Washington (CNN) - Senate Democrats formally unveiled legislation Wednesday to ensure that all millionaires would pay a minimum federal tax of 30 percent.
The legislation comes as the relatively low tax rate for some high earners –like investor Warren Buffett and GOP presidential candidate Mitt Romney– takes center stage in both the policy and political arenas in Washington.
Follow the Ticker on Twitter: @PoliticalTicker
President Obama and congressional Democrats have made enactment of the "Buffett Rule," which they say would force high earners pay a higher tax rate than their secretaries, a central part of their re-election messages. They argue it's both a matter of fairness and the best way to reduce the staggering deficit.
Buffett supports the Democrats' legislation.
"These middle class families are really struggling to get by and then they find out that some people with really extremely high incomes are actually paying lower all-in federal tax rate than they are. That's, to them, just not common sense," said Sen. Sheldon Whitehouse, D-Rhode Island, and author of the bill. "Americans deserve a straight deal and right now they are not getting one from our tax system."
A key reason Buffett and Romney pay a lower tax rates is because most of their income comes from investments. Taxes on capital gains from investments are capped at 15%.
The legislation would apply to people earning more than $1 million a year, be it from salaries or investments or both. They could still take some deductions – such as for charitable giving – but after all is said and done, they must pay an effective tax rate of at least 30 percent of their income as federal taxes.
Whitehouse says his legislation would raise billions for the government but there is no official estimate from the Congressional Budget Office about how much it would raise.
Most Republican strongly oppose raising the capital gains tax because they argue taxing investments at a higher rate will stifle job creation and hurt the economy.
Senate Democratic leaders have not decided when they will push for a vote on the legislation, which is called the "Paying a Fair Share Act of 2012." They want to consider first a handful of bills they consider to be job creation measures, including a highway funding bill, the FAA funding bill, and postal reform bill, according to aides.
Romney: Convention or bust
Santorum looks past Florida
New anti-Obama ad slams Solyndra 'fiasco'
Romney to receive Secret Service protection
We could raise everyone's tax rates to 100%. do you know what the politicians in congress would do with it? Waste it. It doesn't matter how much money we give congress, they will spend more than we make.
What's being ignored by most of the (extremely ignorant and poorly informed) comments here about why this is a "bad" idea is that the majority of the tax burden is on the lower classes. We have a system that exemplifies the saying that "the poor get poorer and the rich get richer," because while the taxes for the lower classes have actually INCREASED several times in the last decade, the taxes for the rich and especially the super rich continue to decline. Job creation has declined uniformly with that tax decline.
The beauty of it, from a rich perspective, is that nothing can technically be proven as to what creates jobs and helps the economy. Well, it can be – on paper, you can see lower taxes creates jobs. On paper, we live in a happy world of honest people who strive to do better. In reality, what has played out and what actually lead to many of our current economic trouble, is that these companies don't use their extra income to create jobs. They use this income to push higher rewards to employees who use it to buy more and more excessive personal items. In fact, they use it to do so to the point that they then use borrowed, non-existent investment money to continue funding their operations, but that's another story altogether.
Yeah, on paper, lower taxes may help the economy. But this is reality. To say lower taxes has helped the economy and job creation is to ignore the reality of the very stories that have plastered CNN for the last five years. You tax these people more, their response is to spend more wisely and to make better choices. You tax them less, they turn into slovenly pigs who would rather roll in their cash than make a wide decision. We can keep hoping for them to be better, or we can stop pretending humanity is going to suddenly change after thousands of years of this behavior and treat them accordingly.
You know the number of morons on this board is amazing. Why should anyone pay a higher percentage because they earn more? They should NOT. The bill is a socialist bill by all characteristics. If you want a truly balanced system, then have a FLAT tax that everyone pays exactly the same percentage of tax. Making someone that is making more pay a higher rate is neither equitable or reasonable and is flatly not in the spirit of our nation."
Flat tax system isn't fair, either. The ONLY equitable system is a graduated tax system. Cap it at 35% for top wage earners, and ALL income levels pay taxes. All of them. Period.
Buffet is such a hypocrite!! First, he (and any other American) can over contribute to the IRS; but he hasn't. In addition, Berkshire Hathaway (his company) is fighting to not pay a $1,000,000,000 tax bill. If he thinks the rich aren't paying enough, why not just write a check? All the shareholders in this company are 1%'ers they can afford BH to write the check. Instead the US tax payer has to foot the bill to fight BH's lawyers to get this money. FREAKING HYPOCRITE!!!
Remind me not to invest in any more local and state municipal bonds. If there's no deduction, I'd much rather just buy more equities. Call my construction company if you want to build some infrastructure, good luck getting financing.
Gee -- wonder how THAT will turn out...........................................
"Have this administration not taken enough from the already strapped taxpayers yet?"
Oh man those millionaires sure are strapped. They're struggling hard. If the transmission goes out on their seventh BMW, they might not be able to get the replacement completely diamond plated."
Hmmm... I sense sarcasm AND jealousy -
Complete election year ploy, not to mention that it's not going to work. How are you going to enforce it? You're going to leave the rest of the tax system in place, but this rule just goes on top? It just doesn't mesh at all with the rest of the tax code.
Besides, it's just stupid. I don't know if you noticed, but billionaires have enough money that they can afford to move.
I don't know much about the complexities of economics, but seriously who does? All of these so-called experts got us into this financial meltdown, and different experts have different solutions year after year. What I do know is history. Since Reagan introduced 'trickle down' economics, the wealth gap has widened to the historic high it is at today. The tax cuts Bush enacted did nothing to spur economic growth. During the Clinton years the economy grew at a significantly faster pace, what is wrong with those rates?
So can anyone tell me how a CEO gets a multi-million dollar bonus (on top of millions in salary) when his company goes bankrupt under his leadership? Thousands of people that live of their sad little checks were fired and thousands more did not even get ANY bonus because the company made bad investments. Yet the leaders reward themselves with millions that could have kept the employees on board for a few months longer. You want to talk about class warfare? You (the rich) have been waging it since the dawn of this country.
It's not asking to pay a higher rate because you make more. It's requiring you don't pay a lower rate than the people who bust their @$$ day in and out to make ends meet. Yes, in dollars you pay more, but as a percentage it will be more equal.
Right wingers scream that we have to reduce the deficit. Anybody with a barely functioning brain realizes that in order to do that we have to BOTH cut spending and increase revenue. But, try to increase revenue, and the same people scream that we're killing the "job creators". Looking at past history, cutting taxes hasn't done a damn thing to create jobs. All it's done is divert more money to the already rich, which says to me that when they get a tax break, they just say "thank you very much", and stick it in the bank.
It seems the Senate Democrats have never heard of the Origination Clause.
Maybe, just maybe Buffet's secretary (the 'Joe the Plumber' of the Democratic party) is paying too much. Just a thought.
Yeay, Alright, yes. Finally!!!
Its a beginning. We've got to start somewhere. This is as good a place to start as any. I don't care why its taken this long anymore. Just get it done. Let's get it going, Now! Go, go, go.
A flat tax is much worse for the poor than our currnt system. It has been proposed many times and has never been taken seriously by economists.
IMO a 30% millionaire tax would INCREASE job creation. The tax is on their income AFTER they are all done creating jobs. Creating jobs costs money that will be written off their taxes BEFORE the 30% is paid. The more jobs they create the less tax they will pay. 30% IS NOT ENOUGH! After all, the tax rate used to be as high as 70% and that was back when the USA was a GREAT country! 'Republicans' seem to be forgetting this...
This is crazy. I'm no where near being a millionaire. But if I sacrificed and put in the hard work to become one, I sure as hell wouldn't want the government to take 30%. Wow.
This is crazy. I'm no where near being a millionaire. But if I sacrificed and put in the hard work to become one, I sure as hell wouldn't want the government to take 30%. How does the government determine what a fair share is anyway?
Why doesn't Mr. Buffett just pay a voluntary tax if he's so concerned about how low his taxes are? Also, since Mr. Buffett has brought his secretary into the conversation, why won't she make her income a matter of public record? Is she a lowly, underpaid secretary or not? If she is, why doesn't Mr. Buffett just give her a raise? If Mr. Buffett's effective tax rate is so offensive to everyone, doesn't it make sense to lower everyone else's taxes to match his? I'm tired of Mr. Buffett being obama's puppet for the simple reason of deflecting attention away from obama's failed three years in office and onto how evil rich people are. Political theatrics. Nothing more.
@Four You're citing outdated economic theories that have long since been disproven. In fact, they have been disproven over and over and over and over again. What you're saying may look good on paper, but that's not how it pans out in reality.
In fact, the capital gains tax has been raised numerous times in the past and it has never caused a decline in job growth. Not once. Why? Because the tax applies on RETURNS of investment, not on the investment itself. That's why it's called the capital GAINS tax. As you said, it's Economics 101.
If anything, a higher capital gains tax would motivate investors to put more money into the market in order to offset the reduced returns. That, in turn, will lead to more jobs, not less. Nice try, though.
So this creates jobs, how exactly? Seems to me Obama doesn't have a plan (or a clue) and now needs class warfare to have even a chance. Sad.
@sharkbait The pipeline wasn't a jobs bill. The people who would've been working on that are already employed. This was just a politically-motivated giveaway to the oil industry at the cost of tearing-up our environment. There's not much point in having a job if you can't breathe.
It won't affect middle class investors at all. they're not changing the capital gains tax to 30%. There saying that, if you make more then a million dollars your overall tax rate can't be less than 30%. They're essentially doing what the Alternate Minimum Tax (AMT) was supposed to do in the first place, which was to prevent the very wealthy from taking advantage of tax breaks that allowed them to pay a lower percentage in taxes than middle class people did.
You can read more at Washington Post – they don't want to change cap gains, it's more like if you make more than $1m, take what your income and multiply it by 0.3 – if you're not paying that much in taxes, pay the difference. Simple, elegant, and leaves cap gains tax alone for the Middle Class. I like it.
"This looks to me like it could potentially hurt the stock market. At least hurt middle class investors (like me) that don't have millions to invest. I don't make much in the market anyway and if you take 30% of it, basically double, it really isn't going to be worth it to me to invest. If I understand this correctly (I'm no financial expert by any means), it could broaden the gap between the rich and middle class. If I have it wrong, someone explain it to me please."
That's incorrect unless you make a total of a $1 million or more. If you're under that level your taxing would not change. The entire point of this is that the people making $1 million+ / year are taxed lower than nearly everyone else if they use capital gains as a method to avoid reporting their income. It is a massive loop-hole that has plagued the American tax system for generations. Only people who truly don't understand how bad this loop-hole affects us all oppose it. Simply put, the bill creates an equal taxation method in relative to EITHER Income OR Capital Gains or a mix of both. There would be no loop-hole to get around paying the existing tax rates. It isn't a raise in "taxes on income" either – Its fix to people avoiding their income tax.
Furthermore the fundamental difference between Democrats and Republicans involving taxation is simple: Democrats view taxes based in percentages. Example being 30% tax rate on top 2% of earners. Republicans view taxes based on total revenue, saying that the top 2% pay "millions" more in taxes than anyone else. While Republicans are correct, the top 2% pay "more" taxes – the notion that they pay more in relation to the wealth of the individual is completely false. If Warren Buffet pays only 15% and you pay 24% then it isn't equally fair. If he paid the ALREADY existing 30% tax rate (by closing loop-holes) and you pay your 24% then both of you are taxed relatively the same. Although then finally the rich would pay their fair share.