WASHINGTON (Reuters) - Millionaires would pay a minimum 30 percent effective tax rate under a law introduced on Wednesday in the Senate with the backing of President Barack Obama and named after billionaire investor Warren Buffett.
Nicknamed the “Buffett Rule,” the tax bill reflects Democrat Obama’s bid ahead of November elections to highlight the sort of unfairness he says is represented by Buffett’s tax anomaly - that he pays a lower effective rate than his secretary does.
The “Paying a Fair Share Act of 2012,” introduced by Democratic Senator Sheldon Whitehouse, has almost no chance of passage this year as the Republican-controlled House of Representatives has sworn off tax increases.
“The president is desperate to distract attention away from his failed economic policies,” Kevin Smith, a spokesman for House Speaker John Boehner, said on Wednesday. House Republicans “are going to focus on tax policy that actually helps create jobs - not soundbites,” he said.
Revenue generated from the tax has yet to be officially calculated, but Whitehouse said it could raise $40 billion to $50 billion a year.
In October, Senate Majority Leader Harry Reid, a Democrat, introduced the American Jobs Act, which included a first version of the Buffett rule as a 5.6 percent surtax on millionaires. It never came to a vote.
About 94,500 taxpayers, a quarter of all U.S. millionaires, pay a lower tax rate than the bulk of middle-income taxpayers, according to the Congressional Research Service.
Buffett makes a living off investments, which are taxed at 15 percent for capital gains and qualified dividends. Buffett’s secretary earns a salary and is taxed in wage-income tax brackets that range from 10 percent to 35 percent.
The tax fairness issue flared last month when Republican Mitt Romney, one of the wealthiest men ever to run for president, and his wife Ann came under pressure to release their
Documents released last week showed they paid an effective tax rate of 13.9 percent in 2010 and expect to pay a 15.4 percent effective tax rate when they file their returns for 2011.
Obama seized on the issue in his State of the Union address last week when he called for the 30 percent minimum tax. Buffett’s secretary, Debbie Bosanek, attended the speech as a guest of first lady Michelle Obama.
Republicans in the House and Senate have countered with legislation that would allow taxpayers to donate money to the Treasury Department if they feel they are not paying enough in taxes.
Editing by Howard Goller and Vicki Allen