Wednesday, April 11, 2012

WH Blog: The Buffet Rule Asks the Wealthiest to Pay Their Fair Share

Nearly one-quarter of all millionaires (about 55,000 individuals) pay a lower tax rate than millions of middle-class families. Warren Buffett has famously said that he pays a lower tax rate than his secretary, and he agrees that isn’t fair. To reform our tax system, which is currently tilted in favor of very high-income households, President Obama has proposed a basic principle of tax fairness called the Buffett Rule.

And, using the average tax rate to tell the story actually, like in the chart above, masks the fact that some high-income Americans pay extraordinarily low tax rates. 

A full 22,000 households that made more than $1 million in 2009 paid less than 15 percent of their income in income taxes. And the top 400 richest Americans—all making over $110 million a year—paid an average of 18 percent of their income in income taxes in 2008, but one in three of them paid less than 15 percent.

Americans need to wake up when they hear Republicans talking about flat taxes or fair taxes. Both are regressive taxes that shift the tax burden to the middle class. Herman Cain's 9,9,9 plan is a perfect example of this. So was Mike Huckabee's 'fair tax' in the 2008 election. 

Most US taxes are regressive such as sales tax and municipal property tax. The FICA tax for Social Security is also regressive because of the FICA social security tax cap of $110,100 that lets the affluent off of the hook.

Republicans have flattened the tax tables since the Reagan area in a way that has greatly benefited the most affluent Americans. While the middle class will et some lip service on tax cuts, the wealthy will save tens of thousands. 

As the Citzens for Tax Justice state: 

. . . (T)he Ryan budget would replace the existing personal income tax with a personal income tax that has just two rates, 10 percent and 25 percent, repeal the Alternative Minimum Tax (AMT), and offset the costs by closing unspecified tax loopholes and tax expenditures. The table on the first page illustrates that taxpayers with adjusted gross income (AGI) exceeding $1 million would enjoy a tax cut of at least $187,000 under this plan no matter how it is implemented.

Because of capital gains taxes and other special taxes for venture capitalists such as deferred interest,  most affluent Americans are only taxed as 15 per cent. The affluent benefit from a regressive US tax system.

The Republicans have not only flattened the income tax system which includes capital gains and deferred interest and other special tax break, they have also established numerous exemptions for c-coprorations and also curtailed the estate tax which had been suspened until recently.

The net effect is that the US has a huge deficit that was worsened by the Iraq War and another unfunded bush initiative, Medicare Part D.

The US has had very unequal wealth distribution for many years. We now have the fifth most uenequal income distribution as well. 

This can cause social instability that can be defined using the GINI coefficient. The US GINI  is presently  46.8  in 2009 and is getting worse. 

In general  if the GINI is more than .50, the country has an income distribution problem which could lead lead to social instability and crime.

Of course the GOP solution for crime is a concealed carry permit! 

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