Tax Analysts Blog

Don't Be Fooled: Buffett Rule Raises Big Revenue

Posted on Apr 10, 2012

This week President Obama wants to put the spotlight on his proposal to impose a 30 percent minimum tax on incomes in excess of $1 million--the so-called Buffett Rule. Because of the 15 percent preferential rate on capital gains and most dividends--and because a lot of income of rich people comes from capital gains and dividends--many wealthy taxpayers pay considerably below 30 percent. This is clear from the IRS data and from Mitt Romney's tax return.

Republicans are making a big deal about an official estimate from the Joint Committee on Taxation showing that the Buffet rule would raise less than $50 billion over 10 years which--of course--is only a small portion of our future revenue needs.

Official estimates are scored against official baselines. The JCT scored the proposal against the current law baseline. Under current law the top ordinary rate increases from 35 to 39.6, the dividend rate increases from 15 to 39.6, and the capital gains rate increases from 15 to 20 percent. Yes, Virginia, if we revert to a pre-2001 world the impact of a Buffett rule would be much less. But in the world we are likely to be facing for many years-where Republicans have veto power over any tax increases--a Buffett rule would raise hundreds of billions over the next decade.

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