The Tax Policy Center, a nonpartisan research group, has estimated that the average tax rate, including payroll taxes, for the middle 20 percent of U.S. families will be 15.9 percent in 2015. Of the 217,000 households that will be affected by the Buffett rule, 4,000 will have incomes exceeding $1 million and tax rates below 15 percent. So, according to the Tax Policy Center estimate, less than two percent of the families affected by the Buffett rule will have effective tax rates below that of the middle 20 percent of families.
Roberta Williams, a senior fellow at the Center, says: "The taxes paid by middle-class families are a lot lower than we think they are."
Democratic lawmakers and Democratic Party officials have largely embraced President Barack Obama's advocacy of the Buffett rule, by which millionaires and their billionaire betters would pay at least 30 percent of their income in federal income tax. The 30 percent standard is designed to make sure that the very wealthy pay a higher pecentage of income tax than do any members of the middle-class. The Buffett rule will have no effect on six-figure incomes.
Advocates of the Buffett rule argue that it will help reduce governmental deficit but the best estimate is that it will raise an addtional $47 billion over ten years, a relative pinprick on today's deficit figure.
It is the case that beginning with Ronald Reagan, the top marginal tax rate was significantly reduced and then George W. Bush drastically shifted the federal income tax burden down to those lower on the economic totem pole by giving the lion's share of two major tax cuts to the wealthiest few percent of Americans. From World War II to the Reagan 80s, the top marginal tax rate varied from 70.45 percent to 91 percent. The period after World War II was a time of great economic prosperity and the tax rate system was generally accepted as fair, because so many people were doing well economically and those who were not, were not doing so due to high taxes.
The wealth gap between the very rich and the poor or near-poor was far narrower in the roughly 35-year period after the the Second World War, due partly to high tax rates making it more difficult to accumulate great wealth. The wealth gap started to widen significantly in the Reagan 80s and was accelerated by George W. Bush. The wealthy, however, aren't the only share of the population that is under-taxed, as, generally speaking, when it comes to the federal income tax, under-taxing is nearly universal, illustrated most centrally by the IRS conclusion that in the last year for which data is fully available, only 53 percent of U.S. households paid any federal income tax. Those who try to excuse the non-payers contend that they pay sales tax, property tax and many other taxes. The flaw in this argument is that the 53 percent of payers also pay these other taxes.
The Buffett rule is currently polling very well with the general public, likely because it has the "feel good" effect of making the tax system seem to be fairer; however, the great potential drawback is that the Buffett rule will slow the momentum that has been built up, especially through the Occupy Movement, to have a progressive federal income tax structure with a much higher top marginal tax rate. The best we can hope from President Obama is that he will restore the 39.6 percent top rate by the expiration of the Bush tax cuts. Given that recent signs of an economic slowdown may mean that at the end of 2012 we might be in a situation similar to the end of 2011, Obama might feel compelled to request another extension of payroll tax cuts and unemployment benefits. The GOP price would likely be another extension of the Bush tax cuts.
The chief features of a new income tax structure I proposed in a much earlier blog would be: 1) a tax rate structure of 16 percent at the low end and 60 percent at the high end -- Robert Reich has proposed a top rate of 70 percent -- 2) tax capital gains at the same rate as regular income; 3) cut in half the too-generous child care credit; and 4) tax corporations under the provisions in effect in the Eisenhower years, when corporations paid a much larger share of national government revenue. Eliminating the 10 and 15 percent rates, along with cutting the child care credit in half would increase the percentage of households paying income taxes; also, a top rate of 60 or 70 percent would bring the tax rate more in accordance with the actual distribution of income in the nation.
Here's the thing though, the system will be fairer with the Buffet rule. While most of the rich pay more than middle class families, they pay much less than the small buisness men and doctors who pay 35%. While your plan is a good one there's no way in the world it could pass the senate or the House. The Buffet Rule is the fairest thing passable.
ReplyDelete