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Sunday, September 18, 2011

Obama to Propose 'Buffett Rule' -- Minimum Tax on Millionaires

Buffett New York Times, Obama Tax Plan Would Ask 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....

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. ...
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.

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Comments

Yawn...

Obama really is a one trick pony. "Tax the rich" class warfare is all he knows - a true community organizer.

Does anyone take this guy seriously anymore or still think he is intelligent?

Posted by: Todd | Sep 18, 2011 9:46:56 AM

I for one LOVE this plan - most millionaires contrary to popular perception are very liberal bi-coastal Democrats - hedge fund managers, Wall Street Bankers,investment gurus, athletes, sports men and women and of course entertainment industry honchos/movie stars... will this hurt a few conservatives ?sure - that is the sad part.

But on balance this will be more punitive to liberals who in their true and typical hypocritical way will try to dodge these new taxes or even likelier pull out their investments from the market.

If the GOP had any balls, they should openly announce that they support the plan ONLY to demonstrate how useless this plan will be and how no new "tax revenues" are going to be realized.

When the markets tank,investments sputter the GOP can say " We told you so - this is what happens when Democrats indulge in class warfare."

Further this will only serve to make all the wealthy liberals who backed Obama look like fools who ended up losing money in supporting him and his Alinskyite school of "thought".

Serves them right. Just right.

Posted by: NaSa | Sep 18, 2011 11:10:43 AM

Maybe he could ask Maryland and Washington how a millionaires tax works for them. Millionaires left the state & their total tax receipts went DOWN. That probably doesn't concern Obama since he would rather lose revenue when trying to make it more (un)fair.

Posted by: Stick | Sep 18, 2011 11:19:37 AM

What is there to say? Obama will propose a tax on those making above $1 million without describing the rate or the revenue raised. Remember when Obama said he would increase the capital gains rate (even though it brought in less revenue) because that was "fair."

Prediction one - it won't pass (nor was it designed to pass)

Prediction two - if it passed it will not raise much revenue. It will increase my business as the high-earners once again seek out non-economic tax shelters. Guess what - High-earners did not pay 70% before the Reagan tax reform; they sheltered their income. Guess I should dig out my old files.

Posted by: Ed D | Sep 18, 2011 11:23:59 AM

I wouldn't mind a Buffet tax if they repealed the AMT.

Posted by: patrick | Sep 18, 2011 11:29:42 AM

> If the GOP had any balls, they should openly announce that they support the plan ONLY to demonstrate how useless this plan will be and how no new "tax revenues" are going to be realized.

Exactly, they should also include a provision that when the tax fails to produce it's expected revenue, it will automatically sunset.

We need to be building laws that self regulate. That is, when they fail to live up to their stated goals, they should self destruct.

Posted by: michael61 | Sep 18, 2011 11:52:13 AM

I can't remember any president ever waging class warfare as relentlessly and as shamelessly as Obama.

If I was a rich person, I would just start laying off employees to save money in anticipation of my higher taxes.

Posted by: John | Sep 18, 2011 12:03:23 PM

It's good that he's finally pivoting to jobs.

Posted by: hitnrun | Sep 18, 2011 12:13:33 PM

The Rs should call The One's bluff and insist on a compromise with spending cuts of $200B per year (real ones I mean, $200B less in outlays than the year before) but, having been burned before by spending cut promises that never materialized, condition the tax hikes on acheiving the cuts in the previous year.

Nothing like this will materialize of course because the Rs are as much part of the problem as the Ds.

Posted by: Ed | Sep 18, 2011 12:23:43 PM

I think Republicans would be wiser to say that we will consider this proposal, but only if it is part of a more comprehensive tax reform

Posted by: mike livingston | Sep 18, 2011 1:18:39 PM

Patrick: TFA says: "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."

I urge everyone to review the information provided by CBO at this page:

http://www.cbo.gov/publications/collections/collections.cfm?collect=13

I do not think it supports Buffett's anecdote. A further subject for contemplation is this:

http://politicalcalculations.blogspot.com/2010/11/wrong-path.html

It demonstrates that the there has been an extremely tight correlation (0.9957 where 1.0000 is a perfect correlation) between median household income and Federal Tax Revenues for the years 1967 through 2009. This has been true through several major changes to the tax code in that time. It provides no reason to believe that tinkering such as Obama proposes would change receipts.

Posted by: Walter Sobchak | Sep 18, 2011 1:21:49 PM

Wait--Obama is not specifying the actual rules or computation or the revenue goal?

So this is just a press release and yet another empty talking point? Obviously not meant to pass since there isn't anything TO pass... Just a talking point to beat on Republicans with, when they complain they can't pass something that hasn't been, y'know, reduced to writing?

I suppose he thinks this is "leadership."

Posted by: Marty | Sep 18, 2011 1:31:52 PM

You know what would be cool? A capital gains tax rate that is a function of your income, in the same way that income taxes are a function of your income. So it's 15% up to $200k, but beyond that, BAM, it's 40%.

Soon tax lawyers would have to be experts at excel modeling.

Posted by: anon | Sep 18, 2011 4:20:52 PM

"I can't remember any president ever waging class warfare as relentlessly and as shamelessly as Obama.
If I was a rich person, I would just start laying off employees to save money in anticipation of my higher taxes."

Exactly, if you were rich. I've never seen the poor used so completely and totally like "useful idiots" as I do in this country. You remind me of Joe the Plumber, the hourly wage meager salary bum who protested taxes on people making over $250k. What the heck is wrong with you people?

Posted by: anon | Sep 18, 2011 4:23:11 PM

So the government will confiscate more of the capital from the economy? That sounds like a sure fire job generator.

Posted by: willis | Sep 18, 2011 4:28:00 PM

Add a very clear line to Form 1040 for voluntary contributions to the U.S. Treasury to simplify the process for Limousine Liberals to give their money away. Let's see how popular that is.

Posted by: Woody | Sep 18, 2011 9:30:39 PM

It will work just like AMT.Pass the tax, inflate the currency, and in a few short years bracket-creep will provide a raft of new "millionaires".

Posted by: teapartydoc | Sep 18, 2011 10:14:00 PM

Seriously? It took Team O how long to dream up the idea of removing the LTCG and dividend rates from the AMT calc? I'll grant that it's a tax the rich idea that I hadn't heard before, but it still doesn't get any sort of the simplification of the code that the President is allegedly for. If you're going to do this, you might as well make the top rate equal to the current AMT rate, scrap AMT altogether, and eliminate the rate preferences for LTCG and qualified dividends.

Posted by: TaxBadger | Sep 19, 2011 2:23:31 AM

Why is raising the upper tax bracket or creating a new upper bracket considered class warfare? EVERYONE is subject to the law. This law is just as fair as laws forbidding EVERYONE from sleeping overnight in public parks or panhandling.

If raising the bracket is class warfare, then you must believe that lowering it is also class warfare, only the 'rich' are winning. You can't have it both ways.

Posted by: GaryD | Sep 19, 2011 8:31:59 AM

Well, if this measure is going to actually raise any additional revenues from the Buffets of the world, it will also have to do more than just theoretically close every tax preference available, but get those who can afford to fight the IRS (oh, these are the billionaires!)to actually pay the higher taxes. (See IRS cases for taxes due and unpaid -- he disputes, of course -- previously referenced here and elsewhere.)

Posted by: MG | Sep 19, 2011 12:27:01 PM

Warren Buffet wants to raise the earned income tax rates on “millionaires”, arguing that he should pay a higher tax rate than his secretary. Since he only has $100k in earned income, this is a curious recommendation because it won’t change his tax rate at all but might increase his secretary’s tax rate. (It’s also curious that “millionaires” means a couple that has >$250k in earned income, which is two young engineers in Silicon Valley.)

How about a tax that affects Buffet?

Buffet’s fortune is $50B of unrealized capital gains which he has sheltered from the estate tax, another tax that he supports . (Meanwhile, some of his insurance companies make a lot of money selling insurance so other people can pay said estate tax, but I digress.)

I propose a “Warren Buffet” tax of 5% on unrealized capital gains that are older than 5 years at both the corporate and individual level.

In Buffet’s case, that’s $2.5B/year until he realizes his gains and pays the taxes (currently 15%).

Berkshire-Hathaway will also get to pay taxes under this proposal.

What? He doesn’t want to pay taxes?

Posted by: Andy Freeman | Sep 19, 2011 1:49:30 PM

This new-speak use of millionaire to describe an income level has to end.

millionaire - Noun: A person whose assets are worth one million dollars or more.

Assuming it exists, I do not know the correct word to describe the folks President Obama wants to tax.

I do know that millionaire is not the correct word.

Posted by: The Comedian | Sep 19, 2011 3:40:14 PM

I went back through that CBO data. The very top brackets really do pay more at a higher rate than the lower brackets.

It should be noted that CBO uses a comprehensive income base, while the IRS SoI is based on reported income. The biggest difference is that the comprehensive base includes a portion of the income, and taxes paid by corporations.

In Mr. Buffett's case it would include a chunk of Berksire Hathaway's income and taxes and it would change the picture in meaningful ways. Shareholders pay at the rate of 15% on corporate dividends. But, if they earned $1000 through owning a business as a sole proprietor, they would keep $650 at the top 35% individual rate.

If, instead, they own shares in a corporation conducting the same business, that earns the same $1000, it would retain $650. If the $650 were paid as a dividend to the owner, he would keep $552.5. And, on a comprehensive basis he would be paying taxes at a higher rate than mere wage earners.

Posted by: Walter Sobchak | Sep 19, 2011 4:00:55 PM

Well... Someone has to be taxed, otherwise our country will fall into ruins, our economy will fail and people will lose confidence in the American dream. It really is simple math, I mean it must be, I figured it out, and I graduated Highschool with a 1.86 GPA. If all of the money is controlled by the top 10% of the population, then they are the ones who have to pay the taxes. You can't really expect someone without any money to cover the costs of running our country can you?

Posted by: Katlyn | Sep 19, 2011 6:28:11 PM

Walter, can I get you to do my homework for me? (I hire HR Block to do my taxes, I'm horrible with money, but I want to see how this goes)

You show how $1000 in additional profit for BH turns into $552 for Buffett.
How much After Tax income would $1000 in additional income turn into for a Secretary making the following:
$50,000 : ________ (25% bracket)
$100,000 : ________ (28% bracket)
$200,000 : ________ (33%)
$500,000 : ________ (35%)

Remember to deduct Social Insecurity, Medicare, Medicaid, etc.... Remember they're capped at $______ (I forgot).

My rough guess is : Obama's a liar.

My personal preference for anything called a "Buffett Tax" would be "The taxpayer is allowed to owe the IRS up to the total amount owed by Berkshire Hathaway without paying interest or penalty." I think I'd be good until.....2099 or so.

Posted by: Georg Felis | Sep 19, 2011 6:48:07 PM