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Analysis: Buffett Rule Will Raise $50 Billion Per Year, Affect Just 0.08 Percent of Taxpayers
ThinkProgress / News Analysis
Published: Saturday 28 January 2012
At the same time, the Buffett rule will aid in correcting some of the problems in the tax code that have helped drive income inequality up to a level not seen in the U.S. since the 1920s.
When President Obama announced his latest vision for the so called “Buffett rule” — a 30 percent minimum tax on millionaires — during his State of the Union address this week, Republicans were quick to criticize it. For instance, Speaker of the House John Boehner (R-OH) derided the proposal as a “political gimmick.” “It’s a smokescreen,” added Rep. Steve Scalise (R-LA).
However, as a new analysis from Citizens for Tax Justice pointed out, the Buffett rule as laid out in the speech could raise up to $50 billion per year to pay down the deficit, while affecting just 0.08 percent of taxpayers:
Citizens for Tax Justice has calculated that President Obama’s “Buffett Rule” would, if in effect this year, raise $50 billion in a single year and affect only the richest 0.08 percent of taxpayers — that’s just eight percent of the richest one percent of taxpayers. [...]
To calculate the $50 billion figure, we assumed that there would be a minimum tax that applies to adjusted gross income (AGI) minus charitable deductions. (We’ll call this modified AGI.)
We assumed that a taxpayer with modified AGI greater than $1 million would face a minimum tax of 30 percent of modified AGI. The taxpayer would pay whichever is greater, their personal income tax under the existing rules or this minimum tax.
Obviously, $50 billion by itself won’t balance the budget, but it certainly doesn’t hurt. At the same time, the Buffett rule will aid in correcting some of the problems in the tax code — like one quarter of millionaires paying lower rates than millions of middle class families and some millionaires paying no income tax at all — that have helped drive income inequality up to a level not seen in the U.S. since the 1920s.
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21 comments on "Analysis: Buffett Rule Will Raise $50 Billion Per Year, Affect Just 0.08 Percent of Taxpayers"
January 30, 2012 3:12am
@evdebs
It's very obvious the "Citizens for Tax Justice" who supposedly performed the analysis of the Obama/Buffett 30% minimum tax proposal for millionaires the author wrote about, is NOT very knowledgable about how/why the wealthy invest primarily in financial investments. They also don't understand what will take place if the tax rates on financial investments is increased to the 30% minimum proposed by Obama. Obama is a real nut case if he thinks increasing the 15% tax rate on income from financial investments to 30%, will bring more income/revenue into the government. Substantially increasing to that tax rate will more than likely DECREASE the income/revenue the government receives, because the wealthy will stop investing in financial securities in our country, and instead, invest their money outside of our country, ... where the tax rates are substantially lower. What would you do if you were wealthy enough to have larger financial investments, and you found out the taxes on the income you earned from those investments was going to be doubled, while the tax rates in other countries were at, or less than the current 15% it is in our country? IF you were smart, you would invest outside our country, if you wanted to maxamize the income you get to keep.
The Obama/Buffett tax hike will do more harm to our country than it will good.
January 29, 2012 9:45am
Soak the rich to grow the economy
Republicans like George Will smugly state that even when the US taxed the super rich in the past at 70% and 90% in the highest brackets, no one actually paid those rates. But they fail to mention just how they managed to overcome that liability. The very wealthy did successfully and legally avoid those taxes. Rather than pay those confiscatory rates on their excess income, they opted instead to grow their businesses.
They devoted more funds to research and development, built new plants, updated old ones and hired new employees. They invested in insurance, profit sharing and pension plans for the mutual benefit of themselves and their employees. They did all of this to the benefit of our entire society primarily to avoid that higher tax bracket while continuing to build their individual wealth. .
The prevailing arguments for tax relief for the super rich, those alleged “job creators”, are exactly wrong. If you want to expand the economy you first need to tax the high end of those multi-million dollar incomes at a substantially higher rate to give them the incentive to invest that excess capital back into the economy rather than hoard it or worse, use it to further corrupt "our" political system or earmark it to some hedge fund manager to manipulate the markets to the extreme detriment of all but a very few of US
January 29, 2012 9:18am
no will not work money walks it will end up with a decrease in taxes
January 29, 2012 8:10am
* Please read more carefully, people. the $41 million was for the TWO years Romney said he'd release records for.
* The "Buffet Rule" would establish fair/equitable taxation as a long-term reality.
* Going after unscrupulous "Big Business" tax-dodgers and regulation shirking is our surest way to financial justice and prosperity.
January 29, 2012 9:19am
it will not work money walks if anything it will bring in much less
January 29, 2012 4:13am
@Ronni85,
You need to read a little more so the information you write about is factual. Your claim that Romney made $45,000,000.00 last year, and paid taxes at a rate of 13.7%, is not correct, and is no where near to his reported income in that year.
Romney reported his 2010 income to be about $21,700.000.00, of which he paid about $3,000,000.00 to the government in taxes (about 13.9%). He reported his income for 2011 to be about $20,900,00.00, and is expected to pay about $3,200,000.00 to the federal government (about 15.4%). In addition to his reported income, Romney and his wife gave over $7,000,000.00 to charity and his church.$40,000/year, I was paying close to 40%. On my paltry income. THAT ain't fair! No way. No how!
Also, I'd like to know just HOW you claim you paid a tax rate of about 40% on your income IF your income was about $40,000.00? With an income of about $40,000.00, you would not have had to pay any taxes on about 2/3rds of that income.
January 29, 2012 3:18am
The ONLY reason Buffett is paying a lower tax rate than his secretary is his income is mostly from financial investments, which are taxed at 15%. In fact, his secretary is paying no more than he is on the financial investments she has either. Her overall tax rate is higher than Buffetts ONLY because a big part of her income comes from her salary she's being paid by Buffett, and that income is taxed at a much higher rate.
The reason income from financial investments are taxed at a lower rate than wages is to encourage millionaires and billionaires to invest, instead of letting the money sit idle.
If Obama increases the tax rate on financial investments, there WON'T be an increase of revenue to the federal government. In fact, there will be a SUBSTANTIAL LOSS of revenues, because those who are investing their savings in the financial market will no longer do it. Instead, they'll move their money into offshore investments that won't/can't be taxed at all by our government. Wealthy people are not idiots. They will invest their money where it's going to receive the largest return for the investments.
With a higher financial investment tax rate, the country will be a big loser because, not only will the government income revenue be lower, the income (return on investment) for EVERY person and/or government agency that invests in the financial market will be lowered. That in turn, will be the cause of even less income revenue for the government to tax.
An increase of the tax rate for financial investments to 18% - 20% might not chase investors out of the financial market in our country, but I can guaranty anything higher than that will start having a lowering effect on the income the government receives from financial income investments.
January 29, 2012 9:23am
Any reading of scholarly work on Western Hemisphere and European Capitalism flies in the face of your "equitable taxation of investment leads to less investment and job loss" fable shows the oft-parroted scenario to be flagrant B.S. Romney and his Bain Capital financial muggers are gangsters in Armani suits; loading up their hostile takeover acquisitions with crushing debt, bleeding the retirement funds dry leaving the company carcass to dry in the wind; screw them.
Suggested reading:
"Griftopia" Matt Taibbi
"The Shock Doctrine" Naomi Klein
"Econned" Eves Smith
January 28, 2012 6:37pm
Don't forget about Romney's offshore accounts, for which he paid ZERO taxes.
January 28, 2012 6:35pm
Don't forget about Romney's offshore accounts.
January 28, 2012 5:00pm
50 billion a year is pocket change though guys! It's not going to dent the deficit. We'd need raise that 1000 times (which would be 1/2 trillion) to get a good payback.
January 28, 2012 8:16pm
Hey Dwdallam: (Methinks you're off a magnitude or two ... eh? 50B x 1000 = 50,000B or 50 trillion.) But that aside, here's the thing: They usually calculate these things in 10 year increments (it sounds bigger that way) and 50B x 10yrs = 1/2 billion. That's not chump change. 32 years of it pays off the deficit, assuming no new spending and no interest. Or looking it at it another way, we could give each of the 50 states a billion dollars each ten years. I don't know about your state but it would be a huge shot in the arm to mine.
January 28, 2012 3:59pm
Republicans were quick to criticize it. For instance, Speaker of the House John Boehner (R-OH) derided the proposal as a “political gimmick.” “It’s a smokescreen,” added Rep. Steve Scalise (R-LA).There is the Problem, the GOP/Republican Party. Vote them out this 2012.
January 28, 2012 3:28pm
If you take the figures given by Romney - He made $45,000,000 last year, and paid taxes at the rate of 13.7% = $6,165,000. At the minimum proposed by Obama at 30%=$13,500,000. That's an ADDITIONAL $7,335,000 Romney would have to pay. I think that's fair - when I was working, even with my itemized deductions, at $40,000/year, I was paying close to 40%. On my paltry income. THAT ain't fair! No way. No how!
January 28, 2012 8:17pm
Small error Ronni85: Romney made 21.5M each of the past two years. So your numbers are for 2 years, not one.
January 28, 2012 3:16pm
so the tax will not touch gates or soros
January 28, 2012 8:19pm
Hey OLDHAT: How do you figure that? the tax wouldn't touch Gates or Soros? that makes no sense to me. For a long time now Gates (both Bill Jr and Bill Sr) have been advocating higher taxes on themselves, just like Warren Buffet.
January 28, 2012 3:07pm
I agree!!!!! I am not American but what goes on in the US affects me here in Canada and I am all for social justice!
January 28, 2012 3:00pm
here here! i will vote for him too.
January 28, 2012 2:25pm
Let us all get behind the Buffett rule and get this country back on track, and away from big business who don't pay any taxes!
January 28, 2012 12:28pm
Hey Buffett... will ya just do us all a favor and run for president as an independent! If your choice for VP was Robert Reich, I think I might even cancel my plans for starting that llama ranch in Peru.