Billionaire investor Warren Buffett’s push for increasing taxes on the very wealthiest Americans — who, due to the preferential tax treatment of investment income, often pay lower taxes than those in the middle-class — led to the creation of the Obama administration’s “Buffett rule.” The rule is aimed at ensuring that millionaires can’t use special treatment in the tax code to drive their tax rates down below that of their employees.
Republicans have met the Buffett rule with universal derision, calling it “class warfare.” “If it’s not class warfare, it’s highway robbery,” said 2012 GOP presidential candidate Herman Cain. “Pick my pockets, because that’s what he’s doing!” As it turns out, Cain’s much-touted 999 tax plan would basically do the opposite of the Buffett rule, driving Buffett’s already low tax rate down to new depths:
If the “9-9-9” tax plan promoted by Herman Cain, a leading Republican presidential candidate, had been the law of the land last year, Warren Buffett would very likely have paid no income taxes, according to an analysis prepared for Yahoo News and The Lookout by the American Institute of Certified Public Accountants. At most, Buffett would have paid taxes on just 1 percent of his income.
As Yahoo’s Zachary Roth wrote, “if Buffett thinks he’s getting off easy under the current tax system, he should try life under Cain’s plan. Then he’d really be complaining.” Under 999, Buffett’s taxable income would come to $4.9 million of the $62 million he earned last year. After accounting for charitable deductions — which is one of the few tax preferences Cain says he would preserve — “Buffett would have paid no income taxes at all last year under the plan.”
However, low- and middle-income Americans would pay much more under the 999 plan than they do currently. They will be hammered by Cain’s nine percent sales tax (which Buffett would also pay, though at nowhere near the effective rate of poor Americans, who spend almost all of their income in a given year), while also paying a nine percent income tax.
Cain finally admitted this weekend that “there are some” people who will pay more in taxes under his 999 plan. However, he has yet to fess up to the fact that his plan entails a humongous tax cut for the very wealthiest Americans.