The following editorial appeared in the St. Louis Post-Dispatch on April 12:
On Monday the U.S. Senate will take up S. 2230, “The Paying a Fair Share Act of 2012,” which would enact the so-called “Buffett Rule.”
As explained by President Barack Obama on Tuesday, the rule says, “If you make more money — more than $1 million a year, not if you have $1 million, but if you make more than $1 million a year you should pay at least the same percentage of your income in taxes as middle-class families do.”
Senate Majority Whip Dick Durbin, D-Ill., admitted to us on Wednesday that S. 2230 has no chance of getting the 60 votes it needs to close off debate and pass in the Senate. None of the Senate’s 47 Republicans is expected to break rank.
Nevertheless, Mr. Durbin told a meeting of St. Louis Post-Dispatch editors and reporters, “if you believe in progressive taxation, this is fundamentally fair.”
The Republican presidential primaries demonstrated that many GOP voters, even those who aren’t millionaires, aren’t sold on the concept of progressive taxation, which holds that as one’s share of society’s benefits increases, so should one’s share of society’s costs.
While S. 2230 may fail on Monday, the “Buffett Rule” will be back again, attached to other legislation that will be considered before the November election. Democrats see the issues of tax fairness and income inequality as political winners — particularly as Mitt Romney, the putative GOP presidential nominee, paid a tax rate of only 13.9 percent on $21.7 million in income in 2010.
The bulk of Mr. Romney’s income came from dividends and capital gains, taxed at 15 percent. That was the issue that billionaire investor Warren Buffett addressed in a controversial op-ed article in The New York Times last August. He argued that it was unfair that wealthy investors, including him, can pay lower rates than middle- and upper-middle class taxpayers pay in combined payroll and income taxes.
Mr. Buffett said, for “those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains.”
In our meeting with Mr. Durbin, he told us that enacting the Buffett Rule in S. 2230 would raise $48 billion over 10 years. While that’s a drop in the deficit budget, he said, it would enable the government to avoid a rise in the 3.4 percent rate it pays on its considerable debt.
In fact, Sen. Sheldon Whitehouse, D-R.I., sponsor of S. 2230, told the Washington Post’s Ezra Klein that his bill could raise considerably more than that. The “millionaire’s tax” would phase in at incomes higher than $1 million and not fully apply at 30 percent until the 2-millionth dollar in income.
If you assume that all the Bush tax cuts expire as scheduled at the end of this year, the “Buffett Rule” would raise $47 billion. But if you assume, as the Republican House budget does, that all the tax cuts are extended, Mr. Whitehouse’s bill would raise $160 billion.
Right now these are political talking points, and they are likely to remain so until after November. The important issue is the principle: What is a fair share, and who should pay it? More important are the larger, existential questions of when and how will the United States combine tax and spending reforms to get its deficit under control.