Certified Public Accountants

Obama’s ‘Buffet’ Rule Doa in Congress, House Republicans Offer Competing Tax Plan

Aug 14, 2012

Democrats in the Senate introduced legislation, the Paying a Fair Share Act of 2012, implementing the so-called “Buffet rule,” which would impose a 30 percent minimum tax on the wealthy. The measure, S. 2230, sponsored by Sen. Sheldon Whitehouse, D-R.I., would apply to taxpayers with adjusted gross income of $1 million annually. Consideration of the bill was quickly blocked by the Republicans, though Democrats vowed to continue their efforts to move the rule forward. The Obama Administration issued a report that says nearly one-quarter of earners with an AGI of more than $1 million had a lower effective tax rate than millions of middle-income taxpayers. The Joint Tax Committee estimates that implementing the Buffet Rule would raise about $46.7 billion over a 10-year period. Republicans were quick to criticize the measure, saying it would do nothing to improve the economy or help struggling families.

Ryan Budget Calls for 25 Percent Top Tax Rate
The Republican – controlled House of Representatives passed its own tax measures as part of the budget. House Budget Committee Chairman Paul Ryan, R-Wisc., devised a plan which would replace the current tax rate schedule with two individual tax rates of 25 percent and 10 percent. It also would lower the top corporate rate to 25 percent and shift the U.S. to a territorial tax system. Ryan would pay for the tax cuts by eliminating other tax benefits which are not specified in the budget legislation, H. Con. Res. 112.  Ryan’s budget was passed by the House on March 29, 2012 by a vote of 228 to 191.
Outlook: The introduction of these measures is essentially political maneuvering by both parties and both Houses of Congress. With the House controlled by the Republicans and the Senate controlled by the Democrats, neither of these measures is likely to become law in this election year, although they may be brought up for another vote. Still, the players are lining up for the 2012 elections, and citizens can use the votes on these proposals to decide which side to support. For tax professionals, the competing tax plans provide an interesting preview of the direction tax policy may take after the November elections.