Congress returns from its congressional spring break this week, and a first order of business will be voting on the controversial Buffett Rule, which the Obama administration has pursued despite a likely defeat in the House.
Formally known as the Paying a Fair Share Act, the Buffett Rule is named after billionaire Warren Buffett, who confessed that he paid a smaller percent of his income in tax than his secretary and believed that he should be paying more.
The White House says the bill is based on “a principle of fairness.”
“It’s wrong that middle-class Americans pay a higher share of their income in taxes than some millionaires and billionaires,” President Obama said in his weekly address.
The Buffett Rule will require people making more than $1 million annually to pay a tax rate of at least 30 percent. The bill is to be introduced in the Senate for a vote on Monday.
Congress has the opportunity to “set things right” by voting on the bill, Obama said, and called on Republicans “to get on board with where the country is.”
Chief sponsor of the bill, Sen. Sheldon Whitehouse, (D-R.I.), believes that at a time working Americans are struggling to make ends meet, it is critical that the system be more equitable.
“It’s inexcusable that our tax system permits the wealthiest among us to pay a lower tax rate than a truck driver or a janitor, and this legislation would help fix that unfair system,” he said in a statement.
Republicans, however, have said they will reject the bill outright.
“This is yet another proposal from Democrats that won’t create a single job or lower the price at the pump by a penny,” Senate Minority Leader Mitch McConnell (R-Ky.), said in a statement. “This is yet another sign that they’re out of ideas and simply focused on tax-hike show-votes.”
House Speaker John Boehner (R-Ohio) has described the Buffett Rule as “a political gimmick.” Even if the bill makes it through the Democrat majority Senate, the Buffett Rule is unlikely to pass in the House.
Obama and the Democrats, however, are moving forward regardless.
“We keep on going. I always think of Joshua and his Israelites going around Jericho,” Sen. Whitehouse told NPR. “If you remember, they had to go around Jericho seven times before the walls came tumbling down.”
Americans largely support the Buffett Rule, according to polls. A Reuters/Ipsos poll conducted in March indicated nearly two-thirds of Americans favored the bill and a more recent Gallup Poll, April 13, indicated 6 in 10 Americans were supported the Buffet Rule.
“Americans in general say that the distribution of money and wealth in this country is not fair, and that money and wealth should be more evenly distributed,” Frank Newport, analyst with Gallup Poll, said on the polls release.
According to Congress’s Joint Committee on Taxation, the bill would raise $47 billion over 10 years, hardly a touch on reducing the deficit, which to date stands at $1.2 trillion, with the national debt coming in at over $15 trillion. Nor is it likely to contribute to jobs.
Some agree with the sentiments of the bill, but say it should have gone much further.
Speaking at a forum on tax reform at the Tax Policy Center in Washington, D.C., April 12, Diane Lim Rogers, chief economist with the Concord Coalition, said deficit reduction was critical but the Buffet Rule would do little to address it.
David Levine, former chief economist with Sanford C. Bernstein & Co., said he would have liked to have seen greater taxes on the wealthy, and would have started by ending the Bush tax cuts; Tax Policy Center director Donald B. Marron said more discussion, followed by a systematic approach to addressing tax reform, was required.
“They are definitely compromising or avoiding confronting some of the hard decisions,” he said, adding they should be asking, “‘What do we want rates, capital gains, and other preferences to be like?'”
Obama’s focus on the bill is seen by others as a symbolic gesture underlying the basic themes of his election campaign.
To make the point, the president and first lady released their tax returns last week, not only for last year but also for previous years. The tax return for 2011 showed that they had earned $789,674 in 2011, nearly half of which was salary and the other half royalties for the president’s book, according to a White House statement. The Obamas paid $162,074 in income taxe at an effective tax rate of 20.5 percent.
The expected Republican presidential nominee, Mitt Romney, has not released his tax returns for 2011, but his 2010 returns, released in January by his campaign, indicated income of $21.6 million, and an effective tax rate of 13.9 percent.
Romney’s low effective rate is due to the source of his income, which is from a variety of capital gains, which, along with dividends, are generally taxed at a lower rate. Tax rates for such gains will be taxed under the Buffet Rule.
The Obama campaign has called on Mitt Romney to release his tax statement for 2011 to further drive the point home.
Combining tax strategy with his campaign has met with differing responses. Political commentator David Brooks described the move as “deceptive” and “a step backward,” but Mark Shields, his political sparring partner on PBS, said he believed Obama’s strategy was fair political play.
In a campaign year, the intention is to embarrass Mitt Romney, Shields said, adding, “The longest trip of 1,000 miles begins with a single step. This is a step toward tax reform.”