Implementing a “Buffett rule” to require a minimum 30 percent tax rate for the highest U.S. earners would raise $47 billion over the next decade, according to a government projection.
The estimate for the proposal backed by President Barack Obama comes from the Joint Committee on Taxation, Congress’s scorekeepers. Lawmakers updated the projection late today to reflect different assumptions about how taxpayers would adjust their capital gains realizations from an earlier $31 billion version.
“The president’s so-called Buffett rule is a dog that just won’t hunt,” Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, said in a statement, adding that the proposal would have little effect on reducing the federal budget deficit. “It was designed for no other reason than politics. There is no economic rationale for it.”
The $47 billion would have covered about half the cost of the 10-month extension of a payroll tax cut that Congress enacted last month. In a broader context, the Congressional Budget Office estimates that Obama’s 2013 budget plan would expand the deficit by $6.4 trillion over the next decade. The bill would reduce that by 0.7 percent.
At the request of the Republican staff on the Finance Committee, the Joint Committee on Taxation analyzed a bill written by Senator Sheldon Whitehouse, a Rhode Island Democrat.
The proposal would require a minimum rate for taxpayers with adjusted gross income exceeding $1 million. The bill would phase in the tax so that it would fully affect taxpayers with incomes exceeding $2 million, and it would allow charitable contributions to be deducted.
“No matter how you slice it, that’s real money that could help bring down our deficit,” Whitehouse said in a statement today. “Most important: It’s simply the right thing to do.”
Obama has said he sees the Buffett rule as a guideline for a tax-code overhaul. His budget didn’t include a specific proposal like Whitehouse’s.
The so-called rule is named for billionaire Warren Buffett, who says tax rates on investment income should be raised.
Under current law, wages and other ordinary income are taxed at a top rate of 35 percent and capital gains and dividends are taxed at a top rate of 15 percent.
The Joint Committee on Taxation analyzed the bill under a scenario in which expiring income-tax cuts would be allowed to lapse. Under that scenario, wages and dividends would be taxed at a top rate of 39.6 percent, capital gains would be taxed at a top rate of 20 percent and a 3.8 percent tax on unearned income would be in effect.
Continuing current tax policy beyond this year, as many Republicans want, would prevent those rates from going up and keep the effective tax rates of more high-income taxpayers under the 30 percent mark. Under that scenario, which isn’t part of today’s estimate, the bill would raise more money for the government.
The bill is S. 2059.