The U.S. Chamber of Commerce on Monday urged senators in Washington, D.C. to vote against the Paying a Fair Share Act of 2012, claiming it would hurt economic growth.
"With more than eight million Americans unemployed, Congress should reject attempts to instigate a debate on class warfare and focus on real initiatives that can get the American economy further down the road to recovery," R. Bruce Josten, the Chamber's executive vice president for Government Affairs, wrote in an open letter.
The Paying a Fair Share Act would enact the so-called "Buffett Rule," requiring those who earn more than $1 million a year to pay at least a 30 percent effective tax rate on their income. The rule is named after billionaire investor Warren Buffett, who lamented the fact that he paid a lower tax rate than his secretary.
Although the wealthy are taxed at a higher rate than most Americans, some can drastically reduce their effective tax rate through tax loopholes, particularly when their primary source of income is from long-term capital gains. Approximately 94,500 millionaires pay a lower effective tax rate than millions of families earning less than $100,000, according to the Congressional Research Service (PDF).
"Raising taxes on higher earning taxpayers would hurt business owners on whom our economy depends to create jobs," Josten added. "According to 2009 IRS data, this tax would affect more than one third of business income."
However, the U.S. Treasury Department estimated that only 1 percent of small business owners would be directly affected by the legislation.
"Rather than legislation, such as S. 2230, that smacks of political gimmickry, the Chamber urges the Senate to avoid the class warfare rhetoric and, instead, extend expiring and expired tax provisions and the 2001/2003 tax rates for all taxpayers while working towards comprehensive tax reform," Josten concluded. "The Chamber will consider including votes on, or in relation to, S. 2230 – including votes on the motion to proceed – in our annual How They Voted scorecard."
If enacted, the Paying a Fair Share Act would generate $47 billion in revenue over the next ten years, according to the Joint Committee on Taxation. But high-income taxpayers would still have a number of ways of getting around the new minimum tax, according to Bloomberg.
Senate Republicans blocked the Paying a Fair Share Act on Monday.
[Ed. note: Updated after publication]