|Go Obama! Looks like he wants to tax the rich after all. I wonder if he could make it stick?|
Obama's 30% millionaire tax
By Jeanne Sahadi @CNNMoney January 26, 2012: 8:26 AM ET
NEW YORK (CNNMoney) -- President Obama this week defined what he believes should be the minimum "fair share" for millionaires and billionaires to pay in taxes. His answer: At least 30% of their income.
"If you make more than $1 million a year, you should not pay less than 30% in taxes," Obama said during his State of the Union address.
The 30% marker is the first real detail Obama has offered since proposing the so-called Buffett Rule last September. That rule is a guideline intended to ensure that the very wealthy don't pay a lower percentage of their income in taxes than anyone in the middle class.
It's named, of course, after billionaire investor Warren Buffett, who has repeatedly asserted that he pays a lower percentage of his income to the IRS than his secretary.
The Congressional Research Service this fall estimated that a quarter of millionaires don't pay enough in federal taxes to satisfy the Buffett Rule. The CRS arrived at the number after considering what filers pay in federal income, payroll and corporate taxes combined.
Billionaires with 1% tax ratesIt's not clear, though, whether the president wants the rich to pay a minimum of 30% in federal income taxes alone or on a broader swath of taxes like CRS measured. Nor is it clear how he defines $1 million in income. Is it gross, adjusted gross, modified adjusted gross or taxable income?
Obama also called for an end to tax deductions for millionaires on home, health care, retirement and child care. It's not clear how that might work in conjunction with the 30% rule.
The White House did not respond to requests for more details. Obama is set to submit his 2013 budget proposal to Congress on Feb. 13, when he might flesh out his new millionaire tax proposal.
Obama's 30% " fair share" rule raises many other questions as well.
The lessons of Romney's taxesAmong them, would it operate as a kind of alternative Alternative Minimum Tax? If so, a wealthy taxpayer might need to calculate his tax liability three times instead of just two and pay the highest tax bill of the three.
Then again, the president often talks about the Buffett rule in conjunction with tax reform. But a full-blown overhaul of the tax code is often proposed as a way to make it simpler and more efficient.
In that context, the Buffett Rule would fail the simplicity test.
"We're not simplifying the tax code here," said Roberton Williams, a senior fellow at the Tax Policy Center. "Anytime you say, 'I'll follow the rules except when the rules aren't good enough,' it complicates things."
Of course, many see tax reform as an opportunity to make the tax code fairer, however they define it.
In that sense, Obama might get some support for a 30% rule, although not necessarily enough in Congress to pass it anytime soon.
At least one billionaire who could be hit hard by the 30% rule came out in support of the idea this week.
"I think it's fair," hedge fund manager George Soros told CNNMoney's Poppy Harlow at the World Economic Forum in Davos, Switzerland. "There are a lot of people like me ... in the 1% who feel this is appropriate."
As for the charge that Obama is pursuing class warfare? "Well, that's what my fellow hedge fund managers are saying," Soros said. "But I think it's because they don't like to pay taxes."