The White House looks like it is set to propose a new tax rate for people earning more than one million dollars a year to ensure that they pay at minimum the same percentage of their earnings in taxes as middle-wage Americans, reported CNN on Sunday. This proposal, called the Buffett Rule, will be part of a deficit reduction plan that President Barack Obama could unveil as soon as Monday, according to White House sources.
The plan is named after billionaire investor and philanthropist Warren Buffett, who has been highly vocal in regards to the fact that wealthy Americans pay less than their share in taxes under current tax codes. In particular, Buffett says, wealthy taxpayers who generate significant investment income pay the lower capital gains rate on that money. According to White House officials, the Buffett Rule would impact just about 0.3% of taxpayers -- in total, fewer than 450,000 individuals. The president will not specify a specific rate or details of the Buffett Rule, leaving it up to Congress to evaluate how to calculate such a rate as part of the larger debate over rewriting the tax code. This could become problematic; leaving it to the Congress to decide on the rate could delay the passage or even get the proposal completely thrown out all together.
The issue of tax increases has been at the epicenter of a heated policy struggle between Democrats and Republicans for over a decade. President Obama wants to put an end Bush-era tax cuts on families earning over $250,000 a year, but Republicans have blocked his efforts, arguing that it will hinder investment. This theory is known as "trickle-down economics;" the more the wealthy are taxed the less they will potentially spend having a very negative effect on an already shaky and unpredictable economy. Speaker of the House John Boehner, last week expressed his opposition to any tax increases being part of a deficit reduction package being negotiated. The Speaker believes like many other Republicans that raising the taxes of the wealthy is not a solution to aide in reducing the national debt.
Meanwhile on NBC's "Meet the Press," former President Bill Clinton expressed how a tax reform is necessary, and that "right now we don't need what the Republicans want, which is further spending cuts." He also said that "conflict seems to be better politics; cooperation is better economics," in what he described of the Republican obstruction of Obama policies, such as the $447-billion jobs plan introduced last week. With divide on both sides of the issue it may be difficult for the President to lobby successfully for the passage of a new tax rate on wealthy Americans.