(Photo: Reuters/Larry Downing)
President Obama will announce a deficit reduction plan Monday that will include entitlement reform and a “Buffett Rule,” which would increase taxes on millionaires. Rep. Paul Ryan (R-Wis.) called the idea “class warfare.”
The “Buffett Rule” was inspired by an Aug. 14, 2011 editorial in The New York Times by billionaire investor Warren Buffett in which he complained that he does not pay enough in taxes because his workers – middle income wage earners – pay higher tax rates than he does.
“What I paid was only 17.4 percent of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent,” Buffett wrote.
Critics argued, however, that Buffett failed to account for the double taxation of capital gains and dividends.
The proposed “Buffett Rule” would, apparently, place a minimum tax on those making more than $1 million a year. It would be just one piece of a package that Obama will propose to the Joint Select Committee on Deficit Reduction, dubbed the “supercommittee.”
Under the deficit reduction bill pass last month to raise the nation's debt ceiling, the supercommittee has the task of crafting a bill that will reduce deficits by at least $1.2 trillion over the next decade.
Obama, on Monday, will ask the supercommittee to “go big” and reduce deficits by $4 trillion. The proposal will include spending cuts, entitlement reform and tax increases.
The president has been touting Buffett's editorial in speeches across the country, arguing that Republicans should agree to some revenue increases by asking wealthy Americans to pay more to help reduce budget deficits.
This would not be the first time that Obama has made a similar populist appeal. He frequently argues that the tax deduction for corporate jets, which was reauthorized in Obama's 2009 stimulus bill to aid domestic private jet manufacturers, should be eliminated, for instance. (Buffett has actually defended the corporate jet deduction as a legitimate business expense.)
Eliminating the deduction on corporate jets would only raise about $3 billion over 10 years and it is not clear, yet, how much could be raised by instituting a minimum tax on millionaires. The proposals do, however, help Obama fashion a message that his policies will benefit the poor and middle classes while Republicans are defenders of the wealthy.
“I think it's a populist appeal by the president that, according to the polls, is a winner. Most Americans think that millionaires should be paying more,” liberal Fox News contributor Juan Williams said on “Fox News Sunday.”
Ryan, chair of the House Budget Committee, was interviewed on “Fox News Sunday” and called the proposed “Buffett Rule,” “class warfare” and “rotten economics.”
“Let's not forget that under current law, that the president has already passed, the top tax rate on individuals and small businesses in 2013 goes to about 44.8 percent. ... The world taxes their businesses at about 25 percent, and he is saying we're going to tax these job creators at above 45 percent with this new tax,” Ryan said.
Former Democratic Senator Evan Bayh (Ind.) agreed on “Fox News Sunday” that now “is not the right time to raise burdens on people who make hiring decisions or investing decisions.” After the economy starts to recover, however, Bayh believes “we may need to ask people who have been successful to do more to get the deficit down.”