President Obama has cited billionaire investor Warren Buffett in his ill-conceived crusade to raise tax rates on high income individuals. In advocating for a so-called “Buffett Rule” the President argued:

Middle-class families shouldn’t pay higher taxes than millionaires and billionaires … Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it. It is wrong that in the United States of America, a teacher or a nurse or a construction worker should pay higher tax rates than somebody pulling in $50 million.

In “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction” released on September 19, 2011 the President states that “people making over $1 million should not pay lower taxes than the middle class.” Leaving aside the harmful economic consequences of adopting the “Buffett Rule,” the President and Warren Buffett are just plain wrong on the facts.

This Republican Staff Commentary will present information derived from data published by the Internal Revenue Service (IRS) that demonstrates the false premise on which the President’s proposal is based.

Summary

• In 2009, 62.8% of all taxable income for those with adjusted gross incomes in excess of $1 million was taxed at the maximum statutory rate of 35% and another 25.5% was taxed at the long-term capital gains and qualified dividend rate of 15%.

• More than 73% of taxable income for those with adjusted gross incomes at $1 million and up was assessed tax rates of 25% or greater.

• The highest 1% of income earners has not seen their share of the income tax burden decline. And their share of income is essentially the same as it was in 2000.

• Collectively, only taxpayers with incomes greater than $100,000 pay a share of taxes that is greater than their share of income.

• More than half of returns reporting positive income of less than $75,000 in adjusted gross income had no positive income tax liability.

• While the capital gains tax reductions that took effect in 1997 and 2003 resulted in lower average tax rates among the top 400 returns, their share of total income taxes paid actually increased.

• The data clearly shows that the highest income earners are not a stagnant group, but a constantly changing set of taxpayers.

 

See full report in pdf format below