The Buffet Rule: An Excellent Idea

      Obama has embraced the "Buffett Rule" which to sum up succinctly is that no super rich person should pay a lower percentage in taxes than average Americans. Buffett who as one of the very richest men in the world has for a long time said, "Raise my taxes" recently had noted that he pays a lower tax rate than his secretary, as most of his income is in capital gains which is-wrongly I believe-taxed at a much lower level than income.

     The Buffett rule would apply to those with at least $1 million in income and works like the alternative minimum tax(AMT); in fact Obama means to replace the AMT with the Buffett Rule which is a good thing as the AMT has failed in its function of making sure the super wealthy aren't able to avoid all tax: in reality it usually hits the upper middle class the hardest. This is an added advantage as although the GOP is predictably denouncing this as a costly tax increase that will destroy growth, it will actually lower taxes for many upper middle class people in addition to being a net revenue raiser. Obama has put the Super Committee on notice that he will not allow 1 dime of cuts to Medicare or Medicaid without raising taxes on the rich and corporations.

    Although the GOP will make the heavy weather over tax increases in the time of recession and that voters will punish Obama for his "class warfare" the reality is that the Buffett Rule will effect very few taxpayers. "About 450,000 out of more than 144 million tax returns filed last year, or about 0.3 percent of taxpayers. And even that 450,000 somewhat overstates the number of individuals affected, given that the number includes small businesses as well as wealthy individuals."

    http://www.thedailybeast.com/articles/2011/09/19/obama-embraces-warren-buffett-s-call-for-higher-taxes-on-the-very-rich.html

    More Americans will be benefited by the end of the old AMT that hit upper middle class tax payers.

    According to Zachary Karabell, "As a result, Obama has at last arrived at something that has political traction and widespread appeal, which in turn puts the Republicans in the problematic position of opposing something that a significant majority support. It is an effective political salvo for a White House that has been increasingly neutered."

   Karablell seems to think Obama will win this one. It will achieve  three important things. It will raise revenue, it will also finally reform the old AMT which as noted has not ever done what it was intended as it was not indexed to inflation. And it supports in principle the idea of progressive taxation.