Democrats are doing everything they can to make the Buffett Rule as the predominant issue of the week before it is subjected to a Senate vote on Tax Day. The rule—named after Warren Buffett's frequent refrain that his secretary pays a higher effective tax rate than the multi-billionaire investor—would force multimillionaires to give up some of their tax breaks until they pay at least a minimum rate of 30 percent. Obama is headed to Florida tomorrow to promote the bill, while his campaign is highlighting the rule as a campaign issue in contrast to Mitt Romney's tax disclosures he released earlier this year, which revealed that the probable Republican candidate paid taxes of just 13.9 percent on his $21.7 million in income in 2010.
I'm sure many of us at the Prospect will have more to say about the bill over the course of the next week, but one minor detail in the New York Times write up of the push is worth highlighting:
The Senate legislation would establish a minimum 30 percent tax rate for households earning at least $2 million a year, with a lower minimum rate for incomes between $1 million and $2 million. Such wealthy families would calculate their taxes normally, and using the minimum tax rate, then pay the higher amount.
It’s striking how modest a proposal this is for the Democrats’ big push on taxes. The bill does not force the wealthy to pay the actual top marginal tax rate, which at 35 percent is already near a historical low, far less than the top rate of 70 percent in the 1970s. With the $2 million cutoff the Buffett Rule won't even apply to most of the individuals and families who fall in the top marginal bracket.
When Barack Obama campaigned in 2008, he pledged to keep tax rates consistent for every family that earns less than $250,000 a year. That was already a low exclusionary bar; taxes will inevitably need to be raised in order to ensure the continued existence of the social safety net while also keeping the deficit in check. The figure also represents a large swath of the country's highest earners; to qualify as part of the top 10 percent of Americans based on annual income, one must only earn $108,000.
If implemented, the Buffett Rule would set $1 million as the de facto cutoff for who qualifies as wealthy. Even then, many people with an annual income of $1 million would be exempt from the full impact of the rule. Those who earn between $1-$2 million per year would only pay a portion of this additional tax and maintain an effective rate below 30 percent, a provision built into the legislation so that there is not a tax cliff at $1 million. The bill under consideration in the Senate would also maintain the charitable contribution deduction as a means to lower that 30 percent rate.
The class of super-wealthy Americans should certainly kick in an extra share for the country’s budget. Considering the vast disparities between the rich and the super rich, there is also good reason to create new brackets at the top of the marginal rates. But it is absurd to think that only those earning above $2 million can afford to pay this minimum tax, one that is still lower than the actual top rate.
Even with these narrow targets, the Times article notes that Democrats are not optimistic that the bill will clear a Republican filibuster next week.