Buffett Rule

The Buffett Rule is part of a tax plan proposed by President Barack Obama in 2011. The tax plan would apply a minimum tax rate of 30 percent on individuals making more than one million dollars a year. According to a White House official, the new tax rate would directly affect 0.3 percent of taxpayers.

The Buffett Rule is named after American investor Warren Buffett, who publicly stated in early 2011 that he believed it was wrong that rich people, like himself, could pay less in federal taxes, as a portion of income, than the middle class, and voiced support for increased income taxes on the wealthy. The rule would implement a higher minimum tax rate for taxpayers in the highest income bracket, to ensure that they do not pay a lower percentage of income in taxes than less-affluent Americans. In October 2011, Senate leader Harry Reid (D–Nev.) proposed a 5.6 percent surtax on everyone making over a million dollars a year to pay for new stimulus provisions, but the change did not go through.

A White House statement released in January 2012 defined the rule as part of "measures to ensure everyone making over a million dollars a year pays a minimum effective tax rate of at least 30 percent ... implemented in a way that is equitable, including not disadvantaging individuals who make large charitable contributions." The White House also stated that "no household making more than $1 million each year should pay a smaller share of their income in taxes than a middle-class family pays."

The Buffett Rule was not in the President's 2012 budget proposal and the White House initially stressed it as a guideline rather than a legislative initiative. The rule, however, was later submitted for deliberation as US Senate Bill S. 2059, Paying a Fair Share Act of 2012. On April 16, 2012, the bill received 51 affirmative votes, but was stopped by a Republican filibuster that required 60 votes to proceed to debate and a vote on final passage.

If enacted, the rule change would result in $36.7 billion per year in additional tax revenue ($367 billion over the next decade), according to a January 2012 analysis by the Tax Foundation, a think tank. These figures assume that the 2001/2003/2010 tax cuts are not extended. If the 2001-2010 tax cuts do not expire as scheduled, estimated Buffett Rule revenues would total $162 billion over the decade. An alternative study released that same month by the Citizens for Tax Justice, a liberal think tank which favors the change, stated that the change would add $50 billion per year in tax revenue ($500 billion over the decade). The United States Congress Joint Committee on Taxation released a letter in March 2012 estimating that the Buffett Rule would raise $46.7 billion over the next decade. The divergent estimates come about because of different assumptions about the details of the Buffett Rule. For example, the Joint Committee on Taxation assumes that many high-income taxpayers would reduce the amount of capital gains realized in one year to fall beneath the Buffett Rule threshold.

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