Obama Will Propose ‘Buffet Tax’ to Ask More of Millionaires

It is expected that president Barack Obama will seek a new base tax rate for the wealthy to assure that millionaires pay at least at the same percentage as middle income taxpayers do.

President Barack Obama is expected to seek a new base tax rate for the wealthy to ensure that millionaires pay at least at the same percentage as middle income taxpayers. Photo: Theseoduke/Flickr

According to a White House official, who preferred to speak anonymously because the plan has not been officially announced yet, the proposal would be included in the president’s proposal for long term deficit reduction that he will announce Monday.

Mr. Obama is going to call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans usually 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.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” Mr. Buffet wrote in his open letter to the New York Times last month. “It’s time for our government to get serious about shared sacrifice.”

Mr. Buffett has pointed out that 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.

President Obama is not going to specify a rate or other details of his plan. It is also unclear how much revenue the plan would raise.

But Mr. Obama’s idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that the president will outline at the White House on Monday.

Meanwhile, republicans repeated their opposition to any tax increases, saying they would hurt the fragile economy.

“The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. The votes simply aren’t there,” House Speaker John Boehner said in his written statement.

Mr. Boehner said that the panel has “only one option, spending cuts and entitlement reforms.” This is a reference to government benefit programs such as Social Security, Medicare and Medicaid.

Democrats and Republicans have already agreed on about $1 trillion in spending cuts over at least 10 years. The final sticking point lies in the fact whether to include some tax changes, as Democrats insist, or none, as Republicans want.

The Obama proposal does not have a lot of chance to become law unless Republican lawmakers bend.

But the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012 by focusing on the wealthiest Americans.

The millionaires’ tax is among several changes that Barack Obama is going propose in urging Congress to overhaul the federal income tax code next year.

During a news conference Wednesday Mr. Obama criticized Republicans for resisting Democratic calls for ending tax breaks for corporate-jet owners, oil companies and hedge-fund managers.

Those proposals, which could raise $64 billion over 10 years, will not do much to dent the $1.5 trillion annual deficit, but they would make it much easier for Mr. Obama to win Democratic support for a deal that is likely to include deep spending cuts painful to his party.

“You can’t reduce the deficit to the levels that it needs to be reduced without having some revenues in the mix,” Mr. Obama said on Wednesday.

“The Republican leadership in Congress will, hopefully sooner rather than later, come to the conclusion that they need to make the right decisions for the country, that everybody else has been willing to move off their maximalist position and they need to do the same,” he added.

The super committee consisting of six Democrat and six Republican lawmakers must find at least $1.2 trillion in deficit savings before the end of the year in order to avoid painful automatic cuts. It is also mandated to seek savings of up to $1.5 trillion. [via Huff Post, The New York Times, The Wall Street Journal and Yahoo!]

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