Sen. Sheldon Whitehouse, D-R.I., has introduced legislation to implement President Obama’s proposal in his State of the Union speech that millionaires should pay at least a minimum 30 percent income tax rate.
Sheldon Whitehouse
The proposal, known as the “Buffett Rule,” is named after billionaire Warren Buffett, who has argued that millionaires and billionaires should not pay lower tax rates than their secretaries. Buffett’s own assistant was in the audience during the State of the Union address, and TV cameras showed her reaction during that part of the speech.
Whitehouse’s bill, dubbed the Paying a Fair Share Act, is co-sponsored by Senators Daniel Akaka, D-Hawaii, Mark Begich, D-Alaska, Richard Blumenthal, D-Conn., Tom Harkin, D-Iowa, Patrick Leahy, D-Vt., Bernie Sanders, I-Vt., and Chuck Schumer, D-N.Y.
Advertisement
“It’s time to give middle class families in Rhode Island and across the country the straight deal they deserve,” said Whitehouse, who began drafting the legislation several months ago. “As we continue working to restore our economy, it’s more important than ever to make sure all Americans are paying their fair share toward our nation’s success – and right now that just isn’t happening. It’s inexcusable that our tax system permits ultra-high income earners to pay a lower tax rate than a truck driver or a janitor, and this legislation would help fix that unfair system.”
Whitehouse noted that the top 400 earners in America paid an average effective tax rate of just 18.2 percent in 2008. His proposed legislation would apply only to taxpayers with income over $1 million, including capital gains and dividends. Taxpayers earning over $2 million would be subject to a 30 percent minimum federal tax rate. The tax would be phased in for incomes between $1 million and $2 million, with those taxpayers paying a portion of the extra tax required to get them to a 30 percent effective tax rate. The bill also includes language to preserve the incentive for charitable giving.
The legislation is expected to reduce the deficit by tens of billions of dollars, and is currently awaiting an official estimate from Congress’s Joint Committee on Taxation.
16 Comments
Don't forget that those corporations paying Buffet millions are paying income tax at the CORPORATE level of 35% federal plus any state on that income, before it is distributed to him as dividends, etc., and then he is paying capital gains rates... of 15%... so he is calling 50%+ income tax lower than his secretary's rate.
Posted by: SaraCPA | February 7, 2012 11:52 AM
Report this Comment
The "Buffet Rule" is indeed laughable. Here is a sentence from Footnote 15 of Berkshire Hathaway's 2010 form 10-K: "At December 31, 2010 and 2009, net unrecognized tax benefits were $1,005 million and $926 million, respectively." For those of you unfamiliar with ASC 740-10 (formerly FIN 48) this means that Mr. Buffet's own company has taken tax positions that are NOT more likely than not (greater than a 50% chance) of being realized upon an audit by the relevant tax authority, such as the IRS. If Mr. Buffet is so concered about taxapayers not paying their "fair share" (whatever that means) why doesn't he direct BH's tax department to file amended returns and pay all taxes so that there are NO unrecognized tax benefits?
Posted by: JohnnyTax | February 2, 2012 7:44 PM
Report this Comment
It is irrelavent whether higher taxes on the rich will make a dent in the budget deficit Everyone should pay their fair share.I agree with Mr. Mahoney but what he speaks of is the self employed. However the market is nothing more than a sophiticated casino and does not reflect the value of the goods produced in the U. S. I believe that investments in the market should be taxed as ordinary income. The pension funds are the biggest investors in the market and the beneficaries are taxes at ordinary income. So why should anyone else escape ordinary income tax rates.
Posted by: rubycpa | February 2, 2012 3:10 PM
Report this Comment
It's the "carried interest" by the venture capital guys like Mitt Romney who puts deals together risking other people's money, that are taxed too low...low rate of income tax and no social security or medicare taxes.
Posted by: Unknown | February 2, 2012 2:36 PM
Report this Comment
To Senator Whitehouse - You are very fortunate that there is a Federal Government to employee you because you would not be employed long in the private sector if you are really that ignorant. There is not one janitor or truck driver in this country paying a higher tax rate than the Ultra wealthy (even if you assume the Ultra Wealthy individual only generates LT Capital gain and qualified dividend income). Well unless that truck driver or janitor works for Warren Buffet and gets compensated as richly as his "secretary" as we have now come to learn. Or is that you know better and are purposely being misleading and deceitful to suit your personally needs. If the janitors and truck drivers, as you describe, are paying such high taxes, who are the 49% of Americans that pay no income tax???
Posted by: knwalcutt | February 2, 2012 2:24 PM
Report this Comment
"The legislation is expected to reduce the deficit by tens of billions of dollars, and is currently awaiting an official estimate from Congress's Joint Committee on Taxation"
That statement is more ridiculous than Buffet's blip about his secretary's taxes. He included social security deducted and who knows what else.
If you raise taxes in this administration, you don't cut the deficit, you raise spending by 120% of the tax increase.
Posted by: Tom1952 | February 2, 2012 10:21 AM
Report this Comment
The pathetic thing about the motivation behind the Buffet tax is that it is based on a completely dishonest comparison of Buffet's effective tax rate to his secretary's marginal tax rate. The worst part of this and all the other "tax the rich" schemes being proposed, is that the politicians are misleading the public into believing that these tax increases will solve most of our financial problems, when the reality is that they will have a small impact on the Government's finances. What these tax increases will do is put in motion a realignment of capital allocation and quite possibly a migration for some from high tax states to lower tax ones.
Posted by: FrankG | February 2, 2012 10:11 AM
Report this Comment
If we could get social/moral engineering out of the tax system, it would clean up a lot of stuff. Childless couples get few breaks. Same-sex couples get no breaks at the Federal level. Unmarried couples...ditto. I make a fair living doing other people's taxes, but would trade that in a second for a less complex, fairer tax code. I don't foresee any changes to the social/moral engineering nor the lobbying efforts.
Posted by: Unknown | February 2, 2012 10:02 AM
Report this Comment
If we really want to be fair about taxation, every American, rich or poor, should pay the same percentage of income tax across the board. How much did you earn (all sources of revenue, including government assistance) x 10%. Either that or a national sales tax of 10% with no income tax, which would automatically tax the income of illegal immigrants or those hiding money when they spend it.
Posted by: wpoffenbarger | February 2, 2012 9:42 AM
Report this Comment
It is time for the educated citizens of this country to wake up! Tax rates and low capital gains tax rates are not the problem!! The problem is the give-away artists (more comonly known as Congress) who cannot see beyond the end of their noses and stop the wild, drunken, free spending and is only worried about being reelected. (Where are term limits when we need them the most?) For years the Congressional Budget Office has been telling us "when capital gains tax rates are lowered, the total dollars collected in capital gains taxes goes UP!" The capital gains rates are there to encourage investment and savings and to reward those who take the risks, just as another reader stated this morning. According to IRS statistics, in 2008 the top 1% of income earners paid 38% of ALL income taxes while earning 20% of all income reported. Likewise the top 50% paid 97% of ALL taxes while earning 87%. This leaves the bottom 50% paying only 3% of all taxes while earning 13% of all earnings. There is no such thing as a fair tax in this country until we stop the free spending. No one guaranteed me a life - I earned mine and am proud of it. Stop the give aways NOW!
Posted by: jghcpa | February 2, 2012 9:40 AM
Report this Comment
I think what's missing here by most folks that don't live in the financial world is that there are TWO levels of taxation...income and long term capital gains. LTCG taxes are less due to the nature of the income itself...it's not earned income, but income from investments and candidly, being the sole shareholder of a closely held corporation, the RISK assumed by indivuals in the investment world, whether closely held or publicly traded entities. Employees never have any of their personal assets at risk. They come to work, do their job and (hopefully) receive a fair wage for doing so. No financial risk whatsoever. Compare that to the entrepreneur who has invested typically ALL of their personal financial resources and has everything on the line 100% of the time. (I can remember wondering if I could make payroll for my 75 employee company on a number of occasions and not taking a salary because the $$$$$ simply wasn't in the checkbook to do so. I never missed a payroll and having just sold 3/4 of my firm and paying LTCG rates in doing so, it seemed "fair" based on the hard work and risks taken to build the firm at the outset!)
Would be great if some of the folks making comments as well as those attempting to create tax law understood the differnece between earned income and investment income and why there's a difference...and most importantly, why there SHOULD be a difference!
Bill Mahoney President Mahoney and Asssociates, Inc. Ft. Lauderdale, FL.
Posted by: Beneman1 | February 2, 2012 9:05 AM
Report this Comment
How about removing the loopholes that allow people like Warren Buffet and companies like GE the ability to avoid paying taxes? My other question about Buffet is why he if fighting the IRS to pay what he already owes?
Posted by: mel4600 | February 2, 2012 8:43 AM
Report this Comment
I read that Warren Buffet challenged House Republicans who were saying that he should voluntarily make a donation to the US government to reduce the debt, that he would donate $2 for every $1 voluntarily paid by Republicans in the House. What he didn't count on was that one congressman was already giving back 15% of his Congressional salary, so Buffet recently cut a check for $49,000.
Posted by: efletcher | February 2, 2012 8:42 AM
Report this Comment
Although this is a good idea, in my opinion when you raise taxes on investments, you will slow down the economy. Raising taxes on unearned income is not good. My idea is to raise earned income taxes. Have the Social Security limit a 2 tier system which will raise earned income taxes (SE and FICA). Continue to have the limit at $106,800 but then start a 2nd tier taxing earned income that is over $250,000 with no limit. That way you tax the high income people without hurting investors and middle income taxpayers and you help fund Social Security. Look at Romney's 2010 return, he paid $29,151 in SE taxes on earned income of $593,996. That is only $14,061 more in SE taxes than a person who had $106,000 in earned income. ($14K on earned income of 489K income is a 3% rate.)
Greg Shelton CPA, Bartlett, TN
Posted by: Unknown | February 2, 2012 8:14 AM
Report this Comment
Does paying higher capital gains rates not affect the stock market? Why would the people with the money want to invest in the market any longer? What is the effect to the overall economy? How about simply reducing tax rates for those with wage earned income under certain amounts? Afterall, the wage earners have to rely on a healthy stock market to build retirement funds, since one cannot fully depend on social security because that is such a mess.
Posted by: MichelleCPA | February 2, 2012 8:13 AM
Report this Comment
Did Warren Buffet pay the taxes that, according to article I read, the IRS assessed him? According to the article also, he was contesting it. Perhaps if he paid it then he could have paid at a rate more than his now famous secretary. Is there an irony about naming the proposed bill in his name? If his conscience is bothering him for paying at lower rate than his secretary, then why did he not voluntary pay more?
Posted by: Linor34b | February 2, 2012 8:00 AM
Report this Comment
Add Your Comments...
Already Registered?
If you have already registered to Accounting Today, please use the form below to login. When completed you will immeditely be directed to post a comment.
Not Registered?
You must be registered to post a comment.