(Fox News)
President Obama and his advisers are presenting the “Buffett Rule” as the cure for an epidemic of millionaire tax scofflaws, but national statistics show millionaires by and large are paying taxes at a much higher rate than middle-class families.
And their income taxes make up a significant portion of the federal budget pie.
Data compiled by the nonpartisan Tax Policy Center show households pulling in more than $1 million pay about 29.1 percent of their income in federal taxes. By contrast, households making between $50,000 and $75,000 pay about 15 percent.
The so-called Buffett Rule has become the political centerpiece of the president’s deficit-reduction program. Named after Warren Buffett, the provision would ensure people making more than $1 million a year pay taxes at a higher rate than the middle class.
The president proposed the rule after Buffett complained he was paying taxes at a lower rate than his secretary. Democrats said he’s not the only one — according to Senate Democratic Leader Harry Reid’s office, 22,000 people who make over $1 million a year pay taxes at a rate of less than 15 percent. According to the IRS, nearly 1,500 households reporting more than $1 million in income paid no federal income taxes in 2009.
That’s out of about 236,000 returns for income above $1 million, most of which belong to households paying taxes at a higher rate. And, as would be expected, they contribute a disproportionate share of tax toward federal coffers.
IRS statistics for tax year 2009 show the millionaires — who make up a fraction of a percent of all taxpayers — contributed more than 20 percent of total federal income tax revenue. That’s about $180 billion in taxes from millionaires, according to number-crunching from the National Taxpayers Union.
The National Taxpayers Union also found that in 2008 the top 1 percent of American taxpayers paid 38 percent of collections for personal federal income tax while they represented 20 percent of all income.
For those wealthy Americans paying taxes at a seemingly low rate, it could be because they earn income overseas or because a large part of annual income is from investments. Though corporate profits are taxed at 35 percent, in the form of capital gains and dividends they are taxed at 15 percent. Senate testimony in May from the Tax Foundation also showed that for taxpayers making more than $200,000 a year, their salary income made up just 20 percent of national salary income. Much more came from business income.
In total, the Obama deficit-reduction package would seek to raise taxes, mostly on high-income households, by $1.5 trillion over the next decade.
About half of that is from letting the Bush tax cuts expire for households making more than $250,000. Other changes would strip tax breaks for oil and gas companies and other benefits.
The White House would not say how much might be raised from the Buffett Rule or how it would be implemented.
But the Buffett Rule quickly became the rallying cry for the president’s plan. In an email to supporters sent Monday night, the campaign urged voters to get the president’s back on the plan.
“This proposal makes sure millionaires and billionaires share the responsibility for reducing the deficit,” the email said. “The other side is already saying it’s ‘class warfare’ — that’s their rhetorical smokescreen for providing millionaires and billionaires special treatment.”
But Republican Indiana Gov. Mitch Daniels told Fox News the president’s proposal appeared to be “purposely divisive.”
“As a practical matter, it’s a loser,” he said, describing the plan as “hair-of-the-dog economics.”
“You know people that have had way too much of something they shouldn’t and there’s always somebody who says have another one, it’ll make you feel better — it just doesn’t work any better in this case,” Daniels said.
Louisiana Republican Gov. Bobby Jindal said the problem is spending and described the president’s proposal as not serious.
“He doesn’t get it,” Jindal told Fox News.
The president’s plan was presented as a proposal to the bipartisan “super committee” trying to find at least $1.2 trillion in deficit savings by Thanksgiving.
The plan includes more than just tax hikes. It covers $580 billion in cuts to entitlement and other federal programs, including to Medicare and Medicaid. The president also claimed $1.1 trillion in savings from winding down the wars in Iraq and Afghanistan — a claim that has been dismissed as a budgetary gimmick in the past. If the war savings are counted alongside interest savings and the cuts Congress enacted in August, the president’s plan is worth than $4 trillion over the next decade.
While Republicans slammed the proposal as divisive and unworkable, some Democrats applauded the president for asking the wealthy to pay more while shielding Medicare seniors and other entitlement program beneficiaries from more severe cutbacks.
“With the wealthiest people in this country becoming wealthier and large corporations enjoying huge profits, it is time that we end tax breaks for the wealthy and large corporations and have them pay their fair share,” Sen. Bernie Sanders, I-Vt., said in a statement.
“We call on Congress to immediately pass the president’s proposal for job-creating investments, to ask the wealthy to start paying their fair share, to focus on the true causes of our long-term deficits, to reject any cuts to Medicaid or Social Security or Medicare benefits, and to stop scapegoating federal and postal employees and retirees for problems they did not cause,” AFL-CIO president Richard Trumka said.
The Associated Press contributed to this report.
Indiana Governor Daniels calls the proposal “purposely divisive”…
