An election-focused White House on Monday argued its proposed “Buffett Rule” makes good economic sense, setting the stage for a weeklong attack on Republican front-runner Mitt Romney’s tax plan that the president says benefits the rich at the expense of the middle class.
Democrats intend to use next week’s expected Senate vote on the Buffett Rule to strike familiar partisan themes, painting Republicans as supporters of tax loopholes and low rates for the wealthy. And as part of that strategy, President Obama’s reelection team will use that debate and vote as a reference point for criticizing Romney and his economic plan.
“In part, this campaign will be a debate on this tax fairness issue, and we’re willing to have that debate,” Obama campaign manager Jim Messina told reporters on Monday.
The Buffett Rule, floated by Obama last year, is embedded in a bill from Sen. Sheldon Whitehouse, D-R.I., that would establish a minimum effective tax rate of 30 percent for taxpayers who earn more than $1 million a year, including income from capital gains and dividends.
Wealthy Americans, who derive most of their income from investments rather than a regular paycheck, disproportionately benefit from the lower tax rate on investment income. Romney in January said he pays an effective tax rate of about 15 percent because his income is primarily derived from investments.
The White House and Obama’s campaign team are using that to argue that the tax code, and Romney’s tax proposals, are inherently unfair.
In a National Economic Council report released early on Tuesday, the administration says the average tax rate for the top 0.1 percent of households stands at nearly the lowest in more than 50 years. According to Alan Krueger, chairman of the White House Council of Economic Advisers, the highest-income households paid 29.9 percent of their income in taxes in 1995. That’s just shy of the 30 percent minimum dictated by the Buffett Rule.
“Romney is the beneficiary of a broken tax system and he wants to keep it that way,” Messina said.
But proponents of a lower tax rate on dividends and capital gains, including Romney, say it is necessary to encourage investments that both keep credit flowing and create jobs for the economy.
What's more, Republicans criticize Whitehouse’s bill as a purely political maneuver that would do little to balance the federal budget.
“It was designed for no other reason than politics—there is no economic rationale for it,” Senate Finance Committee ranking member Orrin Hatch, R-Utah, said in a memo last month.
Whitehouse’s bill would bring in $47 billion in revenue over 10 years, according to a report from the Joint Committee on Taxation. That is less than 0.3 percent of the country’s $15.6 trillion debt, Hatch’s memo said.