Seven members of the Senate Democratic caucus, led by Sen. Sheldon Whitehouse (D-R.I.), formally introduced the "Paying a Fair Share Act" this morning. It sets up an important election-year fight over the "Buffett Rule."
Sahil Kapur has the latest from Capitol Hill:
Whitehouse's office said it's still waiting for an official score but expects the legislation to produce tens of billions of dollars in deficit reduction. The policy is structured as a minimum tax for people making over $1 million per year.
"It's inexcusable that our tax system permits ultra-high income earners to pay a lower tax rate than a truck driver or a janitor, and this legislation would help fix that unfair system," the Rhode Island Democrat said.
There was a time when this sentiment enjoyed bipartisan support, though that point is now long gone.
Indeed, Republican opposition is not only expected to be fierce; it's expected to kill the legislation outright. Even if the "Paying a Fair Share Act" sponsors could overcome a GOP filibuster in the Senate -- an unlikely scenario in its own right -- the Republican-led House almost certainly won't even bring the bill to the floor.
Still, given the larger circumstances, and the strong public support for the policy, it's a debate worth having.
A New York Times editorial helped make the case today.
The bill ... would impose a new rate of up to 30 percent that would phase in gradually on incomes between $1 million and $2 million. The new rate would have to be paid if it is higher than the taxpayer's current rate. It would operate like the alternative minimum tax, superseding all brackets and the lower rates for investment income, though it would preserve the incentive for charitable donations.
Those taxpayers who earn most of their high incomes from salaries would not be affected, as their rates are already higher than 30 percent. But taxpayers like Mitt Romney, who earn most of their income from investments or hedge-fund partnerships that are taxed at 15 percent, would have to pay substantially more.
President Obama prefers the example of Warren Buffett, who, he has said, pays a smaller tax rate than his secretary. (Thus, he calls it the "Buffett Rule.")
The Congressional Research Service estimates that the Buffett Rule, requiring millionaires to pay at least the same rate as most middle-income taxpayers, would affect about a quarter of all millionaires, or 94,500 taxpayers. Citizens for Tax Justice, a liberal policy group, says the bill's 30 percent rate would bring in about $50 billion a year.
Greg Sargent, who's been following the issue closely, has more on the bill and its prospects.
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Yet another reason to vote Democrat.
I support the idea behind this rule, but not the application.
The primary problem with our tax code is that unearned income (income from investments and inheritances) are taxed at both different and lower rates than earned income (income from setting our alarms and going to work each day).
Therefore, the simple solution is to tax all unearned income at the exact same progressive tax rates that we tax earned income--no more and no less. Simple to implement, simple to understand, and fair.
If we supplement this idea by going back to the Clinton rates on earned income for the top tax brackets, then we should be in pretty good shape.
The unearned income rate began in the 1950s to tax higher than for earned income.
This was adjusted downward by several presidents, including Bush, because government is for sale to billionaires.
Unearned income has substantial deductions that don't work right at the lower rate.
You're right and Paul Krugman has argued the same thing although he concedes that a massive re-write isn't possible all at once. But at least the Whitehouse measure starts to whittle away at the disgraceful disparities created in the 50,000 pages of the Internal Revenue Code "and regulations promulgated thereunder" as the lawyers among us would say.
The unearned income rate began in the 1950s to tax higher than for earned income.
I didn't know about the timing of this. It's fascinating that Congress and the president, at the time, intended for the tax code to favor earned income over unearned income, and over the years, the exact opposite has taken place. Had they had their crystal balls out in the 50's, Congress would probably have just left it alone.
They probably agreed with Abraham Lincoln when he said, "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."
http://www.cooperativeindividualism.org/lincoln-abraham_on-labor-and-capital.html
I agree, but since neither one is going to pass this Congress, the best chance for both to happen in the future is to go with the one that's easiest to explain. "Millionaires shouldn't pay a lower tax rate than you" will resonate more than "investment income (which overwhelmingly goes to the rich) shouldn't be taxed at a lower rate than wages."
CJ,
And Teddy Roosevelt said, "All wealth begins with labor."
Put that and Lincoln's quote together and it makes you wonder how us working people got stiffed so badly, especially over the last 30+ years.
Roosevelt said "All wealth begins with labor." because "old money" knows that money in all forms is actually an IOU that represents labor, which includes the labor to plant/harvest food, the labor to drill/process petroleum, the labor to produce electricity, ...
Of course you're right, Redshift, that this won't pass this Congress. In a way, that doesn't matter, as failure to pass it can help the Democrat's messaging this election cycle. Provided, of course, that they can successfully pin failure on the GOP and Obama doesn't undermine the effort by "evenhandedly" blaming Congress as a whole. That may be asking for a lot. Republicans have lately made a specialty of handing Democrats golden opportunities, and Democrats have perfected the art of turning gold into lead.
Better get Luntz in here right away . We need a Luntz-O-Gram sent out to all the players . Job Creator tax , job killing tax, class warfare tax , More than our fair share tax. Trust me he's in the back room with the boys now.
Given the huge national support for a "Buffett Rule Tax" - including a majority of Republicans and even amongst millionaires themselves - Republican Congressional opposition will hand the Democrats another election year issue to campaign on, whether it is the President or someone running for Congress.
I can't wait to watch Romney and the GOP try to swizzle around this in the general election.
Steve, I love your work and have for years, but please oh please don't change your posting style so that every post requires you to click again to "continue reading this entry." I'm already at your fking blog (OK, technically it's Rachel's blog, but you know what I mean), and if I didn't want to read your entire posts I wouldn't be here. From the lack of any other complaints anywhere it seems like this doesn't bother most people, but please at least consider posting your entire post up on the main page. It saves us folks who come here on their lunch break from having to open up a half a dozen tabs just to read your stuff. Thanks for all that you do!
The font here is a lot bigger than that at Steve Benen's previous home with the Washington Monthly. In addition, his words usually have to wrap around a pretty good sized image that goes with each post. Therefore, the only way for Steve to accomplish what you're asking is to reduce the length of his posts (and potentially the quality of his comments).
Respectfully, I'd prefer that he didn't honor your request. The man is a national treasure, and I don't want to lose any of what he has to offer to save a couple of seconds on a mouse click.
CJ, if the font and the picture size is the problem then I agree with you completely, I was mostly just cranky with the general trend in blogs lately of forcing you to click to read the entire entry. But if anybody is worth getting over my personal pet peeve on this issue, it's Steve Benen.
That is standard format for TRMS blog and I doubt it will be changing. Sorry.
While I'm not going to hold my breath, I did hear Rand Paul and a few other "tea-potty" reps. saying that they would consider voting for such a law. Of course lip-service and "the real world" may not coincide, but I'd like to keep hope alive!
Whoa! "tea potty"! Another great bon mot.
This is a campaign tool for the Dems. It can be effective if Romney continues making dumb statements. Now the question is whether the Occupy movement can bring pressure to bear on enough members in Congress. The Senate is going to be the big obstacle and not just because of procedural issues like the filibuster. Senators are elected by the whole state so they do not feel the same pressures that a House member may feel from constituents. I don't believe there are enough Republicans up for reelection in swing states that can make a difference. However, this will make it more difficult for Republicans to campaign on renewing the Bush tax cuts. Republican House members in swing districts are going to feel the heat.
This is yet another political gimmick by Pres Obama. While he may mean unearned income, he only refers to anyone earning over 1 mil. There are many who earn over 1 mil and pay regular rates. Much unearned income has already been taxed. Capital gains, admittedly, is tricky. Venture capital may need an incentive. Churning stocks may not.
The tax code needs an entire re-write, removing all incentives
The Big Fat Issue
“Behind the ostensible government sits
enthroned an invisible government owing no allegiance and acknowledging no
responsibility to the people.”
- Teddy Roosevelt
Teddy Roosevelt was a Republican President who was committed to checking the power of elites. His remark that I quote above is apt for our time. I don’t know if it was
true then, or if it’s true now, but the thought that it might be true gets my hackles up.
If we looked at every government of every nation, tribe, or empire in the recorded
history of homo sapiens, and we calculated what percentage of those governments
were designed to benefit the majority, and for how long those benign
governments were able to sustain such a system, I would guess (I’m not a social
or political scientist) that the percentage would be small, and the time would
be short.
I would guess that most systems of government have been designed to reward elites, so that they (the elite) could control the affairs of the people. For such governments, there was no need to win the assent of the governed. They only needed to retain the loyalty of the elite. If the people didn’t go along with the program, they were hanged, tortured, drawn or quartered.
Aside from our current western democracies, one moment in human history stands out,
and that is the brief moment of democracy in the city-state of Athens starting around 500 BCE.
Athenians were not perfect according to our standards: They kept slaves, and women did not participate in public life. But they were committedto winning the assent of the governed. And they did so by developing a practice they called rhetoric. We call it public speaking.
Public speaking is a tool designed 2500 years ago, not to concentrate power in the
hands of an elite, but to ensure that decisions are made to benefit the majority of people in a society. The Athenians said rhetoric was needed to govern
the souls of men. The fact that these tools of power have frequently been used to destroy the souls of men does not diminish their importance to society: what makes a speaker harmful to his fellow man is not his technique, but his purpose or his ignorance.
Teddy Roosevelt’s remark seems to frame the key issue for our upcoming election. I hope the candidates will address the issue openly and honestly. Is the remark
true? If so, to what extent? What is the evidence? And what can we, and should we, do about it?
Or is it true, and rightly so, because 99% of governments since the dawn of time had it
right? That it’s best to reward an elite so they can manage the affairs of the people.
Yes! Make the rich pay their fair share! Hold them accountable. This is what real Americans are demanding from this president and from Democrats. Incomes for the top percent of taxpayers have shot up at an obscene pace even as incomes and wages for the vast majority of Americans have fallen. Poverty is at record levels while the rich get big tax breaks on their market investment and corporate jets. Hit 'em in the pocketbook and stop forcing deficit reduction on the backs of the middle-class. http://www.sunstateactivist.org
<i>It would operate like the alternative minimum tax</i>
Good, then let it be a replacement for that horrible thing. Just because someone's salary is in 6 figures doesn't mean they didn't work for it, and the AMT hits way too many of these people like the Pentagon's Dirty Tricks Department. Do the right thing, folks.
No, I'm not gonna hold my breath, you silly goose...
Every damn right thinking person in this country understands that only earned income should be taxed and that any talk of raising taxes on unearned income is socialistic class warfare.
Saith the 1/10 of 1%ers "Only income earned from working should be taxed!". And then we still need to have exemptions so that our next President Mittens can give his earned income to the Mormon cult and avoid paying income taxes on it.
It was not accidental that the 1/10 of 1%ers bought changes to the tax code in 2002 so that little of their income would be considered earned income and that they now fight to reduce the capital gains tax rate to zero! Gotta take care of the job creators!
Whitehouse's office said it's still waiting for an official score but expects the legislation to produce tens of billions of dollars in deficit reduction.
OK - so with our current annual deficits about $1.2 Trillion, which comes out to $100 Billion a MONTH of overspending means that taxing the rich will cover 1 months worth of our current deficit. And the quote above says "tens" of billions so I am being liberal with the savings ....and it still is only one month reductions. Now...how do we close the OTHER 11 months (1.1 TRILLION to go per year).
As always I am amazed that everyone seems to think $1 TRILLION in overspending every year for the past 10 years or so is no big deal. This article and statement by the White House kinda puts things in perspective. Even if you tax the people making over $ 1 million a year at the normal rate - which I agree is a fair share, it will only pay for ONE MONTH of our deficit based on the current deficit amounts. Even if they are taxed at 50% it will only reduce our staggering overspending by 2 or maybe 3 months.
Why does this math seem to escape what I believe to be very smart people at this blog and elsewhere?
The primary cause of our current deficits is the <expletive> economy. Have a look at the CBO projections of "current law" and you'll see that our medium-term deficit problem is in the minor-to-nonexistent range once the Bush tax cuts expire and we get back to somewhere near full employment.
Now, that doesn't solve the long-term problem of rising health care costs. For that we need to bring down the growth rate of health care spending. The PPACA is a step in that direction, but there's more work needed. Maybe some day we can have a Government that can take time from re-re-proclaiming that "In God We Trust" and making preventive care illegal to deal with minor matters like that.
D.C.
Yes a crappy economy doesn't help and letting the Bush tax cuts expire will definitely help. And you know that won't even be brought up until AFTER the elections since those cuts help the middle class - along with the Payroll tax "holiday". Politicians are soooo predictable. I would like to see how much more revenue would come in if the tax cuts expire. I really don't think it would generate the one thousand Billion (1 Trillion) needed to even out our annual budget. Again the math is not that hard to figure out.
If the Bush tax cuts expire it would change the trajectory of the deficit. However, how far it would come down is also based on an economy that will continue to improve even if growth is anemic. But either way, it would tilt down. The issue with the Buffet rule is that many people have 401 k plans that are dependent on long term gains. The Buffet rule will need to help people save for their retirement while at the same time continue to encourage investment. We will have to strike a balance between those two objectives. But it will never be agreed to by the Republicans because of the Norquist pledge. Until enough Republicans stand up to Norquist, we will continue with gridlock on changes in the tax code that may involve hiking taxes.
Mike,
Is the Obama administation for letting the cuts expire? I am not totally sure. You don't here much talk in the media on his stance. But of course, it is an election year.
If the Bush tax cuts expire it would change the trajectory of the deficit.
I like that comment :). It will change the "trajectory", but we will most likely still spend more than we take in. So..instead of going over by a TRILLION every year, it will be only 500 Billion or so - which by default means we will still not be paying off the current and past debt. You know how on credit card statements now they show you how long it would take to pay off your balance if you only make the minimum payment? I would love to see how many decades it will take if we pay the "minimum" on our national "credit card". Remember, we are not even paying the minimum now really since we are adding a trillion more every year.
Mike, 401(k) proceeds are taxed as regular income, not as capital gains. In any case if your retirement income is over a million a year I'm not going to worry too much about you.
Not all the income is taxed as regular income. I believe that when you draw out, the amount is broken down into regular income and capital gains. In any event, we still want to encourage people to save for retirement.
Obama is in favor of ending the Bush tax cuts for the wealthy but not the middle class. However, it will be impossible to get the Republicans to agree to any extension just for the middle class. It is possible that Obama may be forced to extend all the cuts again if the public opinion favors it before the election. I would prefer Obama stand fast and tell Congress to send a bill extending the cuts for only the middle class, otherwise, he will veto. We will hear about these tax cuts during the election because the Republicans will make it an issue that Obama is raising taxes. The problem for Obama is to get public opinion on his side because the Republicans are not going to agree to extend any cuts before or after the election. If Obama can make this an election issue that works in his favor, then Republicans are going to be pushed into a corner. That will result in more hostage taking by the Republicans.
I could go for extending them until the economy hits some reasonable milestone, such as employment rate. Dates? Not a good approach.
And one might hope that he learned his lesson last year and will insist that any tax cuts etc. come with an attached hike in the debt limit, or else Congress will order spending (again) and blame him for the debt (again.)
Extending all the cuts until the economy recovers would still let Republicans claim Obama is raising their taxes because the issue works for elections. The Republicans want to make the cuts permanent and that is what they will be looking to do, especially if Obama wins reelection and Dems take the House. Obama needs to turn the issue back on the Republicans with the "fairness" issue so that they will be forced by public opinion to accept tax cuts for only the middle class.
will insist that any tax cuts etc. come with an attached hike in the debt limit
Is there ever going to be a ceiling on how high our debt goes or is asking for a hike going to be an annual (or even semi-annual) event? Are we going to blow past 20 Trillion? 25 Trillion? 50 Trillion? Of course the arguement will be that "once the economy picks up we will start to pay that down". Does anybody really believe that. Say we owe 20 Trillion. We would have to have a 1 Trillion SURPLUS for 20 CONSECTUTIVE years to pay it off. 1 Trillion a year more revenue over spending for 20 straight years. Really???
We are a joke. Congress was soooo proud that they came up with 3 Trillion in savings over the next decade. First, that is on paper right now and second that is a whopping 300 Billion a year.
The debt limit won't be necessary if the tax cuts are not renewed for the rich. The wars are over and they cost over a trillion dollars. But with the end of Afghanistan, we will not be spending billions every month. That leaves the Bush tax cuts as the second part of decreasing the deficit. The third part is Medicare and that needs to be dealt with now before the expenses get out of control because of the Boomers retiring. That is where Congress needs to work on spending. The deficits will come down largely because of the first two items. But it is the third item that will start driving up the deficit in the near future.
Mike,
You cannot be serious. You actually think that we can pay down the 16 Trillion we have in the near future. I used 20 Trillion above, but let's stay with our current debt at 16 Trillion. Are you saying that with the end of the tax cuts and some majic Medicaid savings that we will have really, really big surpluses that will pay down the debt? As i stated above it would take us 16 CONSECUTIVE years of 1 Trillion dollars of suplus (EVERY YEAR). And if you are suggesting it will go down faster... well then you are not even close to serious. I mean are you saying maybe we will have say, 2 Trillion in surplus EVERY Year? OK - then we would have to do that miraculus task for 8 straight years. Here is a quote from the article above:
Citizens for Tax Justice, a liberal policy group, says the bill's 30 percent rate would bring in about $50 billion a year.
So is that part of the 1 to 2 Trillion in suplus we are going to have? Remember this is from a "liberal" group with their predicition. Oh well maybe the other 950 Billion will come from the Bush tax cut expirations - for 16 straight years.
Simply unbelievable.
Your figures assume the deficit does not come down and continues to go up, rates of spending do not decrease, taxes do not increase and the economy is not getting better. All four are wrong assumptions. The biggest fiscal problem with the deficit will be Medicare.
Mike I AM assuming most of that. Increasing taxes will not bring in an extra Trillion a year - the 30% rate on the rich will be in the "tens" of Billions, the Bush tax cuts, may be in the hundreds of billions, and maybe another few hundred billion a year from more people working. I am assuming that between those three things we break even (take in an extra TRILLION a year - which I think is pretty liberal assumption )and it MAY stop future deficits (we break even), but we still owe 16 Trillion from past busts.
Come on Mike, the hole is massive - you basically have to bring in about 2 TRILLION more EVERY YEAR to 1 - stop future deficits (currently over 1 trillion a year) and 2 - pay off past debts (at 1 trillion a year to pay it off by 2028).
You are partly correct though - I do not believe spending will decrease in any appreciable amount. I can't believe anyone really thinks that will happen. And I also do not think Medicare expenses will somehow magically go down - not with the baby boomers aging in record numbers AND our generally poor health as a nation. If you make those two assumptions....well I just think you are dreaming.
I realize that this is a heretical thought, but why can't we have a simple tax code with a progressive set of rates and 1 (fixed dollar amount) deduction for each person supported by the income? The current loopholes and special deductions are a nightmare to understand and to apply. Frankly, I don't care if my income is from work or from interest on my savings - income is income. It should be taxed at the same rate, regardless of its source.
I would much prefer a tax form that said simply: (1) what is your income (itemize as necessary for documentation); (2) how many people (adults & children) are supported by this income; (3) multiply line 2 by $$; (4) subtract line 3 from line 1; (5) if line 4 is between X1 and X2, multiply by 0.Y, if line 4 is between X2 and X3, multiply by 0.Z, if line 4 is between X3 and X4, multiply by 0.ZZ, etc. This retains the concept of a progressive tax code (different multipliers at step 5) and accounts for the fact that the fixed costs associated with living depend on the number of people in the household. My preference would be for a big number at (3), i.e., $10000 per person and reasonable numbers at (5) i.e., 15% to 30%.
My preference is to have no other deductions. No mortgage credit. No education credit. No charitable donations credit. While these are all good things, I don't think our federal tax code should be written to play favorites with some aspects of our society and not with others. Let's get an actual 'fair tax' in place, with no possibility of loopholes, so that all members of our society contribute, even the rich ones. [Please note the quotes around 'fair tax' since that phrase has been co-opted by plans that are not actually fair...]
Skip, it doesn't matter how long it takes to reduce the deficit as long as the deficit is being reduced and the economy is growing.
Tax rates are going to have to go up at some point in the future, the only questions being on whose income and how much. High marginal tax rates, such as those in place between 1938 and 1980, encourage investment and discourage payouts such as we've seen on Wall Street and elsewhere. Increased investment, whether in new facilities and R&D, increased employee wages or increased dividends to stockholders, means a growing economy and a growing economy means more tax dollars available without increasing taxes.
The Republicans seem to have a problem with everyone enjoying increased prosperity. Apparently, if anyone can have it, they don't want it...
Do you mean the deficit or the debt or both. I can see a slight possiblity of stopping the annual 1 Trillion in overspending (deficit), but to do that AND get rid of our DEBT is daunting. Yes it would be great to not incur anymore debt, but the bottom line is we already owe 16,000 Billion.
50 billion dollars from a group of people that wouldn't even fill Beaver Stadium.
Yep - and that will take care of 4% of this years deficit. Now... on to the other 1.15 Trillion....
Why don't they just call it double taxation. Make people pay taxes on income that's already been taxed. Tax the people that already pay most of the taxes in the country as it is. How is that fair?
The biggest problem that will be faced is NOT spending that extra money.......yea right! Like Congress is just going to stop doing what it has done in the past and NOT spend any increase in tax revenue.
You could tax the 1% at 100% over $1 million and maybe close the deficit. We know that will never happen. It's going to take a tax increase on everyone, major budget cuts, and fixes in government handouts to even have a chance of balancing the budget, let alone reduce the Fed. debt.