Warren Buffett, the famous investor who proposed the minimum tax on the wealthy that led to President Obama’s proposed “Buffett Rule,” renewed his call for such a tax in a Monday editorial in the New York Times.
Buffett supports the expiration of the high-income Bush tax cuts, though he would raise the threshold from $500,000 to $250,000. But more importantly, he wrote in the editorial, a minimum tax would mitigate many of the preferences the wealthy glean from today’s tax code, raising a significant amount of revenue to reduce the nation’s deficit and debt without hurting the incentive to invest:
Additionally, we need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.
Buffett’s minimum tax would reverse the trend of falling tax rates for the ultra-wealthy. The average effective tax rate for taxpayers with incomes over $10 million fell to 20.7 percent in 2010, according to Internal Revenue Service data released last week, largely due to the fact that income from investments, which are taxed at a lower rate, make up nearly half of their incomes. The capital gains rate has been steadily eroded over the last 30 years, driving up income inequality in the process. In 2010, 93 percent of income gains went to the top 1 percent.
Republicans blocked Democratic attempts to enact a Buffett Rule earlier this year, arguing that it would raise a small amount of revenue while hammering small businesses. Citizens for Tax Justice, however, found that the rule would have raised about $50 billion a year while affecting only the richest 0.08 percent of taxpayers. And conservatives haven’t always opposed such taxes: it was Ronald Reagan who equalized capital gains rates with wage income rates and famously made the case that millionaires shouldn’t pay lower tax rates than middle-class earners.