The Buffett Rule: Tax reform or political gimmick?
As last-minute tax filers sweat the IRS, Democrats are pushing – and the GOP is resisting – the Buffett Rule, which would mean higher tax rates for millionaires (like Mitt Romney and Barack Obama).
The “Buffett Rule” is a wonderful political device – a call to even out the tax burden in a way that picks the pockets of those “millionaires and billionaires” President Obama keeps talking about while evening things out for the vast American middle class.
It’s very easy to understand, especially in contrast to a tax code requiring battalions of lawyers to navigate. And it has this wonderfully avuncular fellow for whom it’s named.
That it wouldn’t do much to help the US economy (or that it has any chance of passage in Congress) is true but also irrelevant. Its purpose is to define an important difference between Republicans and Democrats, as Obama pointed out in his radio address Saturday.
“We can’t afford to keep spending more money on tax cuts for the wealthiest Americans who don’t need them and didn’t even ask for them,” he said. “We just need some Republican politicians to get on board with where the country is.”
In fact, most of the country is with Obama on this.
A Gallup survey out Friday has 60 percent of those polled favoring a minimum 30 percent tax rate for Americans with a household income of $1 million or more per year – in essence, the idea named for billionaire investor Warren Buffett.
“Americans in general say that the distribution of money and wealth in this country is not fair, and that money and wealth should be more evenly distributed,” writes Gallup editor-in-chief Frank Newport. “Plus, 59 percent of Americans last year agreed that households making $250,000 or more per year should pay higher taxes.”
“The current results reinforce these findings and underscore the now well-documented conclusion that Americans in general support various proposals for increasing taxes on higher-income Americans,” observes Mr. Newport.
Not surprisingly, Democrats and Independents are more likely to favor the Buffett Rule (74 percent and 63 percent respectively) than do Republicans, who oppose it 54-43 percent. Still, more than 40 percent of GOP voters favoring higher taxes for the wealthy is a substantial minority.
The poll – and the debate – come just as last-minute tax filers are sweating this coming Tuesday’s deadline to communicate with the IRS.
Mr. and Mrs. Obama have done their taxes already.
For 2011, they reported a joint adjusted gross income of $789,674 and paid $162,074 in federal taxes, or about 20.5 percent – less than they would under the Buffett Rule and slightly lower than the President’s secretary, as Obama acknowledges. (Which is why he typically includes himself when speaking of the wealthiest Americans needing “to pay their fair share.”)
All of which puts Mitt Romney – Obama’s likely opponent in this year’s presidential election – in something of a bind.
Mr. and Mrs. Romney are far wealthier than the Obamas – upwards of $250 million in net worth by most accounts.
They’ve just filed for an extension on their 2011 taxes. But for 2010, Romney’s campaign reported, their tax rate was only about 14 percent on $22 million in income. And so far, Romney has resisted calls to be more forthcoming about earlier years – especially the period when he headed the private equity firm Bain Capital.
“What does he have to hide?" Obama campaign manager Jim Messina taunted in a statement Friday. "Did he exploit loopholes in the tax code by keeping his investments offshore and is that why he’s protecting those loopholes now? Why did he open a Swiss bank account instead of an American bank account and establish a corporation in Bermuda instead of on our shores? Did he pay a lower income tax rate than the 13.9 percent he paid in 2010, and is that why he opposes the Buffett Rule to ensure millionaires don’t pay less taxes than middle-class families?"
Republicans like to dismiss such questions as part of Democrats’ “class warfare.”
But to some critics, all of this misses the point about the Buffett Rule – which is that (according to the nonpartisan Tax Policy Center) it would bring in less than $5 billion a year – pocket lint to Uncle Sam.
“There are [those] who are saying, well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule won’t do enough to close the deficit,” Obama said in a speech this week. “Well, I agree. That’s not all we have to do to close the deficit. But the notion that it doesn’t solve the entire problem doesn’t mean that we shouldn’t do it at all.”
On Monday, Senators will be voting on a bill mandating that income above $2 million be taxed at no less than a 30 percent rate, with a graduated boost in the minimum marginal rates for income between $1 million and $2 million.
There’ll be speechifying and an essentially symbolic vote. But that’s as far as the Buffett Rule is likely to go.