On the same day that President Obama is scheduled to speak about the topic at Florida Atlantic University, the White House has released a report on the so-called “Buffett Rule,” the proposition that households earning more than $1 million a year should not pay less than their fair share of federal income taxes.
According to the White House, “fair share” means no less than 30% of household income for those earning over $2 million. Households earning between $1-2 million would see an increased tax rate.
The report claims that nearly one-in-four millionaires currently pay a lower tax rate than millions of middle-income households. And among the 400 wealthiest Americans — all earning in excess of $110 million annually — the average tax rate is around 18%. And then there were those 1,470 millionaire households that managed to effectively pay no federal income tax in 2009.
Over the last 50 years, says the White House, the average income tax rate for the top .1 percent of U.S. households has dropped from 51% to 26%, while the middle quintile of income-earners have seen their taxes actually creep from from an average of 14% to 16% over the same time period.
“It’s not a new tax,” said Council of Economic Advisers Chairman Alan Krueger on a conference call yesterday. Instead, explained Krueger, the Buffett Rule is about ensuring that higher-income households are not using the means at their disposal to restructure their income in order to get away with paying a lower tax rate than those of us who don’t have access to high-priced accountants and lawyers.
Krueger and Deputy Director of the National Economic Council Jason Furman both cautioned that the Buffett Rule is not intended to fix the current budget woes and that it’s merely just a first step in the right direction.
“Tax reform will be a long and difficult process,” said Furman, adding that the administration feels there is no need to wait to implement the Buffett Rule, which it believes is the “most simple, common sense reform.”
The next step for the Buffett Rule is a procedural vote in the Senate on April 16.