate that is lower than that of the 10.4 million Americans who make $100,000 per year, according to a nonpartisan Congressional Research Service report released in October.

Of those, a smaller group of millionaires, approximately 10 percent, pay little to no federal taxes, according to IRS data. 

Of the 241,528 households whose adjusted gross incomes were higher than $1 million in 2009 (the last year for which data are available), 9 percent (22,000) paid less than 15 percent of their income in taxes. One percent (1,470) paid no federal income taxes at all. Mr. Buffett, one of America’s most celebrated investors and businessmen, has said he paid just over 17 percent of his income in federal taxes last year. 

And one particularly important millionaire? Mitt Romney, the presumed GOP presidential nominee, paid a federal tax rate of 15 percent on his $20.9 million in income last year, a fact that Democrats are eager to get in front of middle-class voters. It remains to be seen whether Obama will bring up Romney's taxes when he speaks Tuesday on tax reform at Florida Atlantic University in Boca Raton.

But his campaign staff members aren't shy about doing so. Obama campaign manager Jim Messina ripped Mr. Romney for offering 23 years of tax returns to 2008 GOP presidential nominee John McCain for vetting purposes but only two years of such returns to the public in this presidential election cycle.

“Romney supports tax policies that reward people like him, and now he’s trying to obscure just how much he would benefit by hiding his own financial records,” Mr. Messina said to reporters Monday.

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