Obama To Propose New 'Buffett Tax' As Part of Deficit Reduction Plan

Desperate to establish a leadership role in the quagmire that is D.C. politics, President Barack Obama is set to unveil his own deficit reduction package on Monday. According to White House officials, at the center of Obama’s proposal will be a now familiar theme: taxing the rich.

In a tweet sent on Saturday, Dan Pfeiffer, who is the White House Communications Director, said that Obama will introduce what is quickly being referred to as a “Buffett tax” on those making more than $1 million a year.

Pfeiffer’s tweet said the new tax will be “a kind of AMT” (Alternative Minimum Tax) on people making $1 million plus. The idea is to make that those making millions will pay a rate of tax that at least matches those of the middle-class.

Recall that on August 15th, the “Oracle of Omaha” Warren Buffett made headlines with a NY Times Op-Ed Piece suggesting that the ultra rich have been “coddled long enough” and needed to start paying their fair share in terms of income taxes.

In the editorial, Buffett explained that his tax rate is actually less than many of his staff. Buffett wrote, “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% 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% to 41% and averaged 36%. 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.”

The “Buffett Tax” will be part of the plan the president will present to the congressional “Super Committee” which is tasked with coming up with plans to cut at least $1.5 trillion from the nation’s budget deficit over the next 10 years.

The New York Times reports that Obama will not propose a specific a tax rate or provide other details of the plan such as how much revenue the new tax would produce, just that the new tax will be a prominent feature of the plan to be outlined on Monday.

While most Americans will likely agree that the raising the tax rate on the uber-rich sounds like a good idea, the proposal looks to us to be another effort to set up a fight with the opposing party. Thus, the president appears to be betting that the Republicans won’t want to get caught up in the type of contentious fight the occurred this summer.

However, House Speaker John Boehner has already reminded the White House that raising taxes are not an option for the Super Committee. Boehner has suggested that the deficit-reduction should come from an overhaul of entitlement programs such as Social Security, Medicare, and Medicaid. As might be suspected, the White House has said that Obama will not discuss any cuts to Social Security.

On Thursday, Boehner agreed with Obama that tax reform can and should deal with tax reform. But Boehner added, “Tax increases… are not a viable option for the joint committee.”

The AP reports that the White House sees this as the time to draw sharp contrasts with between his views and that of congressional Republicans, whose public approval ratings are lower than Obama's.

Communications Pfeiffer said this weekend, "I would view this as the president's vision for how we achieve deficit reduction, which makes it inherently different than the sorts of legislative negotiations we were undertaking with the speaker over the summer."

The President’s proposal would effectively complete his proposal for $447 in new tax cuts and spending proposals aimed at creating jobs.

But as one might suspect, the proposal is unlikely to be greeted with open arms. House Budget Committee chairman Paul Ryan commented on the President’s proposal on Sunday. Ryan told Fox News, "It adds further instability to our system more uncertainty and it punishes job creation and those people who create jobs." Ryan then added, "Class warfare may make for really good politics but it makes for rotten economics."

 

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