Point/Counterpoint: Should Congress adopt the 'Buffett Rule?'

  • Warren Buffet
Warren Buffet (RICK WILKING, Reuters )
April 19, 2012

The "Buffett Rule" would ensure a 30 percent federal income tax rate for the richest Americans. It's named after billionaire Warren Buffett, who finds it absurd that his rate is lower than his secretary's. Reporter Colby Itkowitz asked tax policy analysts whether it should be adopted.

PRO: Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities

Q: How would you describe the Buffett Rule?

A: Under the tax code today, there's a group of very, very wealthy people who actually pay a lower tax rate than many working- and middle-class people pay, and the Buffett Rule is designed so that does not happen.

Q: Why is it important that wealthy Americans pay more?

A: I think most Americans would agree that very wealthy Americans should not pay less taxes than average Americans pay, particularly given what we've seen with incomes. … Incomes at the top have exploded and incomes for working- and middle-class people have stagnated. You have to think about what is going to happen to the budget in future years. There's going to be tremendous pressure to cut Medicare and reduce spending in areas like education and science. The middle class and lower classes will be asked to make sacrifices, and wealthy people need to be part of that sacrifice as well.

Q: Opponents call it class warfare. Is it?

A: Warren Buffett has said many times that there is class warfare going on and his class is winning. That argument is used to prevent any debate from happening. It's intended to close off debate, it's intended to be a silencer and I think that's wrong. I think tax policy needs to respond to what is going on in the economy, and in recent years a very large share of the income gains have gone to a very tiny sliver of the people at the top of the income scale. This is a problem. Tax policy needs to lean against this trend. Tax policy has been used to make incomes more unequal and this needs to be reversed.

Q: On the campaign trail this week, Mitt Romney said the revenue from the Buffett Rule would pay for only 11 hours of federal government operations. Would it have a real impact on the debt?

A: Estimates range from $50 billion to $160 billion over a decade. It's real money, but it's only one step. It's a step in the right direction. The next step needs to be to let the Bush-era high income tax cuts expire at the end of the year. That would raise close to $800 billion to a trillion dollars over 10 years and that's real money.

Q: There's also a counter argument that income tax rates for middle-class Americans are low right now. So where's the discrepancy?

A: The federal taxes overall are progressive: As you get higher income, your tax rates go up. But there's an exception to that: those people who have investments. The reason, the need for the Buffett Rule, is because the capital gains tax is so low. It's not all wealthy people, but there's this group. What they tend to neglect is that the wealthiest make so much money, the top 1 percent makes more than one half of the country. It's an equality consideration, and equality is a question of values.

CON: Scott Hodge, president of the Tax Foundation

Q: How would you describe the Buffett Rule?

A: Essentially, [Buffett Rule advocates] are focusing on a small group of taxpayers who gain their income from capital gains and dividends rather than salaries, and pay a tax rate of 15 percent on that income, and they believe that's unfair. [Advocates] have picked out of a hat 30 percent that those people should pay, and I have no idea where that number came from.

The reality is that the average tax rate paid by millionaires … is 25 percent — that's IRS data. Now the average tax rate for all taxpayers is 12 percent. The average income tax rate for people earning between $30,000-$50,000 is 5 percent; that's after taking all their credits and deductions. Your typical taxpayer paying between $75,000-$100,000 has a tax rate of about 8 percent.

Q: President Barack Obama says it's about wealthy Americans paying their fair share. Is there a fairness problem in tax policy?

A: This is a trumped-up issue during an election year to play into people's preconceived notions about inequality and the rich. It flies in the face of facts and actual data. But because it plays into preconceived notions, it is getting overblown in the press and the public. This is a completely politically fabricated issue that the White House is using for political gain, and it's really because the presumptive Republican candidate, Mitt Romney, is rich. And so this is all about putting him, and Republicans generally, on the defensive.

Q: Is there a debate that should be had about tax policy equity?

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