On Monday, April 16, the U.S. Senate is scheduled to vote on a procedural motion intended to move the so-called Buffett Rule forward. The motion, if agreed to by at least 60 votes, would invoke “cloture,” stopping a Republican filibuster and allowing the Senate to proceed to a vote on the Buffett Rule itself.
The Buffett Rule is named after Warren Buffett, the Omaha investor who runs Berkshire Hathaway, a multi-national conglomerate holding company. Buffett gained notoriety when he claimed in early 2011 that he paid taxes at a lower rate than his secretary, which he said was “unfair.” The bill would implement a higher rate for taxpayers in the highest income tax bracket to ensure that they do not pay a lower percentage of income than lower income taxpayers. The minimum rate would be 30 percent on income above $2 million a year, with a sliding scale of lower rates applied to incomes between $1 million and $2 million.
Although it appears that the Buffett Rule is dead on arrival, some have predicted that, even if it were passed by both houses of Congress and signed into law by the President, its impact on federal revenues would be modest, perhaps even imperceptible. The Joint Committee on Taxation, for instance, predicts that the rule would generate another $47 billion a year for the next 10 years, while the Tax Foundation estimates revenues raised would be $36.7 billion a year. With annual deficits exceeding $1 trillion a year, this additional revenue amounts to nothing more than a rounding error.
The rule is based on the assumption that Buffett does actually pay taxes at a lower rate than his secretary. But that is misleading, if not outright