Sen. Whitehouse proposes 'Buffett rule' bill to tax millionaires

Sen. Sheldon Whitehouse (D-RI) introduced a bill to the Senate on Wednesday that would require those earning more than $1 million per year to pay at least a 30 percent effective tax rate on their income.

The bill, The Paying a Fair Share Act, would establish the so-called "Buffett rule," which President Barack Obama called for in his latest State of the Union address. The rule is named after billionaire investor Warren Buffett, who has lamented the fact that he paid a lower tax rate than his secretary.

Republicans have condemned the proposed rule as class warfare.

"Now, you can call this class warfare all you want," Obama said during his address to Congress in January. "But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense."

Whitehouse has pointed out in Senate speeches that the top 400 earners in America paid an average effective tax rate of just 18.2 percent in 2008.

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). The nonpartisan organization also found the Buffett rule was unlikely to affect many small businesses or investing.

“It’s time to give middle class families in Rhode Island and across the country the straight deal they deserve,” said Whitehouse, who began drafting the legislation several months ago.  “As we continue working to restore our economy, it’s more important than ever to make sure all Americans are paying their fair share toward our nation’s success – and right now that just isn’t happening.  It’s inexcusable that our tax system permits ultra-high income earners to pay a lower tax rate than a truck driver or a janitor, and this legislation would help fix that unfair system.”

The bill is cosponsored by Sens. Daniel Akaka (D-HI), Mark Begich (D-AK), Richard Blumenthal (D-CT), Tom Harkin (D-IA), Patrick Leahy (D-VT), Bernie Sanders (I-VT), and Chuck Schumer (D-NY).

“With a record-breaking $15 trillion national debt and a growing gap between the very rich and everyone else, it is absolutely absurd that the wealthiest people in the country are paying the lowest effective tax rate in decades," Sanders said. "There is no excuse for millionaires and billionaires to have an effective tax rate lower than middle-class families.  If we are serious about addressing this deficit crisis, it is imperative that we have a tax system which is fair and which asks the wealthiest people in our country to pay their fair share.”

The bill would preserve the incentive for charitable giving by allowing wealthy taxpayers to receive a credit equal to the value of the charitable contributions deduction under the regular income tax.

The Paying a Fair Share Act is likely to face fierce opposition from Republicans in the House and Senate, almost all of whom have sworn to fight any and all tax increases.

Photo credit: Pete Souza