Tuesday, April 10, 2012

Obama Makes Case for ‘Buffett Rule’

By JACKIE CALMES

President Obama took his argument in favor of a 30 percent minimum tax on millionaires to Florida on Tuesday afternoon, where he told an enthusiastic crowd at Florida Atlantic University that "in this country, prosperity has never trickled down from the wealthy few."

In his speech, he said that fairness demanded that the richest Americans be taxed at least as much as the upper middle class normally pay, so that the money can go to programs that he said would benefit society at large.

“You might have heard of this, but Warren Buffett is paying a lower tax rate than his secretary,” Mr. Obama said, referring to the billionaire chief of Berkshire Hathaway, who has called for higher tax rates for wealthy Americans. “Now, that’s wrong. That’s not fair.”

The president framed the issue as a choice between tax breaks for the wealthy, and assuring the nation’s economic prosperity. He also made some effort to frame his argument for the minimum tax rule, now commonly called the Buffett Rule, as a potentially bipartisan issue.

“I believe the free market is the greatest force for economic progress in human history,” Mr. Obama said. “But here’s the thing. I also agree with our first Republican president -- a guy from my home state, a guy with a beard, named Abraham Lincoln.”

He added: “And what Lincoln said was that through our government, we should do together what we cannot do as well for ourselves. That's the definition of a smart government.”

In his speech, which elicited raucous applause at times, Mr. Obama also took a jab at the Republicans in Congress and Republican presidential candidates for advocating what he referred to as “old broken-down theories” of economics that argue that prosperity for the wealthy will trickle down to the middle class.

“A lot of the folks who were peddling these same trickle-down theories -- including members of Congress and some people who are running for a certain office right now, who shall not be named -- they're doubling down on these old broken-down theories,” he said.

He added: “They proposed a budget that showers the wealthiest Americans with even more tax cuts, and then pays for these tax cuts by gutting investments in education and medical research and clean energy, in health care.”

A report released Monday from the president's economic team said the proposed minimum rate for those with incomes exceeding $1 million annually would restore some fairness to the federal tax code and reduce economically inefficient gaming of the system.

Over five decades, the report, from the White House National Economic Council, said the average tax rate paid by the wealthiest Americans has dropped much more than the rate for middle-income taxpayers, even as the income of those at the top of the scale has grown significantly more than for everyone else.

“The idea behind the Buffett Rule is to have a tax on high-income earners who avoid paying much of their income taxes,” said Alan B. Krueger, chairman of Mr. Obama’s Council of Economic Advisers. “So in that sense, it’s not a new tax — it’s bringing the high-income earners who managed to avoid paying a large share of their income in taxes up to the level of other high-income earners.”

The White House, by releasing the seven-page report and holding a related conference call with reporters on Monday, sought to provide the substantive arguments for a tax proposal that has become a centerpiece of Mr. Obama’s campaign for re-election. The president is expected to face Mitt Romney, the former governor of Massachusetts who is the front-runner in the contest for the Republican presidential nomination — and, in the Obama campaign’s view, the personification of the argument for a minimum tax on the wealthy.

Mr. Romney, with a big investment portfolio, reported income of about $21 million in each of the last two years and paid about 14 percent of that in federal income taxes. That effective tax rate was far below the tax code’s top rate of 35 percent on the highest incomes because much of the Romney income is from capital gains and dividends, which are taxed at 15 percent, and because he claimed an assortment of tax deductions. Hedge fund managers and private-equity investors similarly pay the 15 percent rate on their income.

Against that backdrop, the potential political appeal of the Buffett Rule is such that a reporter on the White House conference call asked administration officials why they did not call it the Romney Rule. Mr. Obama first proposed the rule last September, but he and his advisers — both in the White House and the Chicago campaign headquarters — have lately begun emphasizing it anew as they mobilize for the expected race against Mr. Romney.

In case the idea might have been lost on anyone that Mr. Romney would fall under the Buffett Rule, the Obama presidential campaign issued a statement Tuesday pointing it out.

"Mitt Romney opposes the Buffett Rule – he thinks millionaires and billionaires should keep paying lower tax rates than middle-class families," the statement said. "In fact, Romney himself isn’t paying his fair share – in 2010, Romney paid a tax rate of only 13.9 percent, well below the rate paid by many middle-class Americans."

In its own statement on Monday, the Romney campaign echoed the criticism of many other Republicans and called Mr. Obama "the first president in history to openly campaign for re-election on a platform of higher taxes."

"He has already raised taxes on millions of Americans, but he won’t stop there," said Gail Gitcho, the campaign's communications director. "He wants to raise taxes on millions more by taxing small businesses and job creators."

En route to Florida on Tuesday, Jay Carney, the White House press secretary, acknowledged that Democrats are unlikely to succeed in advancing the Buffett proposal in a Senate vote set for next week. But he reiterated that millionaires and billionaires "should not pay less or a lower tax rate on their income than average Americans."

Mr. Obama’s stop at Florida Atlantic University in Boca Raton is the latest in a string of visits to a state that is a prime battleground for the election. Mr. Obama was scheduled to hold three fund-raisers in Florida on Tuesday, in Palm Beach, Hollywood and Golden Beach. He will be back in Florida on Friday, in Tampa, before heading to a summit meeting in Colombia.

According to the White House's economic brief, the average federal tax rate of the top earning 0.1 percent of Americans, including income and payroll taxes, has dropped 50 percent over the last half-century, to 26 percent from 51 percent. The 400 richest Americans — all with annual income exceeding $110 million — paid 18 percent in federal income taxes in 2008, the report said; as recently as 1995 their income tax on average was nearly 30 percent, the level of the Buffett Rule.

By comparison, taxes for the vast number of middle-income Americans have stayed at about the same level or have slightly increased in 50 years, the report said. Those in the middle 20 percent of all taxpayers paid an average 16 percent of their income in federal taxes in 2010, compared with 14 percent in 1960.

The report noted that income tax rates vary widely among the highest-income Americans, depending on their source of income and ability to take advantage of tax breaks. But it said that nearly one-quarter of all millionaires — about 55,000 taxpayers — pay a lower tax rate than nearly 1.5 million Americans whose income of $100,000 to $250,000 puts them in what is considered the upper middle class.

Of those households reporting more than $1 million in income in 2009, the most recent year for which federal tax data is available, 77,000 paid less than 30 percent in income and payroll taxes, 22,000 paid less than 15 percent, and 1,470 paid no federal income taxes, according to the administration report.

Jason Furman, the principal deputy director of the National Economic Council, said the administration sees the Buffett Rule as simply a first step toward the broader overhaul of the income tax code that both parties have called for, though often without specifics.

“Tax reform will be a long and difficult process,” Mr. Furman said, “and so we think it’s appropriate not to wait to complete every aspect of reforming the tax system before locking in what should be the most simple, common-sense element of any tax reform, which is that no one who makes over $1 million per year should be paying less in taxes than the middle class.”

Senator Sheldon Whitehouse, Democrat of Rhode Island, has introduced the legislation in the Senate but it is not expected to get the 60-vote supermajority needed to overcome a Republican filibuster. The measure would allow the wealthy to continue to deduct charitable contributions and get credit for payroll taxes paid in computing the 30 percent tax rate.

NYT

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