President Obama and Vice President Biden have been misleading voters with their rhetoric about taxing those who earn $1 million or more a year with the so called Buffet Rule.
For one according to the Tax Policy Center more than 99 percent of millionaires will actually pay a higher tax rate than most middle class families in fiscal year 2015, even without the Buffet Rule.
The president and vice president have given several speeches to gather public support for the Buffett Rule, named after billionaire investor Warren Buffett, who famously wrote that many of his office staff pay a higher tax rate than he does. It would impose an effective tax rate of 30 percent on the adjusted gross income of those making over a million dollars a year. The effective tax rate includes the employee share of payroll taxes and other federal taxes.
But Obama and Biden have distorted the facts when explaining the proposal and its impact. The president says of the Buffett Rule:
“What the rule says is you should pay the same percentage of your income in taxes as middle-class families do.”
But most millionaires already pay a similar rate as middle class families.
Vice president Biden declared that like Buffett there are “tens of thousands and several millions of people who are in that same situation.” An over exaggeration at best.
The non-partisan Tax Policy Center did an analysis of the Paying a Fair Share Act of 2012. Roberton Williams, a senior fellow at the center who spent 22 years at the Congressional Budget Office, wrote:
“The Buffett rule sounds good in principle. High-income taxpayers should pay at least as large a share of their income in taxes as the rest of us. But most already do. On average, middle-income households will pay 2015 taxes totaling about 15 percent of their income (using the legislation’s definition). Without the Buffett rule, more than 99 percent of millionaires will pay more than that and only about 4,000 will pay less.”
Not even close to several millions as the vice president claims.
Under current law, if the Bush tax cuts expire by year’s end, the Tax Policy Center estimates the Buffett Rule would raise taxes for 116,000 households. Just a quarter of the 438,000 households with adjusted gross income of $1 million, not including charitable deductions.
Furthermore, the Buffett Rule would barely make a dent in the deficit. It would generate about $20 billion a year in additional tax revenue, which is around 1.5 percent of last year’s $1.3 trillion deficit and only 3 percent of the $609 billion deficit the White House projects for fiscal year 2015.
Another issue the rule does not address is how the wealthy, like Buffett, actually accumulate their wealth. It is not through income but through investment profits, dividends and interest, which are taxed at the current capital gains tax rate of 15 percent, instead of the current top income tax rate of 35 percent. Capital gains would return to 20 percent and the top income rate to 39.6 percent, if the Bush tax cuts are not extended, President Obama elected to extend them two years ago .
The Obama campaign has a “Pass the Buffett Rule” calculator on its website that allows visitors to compare their tax rates with republican Presidential candidate Mitt Romney’s, but that is also misleading.
But visitors to the campaign site wouldn’t know that, and the president and vice president rather play politics than have a fully informed electorate.
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