Senate Minority Blocks Even Minimal Tax Reform, Preserves Lower Effective Tax Rates for Millionaire Investors
Today, a minority of Senators demonstrated that they will filibuster even the most minimal step towards tax fairness.
The legislation, proposed by Senator Sheldon Whitehouse, would implement the Buffett Rule. It would not affect anyone except taxpayers who have incomes exceeding $1 million and yet manage to pay a smaller portion of their income in taxes than do many people who work for wages and salaries. Even the very basic step of requiring these millionaires to pay at least 30 percent of their income in income and payroll taxes proved too much for the Senate minority, which successfully filibustered this bill.
This legislation should be just the very beginning of the far more sweeping reforms that our tax system desperately needs. The main reason some millionaires pay low effective tax rates is that investment income is taxed at lower rates than other income under the federal personal income tax and is currently not touched at all by federal payroll taxes. The Buffett Rule would limit this tax preference for investment income for millionaires.
But ultimately Congress must go much further than the Buffett Rule. The way to truly make our tax system simpler and more efficient would be to completely repeal the personal income tax preference for investment income and tax all income at the same rates. This would raise over half a trillion dollars over a decade. Eighty percent of the resulting tax increase would be paid by the richest one percent of Americans, and 90 percent of the tax increase would be paid by the richest five percent of Americans. While the Wall Street Journal can be expected to call this tax reform “socialism” or “class warfare,” it was a major part of the tax reform signed into law by President Ronald Reagan in 1986.
Today we find that even the smallest step back to this Reagan-era policy is unacceptable for the Senate minority, who filibustered the Buffett Rule and apparently can be counted on to block anything resembling fair tax reform.