Republicans Getting Buffetted by Taxes
For Republicans on the warpath against Warren Buffett, President Obama’s willing poster child for raising taxes on wealthy Americans, this week has been a very bad one. First, new polling confirmed that Americans overwhelmingly support President Obama’s jobs plan in general and his proposed gilded-class tax hikes in particular. (On that second point, Republican voters agree.) Then on Thursday, the billionaire called Republicans’ bluff and released his $6.9 million tax return and confirmed he paid a lower percentage to Uncle Sam than his secretary. And as it turns out, a new Congressional Research Service study found Buffett’s not alone, concluding that a quarter of millionaires in the U.S. pay federal taxes at lower effective rates than a significant portion of middle-income taxpayers. In response, frustrated Republican mythmakers could only accuse Warren Buffett of giving too much to charity . As Bloomberg News reported, federal tax data show that the need for the Buffett Rule is very real indeed. After IRS data for 2007 revealed that 959 millionaires paid no taxes at all, the new CRS analysis found: Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million “moderate-income taxpayers,” representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7. The findings put the U.S. tax system in conflict with the so-called Buffett Rule, which says households making more than $1 million annually shouldn’t pay a smaller share of their income in taxes than middle class families, says the report, which analyzed 2006 Internal Revenue Service data. And as The Hill reported, the Buffett Rule is aptly named. Responding to demands from Kansas Republican Congressman Tim Huelskamp that he release his tax return (a disclosure Republican presidential candidates thus far have refused to make), Warren Buffett was only happy to comply: Buffett revealed in a letter sent to Huelskamp that his adjusted gross income was $62,855,038 last year and that he paid $15,300 in payroll taxes, as reported by CNN Money. He also claimed, as he had in an op-ed previously this year, that his federal income tax bill last year came to $6,923,494, or about 17 percent of his $39,814,784 taxable income. Finding themselves in a hole, Congressional Republicans continued digging. South Dakota Senator John Thune introduced a bill titled “The Buffett Rule Act of 2011″ (S.1676), which makes it easier for those who voluntarily wanted to pay higher taxes to do so. Meanwhile, Buffett’s House inquisitor Tim Huelskamp declared the billionaire’s response “inadequate” and charged: “What he does disclose may be accurate, but it is incomplete and it fails to explain how he shelters millions of dollars in income from taxation,” the lawmaker said in a statement. “It is unprecedented that we would write an entire law based on one man’s anecdotes without actual proof. By sheltering millions of dollars of income from taxation, probably through charitable giving, Mr. Buffett demonstrates that he doesn’t trust Washington with his own money either.” The Republican accusation that Warren Buffett is giving too much to charity is certain to backfire (even leaving aside that neither the McCains in 2008 nor the Romneys now have provided the information Huelskamp is demanding from Buffett.) For starters, Buffett with Bill Gates is one of the driving forces behind the ” Giving Pledge ” by which a growing group of American billionaires promise to give away half of their fortunes in their lifetimes. Worse still, Republican presidential candidates including Newt Gingrich and Michele Bachmann have stated that uninsured Americans should turn to charities for their health care. Most damning, Buffett highlights that Republican positions on taxes and charitable giving have it exactly backwards. In 2009, President Obama first proposed raising $318 billion over the next decade by trimming wealthier taxpayers’ deductions for charitable giving to 28% from its current 35%. Predictably, Republicans (joined by some Democrats) forecast an apocalypse for donations to charities. As John Boehner ominously (and wrongly) warned, “It will also deliver a sharp blow to charities at a time when they are hurting during the economic downturn.” But as Bloomberg and The Chronicle of Philanthropy each reported, Obama’s proposal would likely have little to no impact on charitable giving. As Bloomberg noted: Not necessarily, say tax and philanthropy experts. They say altruistic or religious motives outweigh tax-shelter considerations among such donors, and cite previous limitations placed on deductions for high earners that they say haven’t hurt donations. Among those previous limitations, as former OMB director Peter Orszag among others recalled, was the same upper income 28% deduction during Ronald Reagan’s first term. As Orszag told reporters in February 2009, the record shows that “what drives charitable contributions is overall economic growth.” Nevertheless, House Majority Leader Eric Cantor continued to push the talking point during an address Sunday at Manhattan’s upscale West Side Institutional Synagogue. Claiming Obama’s proposal to cap itemized deductions (including charitable donations) at the 35 percent tax bracket, a policy he said would cripple many nonprofits and rob altruists of “the mitzvoth of oblations,” Cantor asked: “Why would you do something that makes it less attractive to give to charities when so many people are in need?” As it turns out, while reducing the charitable deduction would likely not have a significant impact on giving, one policy virtually all Republicans support – eliminating the estate tax – surely would. As the data make clear, America’s churches, non-profits, foundations and charities stand to lose billions if the Republicans succeed. In 2003, the nonpartisan Tax Policy Center documented the hemorrhaging that would ensue, concluding “We find that estate tax repeal would reduce charitable bequests by between 22 and 37 percent, or between $3.6 billion and $6 billion per year.” A 2006 analysis of CBO data by the Center on Budget and Policy Priorities found that “had the estate tax not existed in 2000, charitable donations would have been $13 billion to $25 billion lower that year” and that “repealing the estate tax would have reduced charitable bequests by 16 to 28 percent and charitable giving during life by 6 to 11 percent.” And before he became the chief economic adviser for John McCain (who in 2008 called for the repeal of the estate tax despite two years earlier having proclaimed “most great civilized countries have an income tax and an inheritance tax” and “in my judgment both should be part of our system of federal taxation.”), then Congressional Budget Office head Douglas Holtz-Eakin agreed. As CBO director Holtz-Eakin wrote in “The Estate Tax and Charitable Giving”: Furthermore, the estate tax provides an incentive to make charitable contributions during life. The paper finds that increasing the amount exempted from the estate tax from $675,000 to either $2 million or $3.5 million would reduce charitable giving by less than 3 percent. However, repealing the tax would have a larger impact, decreasing donations to charity by 6 percent to 12 percent. Warren Buffett couldn’t agree more. Buffett, who declared “it’s my class, the rich class, that’s making war, and we’re winning,” voiced his support for the estate tax by remarking it’s time for Washington to stop “giving incredible head starts to certain people who were very selective about the womb from which they emerged.” But for Republicans who falsely claim that at a time of record high income inequality and historically low federal taxes that boosting upper-income rates would cripple America’s small businesses and crush its supposed “job creators” , Warren Buffett remains the billionaire they love to hate. Sadly for the right-wing propagandists, Buffett has his life story, the national data and, most importantly, the American people on his side when he makes his argument. Stop coddling the super-rich . (This piece also appears at Perrspectives .)
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Republicans Getting Buffetted by Taxes
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on October 14, 2011. Filed under