Obama plans to call Monday for a new minimum tax rate on millionaires as part of a comprehensive rewrite of the U.S. tax code to force the wealthiest Americans to pay the same share of income in taxes as middle-class families.
In a twist on Obama’s long-standing assertion that the wealthy should do more to tame the soaring national debt, the proposal would target the top 0.3 percent of taxpayers, many of whom currently reap huge benefits from lower rates on capital gains and dividends, which form the bulk of their earnings.
While the idea has little chance of winning congressional approval, it could help shape a populist message for Obama and other Democrats heading into the 2012 presidential campaign.
According to a White House official who requested anonymity because the proposal has not been announced publicly, Obama plans to call it the “Buffett Rule,” after Warren E. Buffett, the billionaire investor who stepped down from the Washington Post Co. board of directors in May. Buffett has long complained that the current system taxes him at a far lower rate than his employees.
Although wages are taxed at rates ranging from 10 percent to 35 percent, investment earnings are taxed at 15 percent.
Appearing on CNN’s “State of the Union,” Sen. Lindsey Graham (R-S.C.) echoed Ryan’s characterization of the plan as class warfare, adding that it was “political move” that would do little to reduce the debt.
“The tax code should be reformed for one purpose: to generate more revenue to help run the government and create jobs,” Graham said. “When you pick one area of the economy and you say, ‘We’re going to tax those people because most people are not those people,’ that’s class warfare.”
Democrats, meanwhile, defended the idea and criticized House Speaker John A. Boehner’s (R-Ohio) absolute refusal to consider any tax increases.
“I wonder if Boehner knows what it sounds like when he continues to say the position of the Republican party in America is that you can’t impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio to working families who are struggling paycheck to paycheck.”
Former President Bill Clinton also backed the plan during an appearance on CBS’s “Face the Nation.”
“If you look at the group that has had the biggest income increase and the benefit of most of the tax cuts of the previous eight years before the Obama administration took office, those of us in that income group, we’re in the best position to make a contribution to changing the debt structure of the country.”
White House officials would offer no details of the proposal, which will be the centerpiece of Obama’s recommendations to a special congressional committee working to craft a bipartisan debt-reduction plan before Thanksgiving. The “supercommittee” is aiming for at least $1.5 trillion in savings over the next decade, a target that will be hard to hit without significant tax increases or cuts to popular entitlement programs such as Medicare and Social Security.
In a speech last week, Boehner reiterated his opposition to new taxes. Democrats say they will not agree to entitlement cuts without new revenue, setting up the same stalemate that prevented lawmakers from agreeing to a sweeping debt-reduction package during this summer’s debate over the debt ceiling.
On Monday, Obama is expected to repeat the offer he made Boehner to find significant savings in Medicare and Medicaid, though it was unclear whether he would once again propose raising the Medicare eligibility age. Obama is not, however, expected to revive his call to trim Social Security benefits by using a new measure of inflation, a decision that has cheered liberal activists and many congressional Democrats.
Congressional Democrats were also pleased with the proposed tax on millionaires, calling it a welcome sign that Obama is ready to play hardball with Republicans who have taken the politically unpopular position of defending tax breaks for the wealthy. Republicans have long championed lower rates on capital gains as an important catalyst for investment and job growth.
Rep. Chris Van Hollen (D-Md.), a member of the debt-reduction panel, said the group will be looking at a variety of tax reform proposals and that the millionaire’s tax “should definitely be in the mix.”
Staff writer Rob Stein contributed to this report.