Should the Middle Class Pay a Higher Tax Rate Than Billionaires? President Obama Says No.
In a much-publicized op-ed in the New York Times last month entitled “Stop Coddling the Super-Rich,” billionaire investor Warren Buffett noted that because of the so-called “hedge fund handout” he and other super-rich individuals who “make money with money” pay a lower tax rate than many middle class Americans:
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
In other words, Warren Buffett’s secretary — and every other employee that works for him that is paid a regular wage — pays a higher tax rate than Buffett and his super-rich friends.
If you think this is unfair, especially in these times of “shared sacrifice” and deficit hysteria, you’re in good company. Yesterday, as part of his deficit reduction proposal for the super committee, President Obama proposed what he’s calling the Buffett Rule — the simple idea that middle class families should not pay a higher tax rate than millionaires and billionaires.
In proposing to make our tax code fairer while also reducing the deficit, the president singled out for special criticism those elected officials who’ve signed Grover Norquist’s pledge (including all but 13 Republicans in the House and Senate) not to increase taxes — ever — or end tax giveaways to Big Oil and other special interests:
Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it.
It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million. Anybody who says we can’t change the tax code to correct that, anyone who has signed some pledge to protect every single tax loophole so long as they live, they should be called out. They should have to defend that unfairness — explain why somebody who’s making $50 million a year in the financial markets should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that — paying a higher rate. They ought to have to answer for it. And if they’re pledged to keep that kind of unfairness in place, they should remember, the last time I checked the only pledge that really matters is the pledge we take to uphold the Constitution.
While Republicans immediately trotted out tired charges of “class warfare” to argue that the wealthiest Americans should not have to pay their fair share even as the middle class is being squeezed harder, the facts in support of the Buffett Rule are undeniable. Here’s some fast facts, via the Center for American Progress’ Director of Fiscal Reform Seth Hanlon:
- 1,470 households reported income of more than $1 million in 2009 but paid zero federal income tax on it.
- The average federal income tax rate of the richest 400 people in the country, the so-called “Fortunate 400,” in 2008 was 18.11 percent. In 2007, it was 16.62 percent. That is only a little more than just the payroll tax on wages — normally 15.3 percent on a worker’s first $106,800 in wages, counting both the share that workers pay directly and the share their employers pay, which comes out of their wages — let alone the federal income tax on those wages.
- The tax rates paid by the “Fortunate 400” have plummeted since the mid-1990s, when their average effective rates were about 30 percent.
Our friends at MoveOn.org wasted no time in turning around an ad bringing home the president’s point. Take a look:
The progressive position taken by the president isn’t only fair and what’s right for the economy, it’s wildly popular. Through yesterday, a whopping TWENTY-SEVEN polls taken over the last year showed overwhelming public support for raising taxes on the wealthy. And a Gallup poll out just this morning also showed strong support, with 70 percent favoring making corporations pay their fair share by ending wasteful tax giveaways and 66 percent favoring making those making over $250,000 (much less millionaires) pay their fair share.
IN TWO SENTENCES: As President Obama said, “this isn’t class warfare; it’s math.” In America, the middle class should not have to pay a higher tax rate than millionaires and billionaires.
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