Obama to seek minimum tax rate for millionaires
GOP is expected to oppose plan named for Buffett
WASHINGTON - President Obama tomorrow will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials.
With a special joint congressional committee just starting work to reach a bipartisan budget deal by late November, the proposal adds a new and populist feature to Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future savings from Medicare and Medicaid.
Obama, in a bit of political salesmanship, will call his proposal the Buffett Rule, in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.
Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House tomorrow.
Obama’s proposal is certain to draw opposition from Republicans, who have staunchly opposed raising taxes on the affluent because, they say, it would discourage investment. It could also invite scrutiny from some economists who have disputed Buffett’s assertion that the megarich pay a lower tax rate overall, because many in that group actually make more from wages than from investments.
In a speech Thursday, John A. Boehner, the House speaker and an Ohio Republican, agreed with Obama that the deficit-reduction committee “can tackle tax reform, and it should,’’ to get rid of many tax breaks and allow for lower marginal rates.
“Tax increases, however, are not a viable option for the joint committee,’’ Boehner said. Instead, he emphasized that meeting the deficit-reduction target should come largely from overhauling benefit programs such as Medicare, Medicaid, and Social Security.
The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for reelection in 2012.
It could also reassure Democrats who have feared that Obama would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes.
The administration wants such a tax to replace the alternative minimum tax, which was created decades ago to make sure the richest taxpayers with plentiful deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class. Obama has said that many average Americans could see a tax cut if the system is overhauled, since ending many tax breaks would allow for lower rates while raising more revenues from the wealthiest.
The millionaires’ tax is among several changes Obama will propose in urging Congress to overhaul the federal income tax code next year, both to raise revenues for reducing deficits and to make the tax system simpler and fairer, said the administration officials, who agreed to speak in advance of the president’s announcement on condition of anonymity.
The millionaires’ rate would affect only 0.3 percent of taxpayers, they said. That would be fewer than 450,000; 144 million returns were filed for 2010.
Obama’s proposal comes a month after Buffett began reviving his longstanding objection that he and “my megarich friends’’ pay a significantly lower percentage of their income in federal taxes - income and payroll taxes - than everyone else, thanks to the tax code’s favoritism toward the rich, and especially toward investors like him.
“My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice,’’ he wrote in an opinion article in The New York Times, a complaint he has repeated in talks and interviews since.
Obama has been citing Buffett as he promotes his $447 billion jobs plan. He proposes to offset the cost of that plan and reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.
His proposed Buffett Rule puts a new spin on that pitch, as Obama tries to put Republicans in Congress and in the presidential race on the defensive for their rigid stand against higher taxes.