Obama Tax Plan To Demand More Of Millionaires

President Obama on Monday will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials.

With a special joint Congressional committee starting work to reach a bipartisan budget deal by late November, the proposal adds a new and populist feature to Mr. Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future cuts from Medicare and Medicaid.

Mr. Obama, in a bit of political salesmanship, will call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday.

Mr. Obama’s proposal is certain to draw opposition from Republicans, who have staunchly opposed raising taxes on the affluent because, they say, it would discourage investment. It could also invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all, because many in that group actually make more from wages than from investments.

In a speech on Thursday, Speaker John A. Boehner, Republican of Ohio, agreed with Mr. Obama that the deficit-reduction committee “can tackle tax reform, and it should,” to get rid of many tax breaks and allow for lower marginal rates.

“Tax increases, however, are not a viable option for the joint committee,” Mr. Boehner said. Instead, he emphasized that meeting the deficit-reduction target should come largely from overhauling benefit programs like Medicare, Medicaid and Social Security.

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012.

It could also reassure Democrats who have feared that Mr. Obama would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes.

The administration wants such a tax to replace the alternative minimum tax, which was created decades ago to make sure the richest taxpayers with plentiful deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class. Mr. Obama has said that many average Americans could see a tax cut if the system is overhauled, since ending many tax breaks would allow for lower rates while raising more revenues from the wealthiest.

The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year, both to raise revenues for reducing deficits and to make the tax system simpler and fairer, said the administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity.

The millionaires’ rate would affect only 0.3 percent of taxpayers, they said. That would be fewer than 450,000; 144 million returns were filed for 2010.

Mr. Obama’s proposal comes a month after Mr. Buffett began reviving his longstanding objection that he and “my megarich friends” pay a significantly lower percentage of their income in federal taxes — income and payroll taxes — than everyone else, thanks to the tax code’s favoritism toward the rich, and especially toward investors like him.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” he wrote in an opinion article in The New York Times, a complaint he has repeated in talks and media interviews since. “It’s time for our government to get serious about shared sacrifice.”

Mr. Obama has been citing Mr. Buffett as he promotes his $447 billion job-creation plan. He proposes to offset the cost of that plan and reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.

Mr. Obama’s proposed Buffett Rule puts a new spin on that pitch, as he tries to put Republicans in Congress and in the presidential race on the defensive for their rigid stand against higher taxes.

Behind the arguments of Mr. Obama, Mr. Buffett and others about the inequity of the tax system is the difference between taxpayers’ marginal tax rate, popularly known as their tax bracket, and the effective tax rate they end up paying after subtracting for deductions, credits and other breaks.

The marginal tax rate is the percentage paid on the last dollar a person earns. The current system has six marginal tax rate percentages — 10, 15, 25, 28, 33 and 35 — and each applies to a progressively higher amount of income. In theory, a wealthy filer pays the lower rates on income within each bracket, but the bulk of their income is taxed at the top 35 percent rate. Middle-class taxpayers generally pay marginal rates of 15 percent or 25 percent.

But investors like Mr. Buffett pay no more than 15 percent on most of their income because that rate applies to capital gains, dividends and “carried interest,” which is the compensation paid to hedge fund partners and investment managers like Mr. Buffett.

Another reason many wealthy Americans pay a smaller share of their income in federal taxes is that the Social Security payroll tax does not apply to income above $106,800; most people do not reach the cutoff and pay the tax on all their income.

Counting income and payroll taxes, Mr. Buffett has said he paid an effective tax rate of 17.4 percent for 2010 compared with an average 36 percent rate for many employees of his company, Berkshire Hathaway.

Under Mr. Obama’s proposal, Mr. Buffett and others with taxable income of more than $1 million would pay a minimum tax rate closer to his employees’ rates. But Mr. Obama will leave the details of how such a rate would be calculated — whether to focus on the overall federal tax burden of middle-income individuals generally, or their marginal rates — to the debate over rewriting the tax code.

Republicans and some conservative economists are certain to oppose him, however.

In 2007, when Mr. Buffett made news with his complaints about tax inequities, N. Gregory Mankiw, an economics professor at Harvard who was an adviser to President George W. Bush, disputed Mr. Buffett.

Mr. Mankiw, who now advises Mitt Romney, the Republican presidential candidate, said that unlike Mr. Buffett and others who live on investment income taxed at 15 percent, millionaires typically pay the 35 percent marginal rate on their salaries, bonuses and business income. Even Mr. Buffett probably paid a higher effective rate than he claimed, Mr. Mankiw added, because much of his income came from corporate income that had been taxed before it was paid out to individuals.

Mr. Obama, in his deficit-reduction plan, will call for more than $300 billion in 10-year savings from Medicare and Medicaid but not for changes in Social Security.

Representative Chris Van Hollen of Maryland, one of six Democrats on the 12-member joint committee, said Mr. Obama must make it clear that those reductions from entitlement programs “are tied to his proposals to raise revenues by cutting special-interest tax breaks and asking the folks at the top to pay more.”

“Otherwise,” Mr. Van Hollen added, “there’s a risk the Republicans will cherry-pick the pieces they like and leave behind the ones they don’t.”


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  • by Fair for the Rich? Location: USA on Sep 24, 2011 at 11:48 PM
    "to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers." WHAT??? Surely we can't tax these "rich people" and corporations at the rate we did back in 1999. If we raise their taxes, they won't be able to create all the jobs like they're doing now........Ummm, tell me again how getting the rich to pay their fair share is going to hurt job creations? They aren't hiring now, so what's the difference? Greedy is as greedy does, my Mama always liked to say. She also said Republicans in Washington tried to do what was best for America. Of course, that was several decades ago. Now Mama says, "Why do they want to cut my Social Security money? Why do they want to cut my Medicare reimbursments? Why are they picking on old people?" And I tell her why. It's greed, Mama. The Republicans have becoming the protectors of the greedy. They protect their own money and that of their rich lobbyist buddies. The party that you used to love is gone, just like the good old days.
  • by Momof4 Location: Havelock /Va on Sep 24, 2011 at 09:10 PM
    WE DID contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only 30K over your 49 year working life, that’s close to $220,500. If you calculate the future value of $4,500 per year (yours & your employer’s contribution) at a simple 5% (less than what the govt. pays on the money that it borrows), after 49 years of working (me) you’d have $892,919.98. If you took out only 3% per year, you would receive $26,787.60 per year and it would last better than 30 years, and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had. Entitlement, my foot, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn't make my benefits some kind of charity or handout !! Congressional benefits, aka free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that's welfare, and they have the nerve to call my retirement entitlements !!!!!! They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. What happens to us when we borrow money and can't pay it back? So the govt borrows from OUR money and now they can't pay it back?? This does not compute! THE # DONT LIE.
  • by Disabled on Sep 24, 2011 at 12:10 PM
    Waste and War. Wars were profitable when you took over a country and and it's assets. Trying to liberate other countries is expensive. Not our business. Sending spacecraft to the moon or Mars is WASTE. There is no way I want to spend 35 billion dollars one a rocket. Let's take care of ourselves first.
    • reply
      by Momof4 on Sep 24, 2011 at 09:11 PM in reply to Disabled
      WE DID contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only 30K over your 49 year working life, that’s close to $220,500. If you calculate the future value of $4,500 per year (yours & your employer’s contribution) at a simple 5% (less than what the govt. pays on the money that it borrows), after 49 years of working (me) you’d have $892,919.98. If you took out only 3% per year, you would receive $26,787.60 per year and it would last better than 30 years, and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had. Entitlement, my foot, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn't make my benefits some kind of charity or handout !! Congressional benefits, aka free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that's welfare, and they have the nerve to call my retirement entitlements !!!!!! They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. What happens to us when we borrow money and can't pay it back? So the govt borrows from OUR money and now they can't pay it back?? This does not compute! THE # DONT LIE..
  • by Teresa Location: Farmville on Sep 23, 2011 at 04:33 PM
    I am all for taxing the rich. Sometimes people fail to see the whole picture. If the rich are job creators then what has happened in the last ten years. The jobs went overseas. Why are they not creating jobs? Wake up America. Yes the poor is on food stamps. The Bible said the poor will always be with us. But who take care of the poor? The middle class people. They are the ones paying all the taxes. So we are the ones paying to take care of the poor/FOODSTAMPS. All the democrats are saying is....The rich must pay their share. How HARD is the math? When a person show you who they are and what they are about, please believe them. The republicans are making it plain. They are for the rich. If you are not rich then you are in the bottom 95% of the country. They are not for you. Please hear these people. We have been caring this country for a while now; while the oil companies went up on gas and took our money. We can have more if everyone take part in giving their fair share. Everyone is not being fair. That's all. We are all humans. Just because you are rich do not mean you get to run the country. The almighty "vote" is all we need to say our peace and the rich should never forget that.
    • reply
      by The flood on Sep 24, 2011 at 08:23 AM in reply to Teresa
      First it is not charity if the government forces you. The companies are not hiring because of uncertainty caused by all the temporary measures and the unknown costs of Obamacare. They have no idea how much it will cost to employ anyone in 6 months. Third the "rich" are paying more than their fair share already. As I said below, Obama and Buffett are lying to you because they know you will fall for it. Do some real research and stay away from the spin sites and you will see why cutting spending is the only way out of this mess.
      • reply
        by Anonymous on Sep 30, 2011 at 11:05 AM in reply to The flood
        So...the excuse the companies give is that they don't know if they'll be able to hire somebody in 2014...because 'Obamacare' is going to bankrupt them? That may very well be the most BS excuse I've ever heard for not creating jobs. "Well we don't know how the economy will be in 2 and a half years so we're gonna play it safe and not hire anybody." What an asinine position to take.
  • by Obama Snake Oil co Location: Washington on Sep 23, 2011 at 12:19 PM
    cj, thats the problem. If you look at what millionaires make, they pay 35-38% of the taxes on what they earn. They pay over 58% of all taxes collected amongst 2500 millionaires. This is not being reported as the true facts right off the IRS web site. You can get other info from the CBO. So I pay 15K per year in federal taxes, they pay 350K for every million....I would say, they don't get much for their money. Too bad the idealogues don't factor in numbers into the formula. Its just "fair share". OK, they should pay what I pay then and what they pay is the same. Now you know why lottery winners are better off taking the sum of money on a yearly basis and not at one time. If you get a million....you just pay uncle sam 400K and smile.
    • reply
      by Momof4 on Sep 24, 2011 at 09:13 PM in reply to Obama Snake Oil co
      FLAT TAX IS THE WAY TO GO EVERYONE PAYS NO ONE RIDES FOR FREE
      • reply
        by Anonymous on Sep 30, 2011 at 11:06 AM in reply to Momof4
        For a flat tax to work you'd have to do away with all subsidies and earned income tax credits, as well as tax-breaks for people with childern. You couldn't have tax-refunds either. It really woudn't be a 'flat' tax if you pay 10,000$ a year in taxes and get back 7,500$ after you file your taxes.
  • by The flood on Sep 23, 2011 at 12:02 PM
    I guess all the liberals calling for increased taxes missed this little article form the AP this week. http://www.usatoday.com/money/perfi/taxes/story/2011-09-20/buffett-tax-millionaires/50480226/1 Warren Buffett and President Obama are lying to you and getting you all worked up because they know weak minded liberals love to hate the "Rich Boogy Man" that has "stolen" their wealth. It isn't math it is class warfare and from reading the comments here there are plenty who have fallen for it hook, line and sinker.
    • reply
      by It's everyone's country. on Sep 25, 2011 at 12:10 AM in reply to The flood
      If it's class warfare, the rich folks will be outnumbered by middle-class Americans like America would be outnumbered in a war with China. We need to tax the rich more to help the country pay off our debt. They'll still be rich. And erase the loopholes for big corporations, and give a good portion of those cuts to small businesses to create jobs. Buffet and Obama lying to us? Try the Republicans in Washington. They only lie to us when their lips move. They are transparently self-serving. Any intelligent person can see that. But, the rich Republicans certainly aren't going to tell the average Republicans the truth. And the poor to middle class Republicans seem too brainwashed to think coherently at this point. Still, with Boehner and his cronies trying to bring Obama down at all costs, more and more Republicans seem to getting disgusted with their own party. The 6% approval rating for congress must come from OSOC and his handful of like minded loonies.
      • reply
        by The flood on Sep 25, 2011 at 12:23 PM in reply to It's everyone's country.
        Obviously you didn't read the article I posted. Let me spell it out for you, when Obama and Buffett say that millionaires pay a lower rate than the middle class they are lying to you. The article I posted shows the actual tax rates for these people you are so quick to demonize and guess what, they pay a higher percentage and a significantly higher actual dollar amount than the middle class. It's not about whether they will be rich afterward, it is about the federal government taking more than its fair share. As for the rest of the drivel you posted, stay away from the spin sites you are obviously parroting from.
  • by cj on Sep 23, 2011 at 10:39 AM
    I am not for tax increases and wealth redistribution at all. However, if 20% of my earnings go to the government on what i make (no where near a million) then 20% of the salaries of those making a million plus should also be confiscated. sounds a bit like a fair tax to me, which i am all for. we just need to figure out what the rates should be. going with this 20% model, i also feel that those on welfare, unemployment, disability, food stamps, etc, should also pay 20% of what they are gifted, back. (or simply a reduction in benefits at the same percentage. get rid of earned income, stop paying dead people and illegals.
  • by Obama Snake Oil co Location: Washington on Sep 23, 2011 at 05:36 AM
    To President Obama and all 535 voting members of the Legislature It is now official that the majority of you are corrupt morons: a.. The U.S. Postal Service was established in 1775. You have had 234 years to get it right and it is broke. b.. Social Security was established in 1935. You have had 74 years to get it right and it is broke. c.. Fannie Mae was established in 1938. You have had 71 years to get it right and it is broke. d.. War on Poverty started in 1964. You have had 45 years to get it right; $1 trillion of our money is confiscated each year and transferred to "the poor" and they only want more.. e.. Medicare and Medicaid were established in 1965. You have had 44 years to get it right and they are broke. f.. Freddie Mac was established in 1970. You have had 39 years to get it right and it is broke. g.. The Department of Energy was created in 1977 to lessen our dependence on foreign oil. It has ballooned to 16,000 employees with a budget of $24 billion a year and we import more oil than ever before. You had 32 years to get it right and it is an abysmal failure. You have FAILED in every "government service" you have shoved down our throats while overspending our tax dollars. AND YOU WANT AMERICANS TO BELIEVE YOU CAN BE TRUSTED WITH A GOVERNMENT-RUN HEALTH CARE SYSTEM ??
  • by liberalism is a disease Location: dorothea dix hospital on Sep 21, 2011 at 06:44 PM
    I say we let the democrats and liberals give all the money they want to the government. There is no law against keeping an individual from paying more in taxes than are due. I prefer to keep my money, that I worked for, in my pocket. If liberals are so excited and committed to helping the less fortunate, let's see how many of them would be willing to give their money to the government.
  • by Anonymous Location: Red meat for us! Obama admin wants Wall Street banks to help pay for auto & other bailout losses on Sep 20, 2011 at 05:19 PM
    This should make progressives VERY happy. In fact, it ought to make the Congressional Progressive Caucus especially happy because the Obama administration is pushing to adopt a key component of their People's Budget (pdf): forcing the banks that caused our country's economic crisis to help pick up the pieces by paying for the losses incurred by taxpayers in helping save our domestic auto industry and emergency measures. The mechanism is a "Financial Crisis Responsibility Fee". As usual, the GOP will obstruct the passage of the act.
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