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    Posted April 16, 2012 by
    k3vsDad
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    The Buffet Rule - A Q & A

     

    Sunday,  I opined that perhaps the best thing that Republican lawmakers could do  was to just pass the so-called Buffet Rule and get it off the table.  That way it would not continue to be a distraction to real issues as the  GOP and Democrats face off in the presidential election.

    To read my take on the Buffet Rule: ireport.cnn.com/docs/DOC-776340

    Today I ran across an interesting Question and Answer piece by the Associated Press in the Star Tribune.

    Q: What would the Buffett rule do?

    A:  Citing complaints from billionaire Warren Buffett that he pays a lower  tax rate than his secretary, Obama says everyone earning at $1 million a  year or more should pay at least 30 percent of their income in taxes.  He has been vague on details.

    Monday's Senate vote will be on  legislation by Sen. Sheldon Whitehouse, D-R.I., who would impose the 30  percent tax on people making at least $2 million annually and phase it  in gradually for those earning at least $1 million.

    Q: Isn't the top income tax rate already 35 percent?

    A:  Yes, that is the rate owed this year on salaries over $388,350. Yet  very few people pay that rate because they get to subtract credits and  deductions. In addition, some sources of income like certain dividends  and capital gains — more common among upscale earners — are taxed at a  lower, 15 percent rate.

    As a result, households making more than  $1 million in 2011 owed an average of around 25 percent of their  earnings in federal income taxes and payroll taxes for Social Security  and Medicare, according to the Tax Policy Center, a nonpartisan group in  Washington that studies federal taxes.

    Q: How does that compare to lower earners?

    A:  On average — and that is the key — the rich pay higher rates. The  center computes that families earning $30,000 to $40,000 owed an average  6 percent of it in income and payroll taxes last year. People making  $50,000 to $75,000 owed an average 12 percent, while those making  $75,000 to $100,000 paid an average 13 percent.

    Q: Then what's the problem?

    A:  The White House says it's not the averages that bother them. It's that  thousands of individual million-dollar earners pay lower rates than  millions of middle-income workers.

    Citing Internal Revenue  Service data, the White House says 22,000 households making more than $1  million paid less than 15 percent of their earnings in federal income  and payroll taxes. That includes 1,470 such families who paid nothing in  federal income taxes.

    Q: So where does Obama's 30 percent figure come from?

    A:  White House officials said last week that they want no household  earning more than $1 million a year paying a smaller portion of its  income in taxes than the middle class. While the term "middle class" is  imprecise, IRS data show that the administration would come very close  to that target by imposing a 30 percent tax on the highest earners. Out  of around 27 million taxpayers who earned $50,000 to $100,000 in 2009,  only around 2,000 ended up paying income tax rates of 30 percent or  more.

    Q: Overall, how many taxpayers would have to pay more if the Buffett rule becomes law?

    A:  The Tax Policy Center projects that there will be 438,000 households  earning $1 million or more annually in 2015, the year they examined to  give presidential candidates' tax plans time to be enacted and take  effect. Of those taxpayers, the center expects around 210,000 to face  higher taxes if legislation like the Senate Democratic bill becomes law.  That is just over one-tenth of one percent of all 169 million  taxpayers.

    Q: What impact would the Buffett rule have on businesses?

    A:  The Buffett rule would apply to individual income tax rates. It would  not apply to the taxes that corporations pay, although Obama has  separately proposed to increase taxes on some corporations including  some that do work abroad.

    Yet the proposal would still affect  thousands of companies, from the local bakery to hugely profitable law  firms, whose owners pay individual income taxes on the earnings, not  corporate taxes. Republicans say taxing these companies would snatch  away money they could otherwise use to create jobs — a damaging move  with the economy still laboring to recover from the recession.

    Q: Are there many of these companies?

    A:  In a paper last August, Treasury researchers analyzing tax data found  that around 35 million individual tax returns reported some business  income but just 331,000 of them — about 1 percent — were for earners  making $1 million and up.

    http://startribune.com/politics/147545925.html

    Perhaps this will provide some more clarity to the discussion and the hubbub surrounding the Buffet Rule.

    From  the Cornfield, let's get this shiny object put away and let Congress  get down to the real business of addressing the nation's economy,  unsustainable debt, jobs, healthcare reform, energy policy and tax code  reform.

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