10 things to know about ‘Buffett Rule’

The US Senate is scheduled to vote on the proposed “Buffett Rule,” on Monday, which would slap a minimum tax on the highest-income Americans. However, there is a lot of political noise around the rule.

Republicans have attacked the Buffett Rule as a diversion from the weak economy. They also argue that raising taxes on the rich would hit small businesses and discourage their growth. The Democrats are planning to cast the Republicans and their presumptive presidential candidate – Mitt Romney, himself a millionaire -- as the party of the wealthy.

Here are 10 basic facts about the Buffett Rule and the issues surrounding it.

1. What is the Buffett Rule?

The rule is named after billionaire investor Warren Buffett, who backs it. The rule will require individuals with adjusted gross income of more than $1 million, or $500,000 for married individuals filing separately, to pay at least 30 per cent in taxes.

2. Buffett has said he pays a lower effective tax rate than his secretary, who sat next to first lady Michelle Obama at January's State of the Union speech as the president's guest.

3. The White House on Tuesday said the Buffett Rule was being proposed "as a basic rule of tax fairness" and that many high-income Americans pay less than their fair share of taxes. (White House report on rule).  Democrats say the tax would not apply to people with $1 million or more in assets, who comprise a larger chunk of the US population than those with annual incomes of $1 million or more.

4. About 433,000 U.S. households earn more than $1 million a year. That is only about 0.3 percent of all taxpayers, according to the Tax Policy Center, a research group.

5. Taxpayers earning more than $1 million a year pay an average U.S. income tax rate of nearly 19 percent, according to the Tax Policy Center. The top individual tax rate is 35 percent. Loopholes and other deductions help lower that rate so that most Americans pay a much lower effective rate.

6. About 65 percent of taxpayers who earn more than $1 million face a lower tax rate than the median tax rate for moderate income earners making $100,000 or less a year, according to the Congressional Research Service, based on 2006 IRS taxpayer data.

7. A few months ago, the Obama administration offered the rule as a substitute for the Alternative Minimum Tax (AMT), but congressional tax experts later showed that the Buffett Rule could not raise enough revenue to replace the AMT.

8. The Buffett tax would raise $47 billion from 2012 through 2022, if imposed on taxpayers earning more than $1 million, or $500,000 for married individuals filing separately, according to a March memo from the Joint Committee on Taxation, a nonpartisan body that estimates tax changes for lawmakers. Critics say the additional revenue would do little to tame the $1.2 trillion federal budget deficit forecast for the US fiscal year ending September 30. Proponents say the bigger issue is fairness.

9. Why is the Senate voting again?  

The Democrat-controlled Senate has voted multiple times on measures to raise taxes on the wealthy and each time the legislation has been killed because it lacked the 60 votes needed to overcome procedural hurdles in the 100-member Senate.

With millions of Americans rushing to file their annual tax forms by the April 17 deadline, this is an effective way of again focusing attention on the "fairness" issue that Democrats are emphasizing in the 2012 political campaigns.

Also, recent public opinion polls show that a clear majority of Americans favor raising taxes on the rich.

10. Mitt Romney, who has all but won the Republican primaries, is the sort of taxpayer at whom the Buffett tax is aimed. In January, the Romney campaign released tax documents that showed the Romneys paid an effective tax rate of 13.9 percent in 2010 and an estimated 15.4 percent effective tax rate for 2011. President Obama on Friday released tax returns for 2011 showing he paid a 20.5 percent effective tax rate on $789,674 of income, so he would not be subject to the Buffett Rule.