President Barack Obama will propose a new levy on U.S. taxpayers who make more than $1 million as a means to help trim the nation’s debt, adopting a suggestion from billionaire investor Warren Buffett, according to an administration official.
The tax will be part of the recommendations the president will make to a special congressional committee charged with finding ways to trim $1.5 trillion from the nation’s long-term deficit, according to the official who wasn’t authorized to speak on the record. Obama is set to unveil his deficit-cutting proposals tomorrow.
The president hasn’t settled on the new minimum tax rate for top earners, which is designed to make sure the wealthiest taxpayers aren’t paying a lower effective tax rate than middle- income earners, the official said. Obama has already proposed limiting some tax deductions for those in the highest income brackets, taxing carried interest as regular income and ending breaks for gas and oil companies to pay for the $447 billion jobs package.
The New York Times reported the president’s plan Saturday.
Any new tax will likely face opposition from Republicans, who control the U.S. House and have argued that raising taxes on higher-income individuals would hurt small businesses and stifle investment. A spokesman for House Speaker John Boehner of Ohio didn’t immediately respond to a request for comment.
In a Sept. 15 speech to the Economic Club of Washington, Boehner, an Ohio Republican, said the 12-member panel should focus solely on cuts to federal spending and overhauling Social Security, Medicare and Medicaid to reach the $1.5 trillion in deficit cuts. He rejected tax increases.
“Tax increases, I think, are off the table, and I don’t think they’re a viable option for the joint committee,” he said.
The bipartisan panel has a Nov. 23 deadline to reach agreement on a plan. On taxes, the group is likely to consider setting targets for major changes to be considered over the next year, before income-tax cuts first enacted under President George W. Bush are set to expire at the end of 2012.
With the nation’s jobless rate at 9.1 percent, the economy is a top issue for both parties in next year’s elections for president and Congress. Obama is confronting skepticism from voters about his policies as public opinion polls show his approval ratings are dropping.
A majority of Americans don’t believe his jobs plan will help lower the unemployment rate, a Bloomberg National Poll conducted Sept. 9-12 shows. The poll found 62 percent disapprove of his handling of the economy. The president’s overall job- approval rating was 45 percent, the lowest since he was inaugurated in January 2009.
Gross domestic product climbed at a 1 percent annual rate in the second quarter, down from a 1.3 percent prior estimate, according to revised Commerce Department figures released last month. Combined with the 0.4 percent annual rate of growth in the first three months of the year, the past two quarters were the weakest of the recovery that began in mid 2009.
Buffett has served as an informal adviser to the president since Obama’s 2008 election campaign and conferred with the president before his Sept. 8 address to Congress. Buffett plans to hold a Sept. 30 fundraiser in New York City for Obama’s re- election bid.
Obama has cited Buffett to counter critics of his policy proposals, particularly on taxes.
During his bus tour last month through rural areas of Minnesota, Iowa and Illinois, Obama quoted from a New York Times opinion article in which Buffett wrote that the nation’s richest individuals have been “coddled long enough by a billionaire- friendly Congress.” Buffett argued for raising taxes for the “mega rich” in the U.S.
In the article, the 81-year-old chairman and chief executive officer of Berkshire Hathaway Inc. said his federal tax bill last year, or the income tax he paid and payroll taxes paid by him and on his behalf, was $6,938,744.
“That sounds like a lot of money,” Buffett wrote. “But what I paid was only 17.4 percent of my taxable income -- and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”
Capital gains from most assets held for longer than a year are taxed at a top rate of 15 percent, while wage income is taxed at a top rate of 35 percent. The difference between those two accounts for Buffett’s lower rate.
About 8.4 million U.S. households had assets of $1 million or more, excluding primary residences, according to a March report by Spectrem Group, a Chicago-based consulting firm. It also showed that the number of U.S. millionaires increased by 8 percent in 2010.
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