Published in Summer 2009 in the National Committee for Responsive Philanthropy publication. Linked from NCRP online.
A group of wealthy people is circulating a petition calling for higher taxes for themselves. Sound familiar?
This particular group is based in Germany, and it is asking the government to impose a 5% wealth tax on the 2.2 million people with over 500,000 euros. This has the potential to raise over 100 billion euros for economic recovery.
Like Wealth for the Common Good signers, these petitioners believe that reinvesting in the common good is a necessary strategy for addressing inequality.
As reported by the BBC:
“The path out of the crisis must be paved with massive investment in ecology, education and social justice,” they say in the petition.
Those who had “made a fortune through inheritance, hard work, hard-working, successful entrepreneurship, or investment” should contribute by paying more to alleviate the crisis.
It’s powerful when those who would pay a tax advocate on its behalf. We wonder, where will the next campaign be?
Published 10 September 2009. Linked from TheHill.com
By Alexander Bolton
Warren Buffett, the renowned investor and the world’s second richest man, told Senate Democrats that wealthy Americans need to pay higher taxes, giving Democrats something to mull as they address healthcare reform and soaring federal deficits.
Senate Democrats met with Buffett for more than an hour over lunch Thursday, peppering him with questions about the economy, said lawmakers in attendance.
“He said rich people are not paying enough taxes,” said Sen. Claire McCaskill (D-Mo.). “It was interesting to see someone who is such an aggressive capitalist, who believes so much in our capitalist system, saying we’ve got the scales way too heavily toward people who are very, very wealthy.”
Buffett told lawmakers that because of the cuts to the capital gains tax passed under former President George W. Bush, he pays taxes at a lower rate than some of his company’s employees.
It is an argument the investor has made before. Buffett said he paid a 16.5 percent tax rate on all his income because the tax rate on investment dividends and long-term capital gains is only 15 percent.
By contrast, a single employee at Buffet’s firm, Berkshire Hathaway, who earns between $33,000 and $83,000 must pay a 25 percent federal income tax rate.
Sen. Ben Nelson, a centrist Democrat from Nebraska, said he wasn’t sure whether Buffett’s chat would embolden his colleagues to raise taxes.
“I don’t know that people will move toward tax increases,” he said in reference to healthcare reform funding. “Tax is still for a four-letter word, and I think there are other ways to pay for this than raising taxes.”
In 2003, Congress cut the capital gains tax from 20 percent and created a separate 15 percent tax rate for dividends. Before then, dividends were taxed at the ordinary income rate, which is 35 percent for top earners.
Both tax cuts are due to expire at the end of next year.
Senators were eager to hear from the famous “Oracle of Omaha” as they struggle to solve the nation’s economic woes, which have helped drive Congress’s approval ratings to new lows.
Buffett told lawmakers that the long-term economic outlook of the nation was strong but declined to predict when the recession would end.
“People wanted to know what was going to happen in the next six months and he said, ‘I can’t tell you,’ ” recalled one participant.
Buffett told lawmakers that improving education and ensuring broad opportunity would help the nation grow economically over the next decade, but what most perked up some ears was what he had to say about taxing the rich.
Sen. Byron Dorgan (N.D.), chairman of the Democratic Policy Committee, who invited Buffett to the lunch, said colleagues wanted to hear the wisdom of an economic genius who draws 30,000 people to Berkshire’s annual meeting in Omaha, Neb. Buffett has met with Senate Democrats several times over the past few years.
“There were a lot of questions about the economy and his assessment of financial regulation,” said Dorgan.
Buffett shared with lawmakers his “common-sense approach to capitalism,” said one attendee.
He told lawmakers that they should overhaul the nation’s financial system in a way that allows investors to do well but also imposes a sense of responsibility on Wall Street.
Buffett supported President Barack Obama during the 2008 presidential election but has since criticized some of the president’s policy proposals. Earlier this year he called a cap-and-trade proposal to limit greenhouse gas emissions a “regressive” tax.”
Buffett has also urged Democrats to scale back their policy agenda to focus on fixing the economy.
The billionaire investor called the Employee Free Choice Act a “mistake.” The legislation, which would overhaul labor laws, is a priority of unions and many liberal Democrats.
But Buffett and Senate Democrats put aside their policy differences on Thursday to focus on the nation’s sluggish economy.
He gave a pep talk to some lawmakers who are wondering if the nation’s best economic days are past.
“He’s a real optimist and thinks this is a great country and our best days are ahead of us,” said Senate Majority Leader Harry Reid (D-Nev.).
One lawmaker who attended the meeting said that Buffett gave the audience a lesson on the economic history of the world, touting the U.S. system as one that unlocks individual potential, striking a contrast with totalitarian countries that limit economic freedom.
Lawmakers said it was refreshing to hear a positive assessment of the nation’s economic system after listening to months of criticism from the left about capitalist excess and the inability of markets to self-regulate.
Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, said the cap-and-trade proposal did not come up.
Many senators saw their own portfolios shrink as stock markets plunged over the last year, and no doubt would have liked to hear some personal stock advice from the market guru.
But Buffett said lawmakers didn’t invite him to ask for stock tips.
“They didn’t ask for any, they must have known how my recent ones worked out,” said Buffett, who has lost about $25 billion in wealth because of the recession, according to Forbes.com.
He declined to otherwise comment on his discussions.
Originally published on 11 July. Linked from Wall Street Journal
WASHINGTON—House Democrats plan to pay for their health-care legislation with a big tax increase on wealthy households, aiming to raise $540 billion over the next decade with a package of surtaxes on families making $350,000 or more.
The tax increase is the financial cornerstone of legislation that seeks to make good on President Barack Obama’s call to expand health-insurance coverage to tens of millions of uninsured Americans, while attempting to offset the cost and avoid expanding the federal budget deficit.
![[New York Rep. Charles Rangel speaks at the White House Forum on Health Reform in March. His proposed wealth surtax would begin in 2011.]](http://s.wsj.net/public/resources/images/NA-AY911_HEALTH_DV_20090710190900.jpg)
Associated Press
New York Rep. Charles Rangel speaks at the White House Forum on Health Reform in March. His proposed wealth surtax would begin in 2011.
The House bill, expected to be formally unveiled as soon as Monday, is likely to cost $1 trillion overall. About half the cost of the bill will come from budget savings from ratcheting down payments that health-care providers receive through programs like Medicare, which covers the elderly. The balance will come from revenues generated by a graduated surtax that would begin in 2011, said New York Rep. Charles Rangel, chairman of the tax-writing House Ways and Means Committee.
Upper-income families currently face a top income-tax rate of 35%, though that is scheduled to rise to 39.6% in 2011. Under the Rangel plan, married couples making $350,000 would also be subject to a 1% surtax to cover the health plan. The levy would rise to 2% for those making above $500,000 and 3% for those with incomes of $1 million or more. Around 1% of U.S. households filing tax returns make more than $350,000, according to the Internal Revenue Service.
Congressional aides said the surtax rates would go higher as soon as 2013—to 2%, 3% and about 5% for each of the three levels. They added, though, that the higher rates might not kick in if other ways to pay for the health plan were found by then.
Mr. Rangel offered details of the financing plan Friday after emerging from a daylong caucus of Democrats on the Ways and Means panel. House Democrats aim to convene three key committees next week to formally consider the package. The legislation, which would create a public health-insurance plan that competes with private insurers, is expected to be brought before the full House by the end of the month.
But even as details are coming together, Democratic leaders are scrambling to win support from fiscal conservatives, rural Democrats and politically vulnerable freshmen who have all raised objections. Some worry the public plan will tilt the marketplace against private insurers. Others worry about the cost of the package, and fear having to vote on a bill that includes such substantial tax increases.
“I’m not persuaded any sort of tax increase is needed,” said Rep. Gerald Connolly, a first-term Democrat from Virginia. He suggests Democrats should focus more on finding budget savings. “The jury is still out on what, if anything, we have to do for revenue enhancement.”
The struggle for unity among Democrats dramatizes the larger challenge facing the majority party: whether rank-and-file Democrats are willing to stomach higher taxes in the pursuit of expanding access to health care.
Throughout 2008, Mr. Obama himself signaled a readiness to raise taxes on wealthy individuals as a way to pay for his priorities. In his budget unveiled in the spring, Mr. Obama assumed the Bush tax cuts for the wealthy would expire at the end of 2010. Those higher rates would fall on couples with incomes above $250,000. Mr. Obama also proposed to limit tax deductions taken by the wealthy to help pay for heath care.
A White House aide speaking on background said the majority of the funding for the health-care overhaul should come from budget savings, such as cuts in wasteful spending in Medicare and Medicaid, which provides care for the poor. The White House aide added that “Congress is making good progress” in looking for addition revenues beyond budget cuts. “There are several good ideas on the table,” the aide said, pointing to the president’s proposal to limit itemized deductions for the wealthy.
Democratic leaders argued Mr. Obama’s efforts have made raising taxes on the wealthy an easier political gambit than such alternatives as taxing health benefits. Broadly, they hope to steer debate away from the cost of the bill and how to finance it. “The big debate is going to be between those who want to protect the status quo, and those who want to reform our health-care system,” said Rep. Chris Van Hollen (D., Md.).
Curtis Dubay, a senior tax policy analyst at the Heritage Foundation, a conservative think tank, said the Democratic plans to raise taxes on the wealthy could backfire politically. “There certainly will be a steep price to pay,” he said.
Michael Steel, a spokesman for House Minority Leader John Boehner (R., Ohio) criticized Mr. Rangel’s proposal, underscoring the Republican line of attack. “In the middle of a serious recession, with unemployment nearing double digits nationwide, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs,” he said.
Even if the House does embrace the higher income taxes, that doesn’t guarantee the levies would be part of a final health bill. Senators are separately deliberating on their own versions of a health plan, and higher taxes are likely to face more resistance in the Senate.
After discarding a proposed tax on health-care benefits as too politically risky, Senate Democrats are considering a range of alternatives, including possible levies on pharmaceutical companies and insurers, as well as a surtax on wealthy individuals. Details of the Senate bill are not expected to be nailed down until later this month.
Party leaders argue taxes on the wealthy are more easily defended than other levies, such as the proposed tax on health-care benefits. The issue of financing has produced a sharp debate among Democrats, in part because the issue is exposing the party to political attacks from Republicans.
GOP leaders have pounded the Democrats for proposing to raise taxes during a recession, which they argue would further stunt economic growth. The Republican National Committee swatted at Democrats again Friday, saying their plan to pay for health-care legislation “would hit small businesses hard,” since small-business owners often pay their business taxes as part of their personal income taxes.
Under the emerging House bill, the second increase in surtax rates wouldn’t kick in if budget savings exceed expectations and cover the cost of the bill. That was a nod toward House Majority Whip James Clyburn (D., S.C.), who suggested that putting a trigger on the surtax could mollify restive Democrats.
“What I’m talking about is not unprecedented,” Mr. Clyburn said in an interview. He noted that other lawmakers are proposing a trigger for the public plan, in case other provisions in a health-care overhaul don’t lower the number of uninsured Americans as rapidly as planned.
U.S. House May Include Surtax on Wealthy in Health-Care Package
By Ryan J. Donmoyer
July 7 (Bloomberg) — House Ways and Means Committee members are likely to propose a surtax on high-income Americans to help pay for an overhaul of the health-care system, according to people familiar with the plan.
The tax would be similar to, yet much smaller than, a surtax proposed in 2007 by Ways and Means Committee Chairman Charles Rangel, a person familiar with the committee’s talks said. That plan would have added at least a 4 percent levy on incomes exceeding $200,000, and was projected to reap as much as $832 billion over 10 years.
Two people familiar with closed-door talks by committee Democrats said a House bill probably will include a surtax on incomes exceeding $250,000, as Congress seeks ways to pay for changes to a health-care system that accounts for almost 18 percent of the U.S. economy. By targeting wealthier Americans, a surtax may hold more appeal for House Democrats than a Senate proposal to tax some employer-provided health benefits.
“The surtax is obviously more attractive to Democrats in the House because it’s more progressive, which they find attractive in and of itself,” said Paul Van de Water, a senior fellow at the Washington-based Center on Budget and Policy Priorities, a research group focused on policies affecting low- and moderate-income families.
Supporters on the Ways and Means Committee include Representative Lloyd Doggett, a Texas Democrat who backs including a surtax among revenue-raising measures in a health- care package, Doggett spokeswoman Sarah Dohl said.
Republicans in Congress, and some Senate Democrats, are likely to fight moves to increase tax rates, said Clinton Stretch, who analyzes tax legislation at Deloitte Tax LLP, a Washington consulting firm.
Republican Opposition
“This will be a point of discomfort for moderate or conservative Democrats” in the Senate, he said. “It will be an anathema for Republicans.”
The possibility of raising taxes on top earners surfaced last month as a revenue option for members of Rangel’s committee, and the people familiar with the talks cautioned that no agreement has been reached. A Senate plan to tax the value of employee benefits that exceed coverage for federal workers may generate as much as $418.5 billion over 10 years, though talks are focused on proposals that would raise considerably less.
Rangel’s 2007 plan would have added a 4 percent tax on incomes exceeding $200,000 and an extra 0.6 percent levy on those making more than $500,000. A House plan this year may include lower rates and higher income thresholds, a person familiar with the plan said.
Tax Increase
A surtax proposal would force President Barack Obama to decide whether he is willing to add the levy on top of higher income-tax rates for top earners that he wants to take effect in 2011. Obama has promised that he won’t increase taxes on Americans earning less than $250,000 and said he will delay increases for high-income earners until 2011.
Obama hasn’t commented on the possibility of a surtax, and the White House had no comment on specific proposals. The president has proposed limiting itemized deductions for high- income taxpayers.
Obama has said he doesn’t want to tax health-insurance benefits, while refusing to rule out that possibility if it helps seal approval for an overall health package.
Congressional Democrats have said they may need to raise taxes by at least half a trillion dollars to pay for the health- care revamp, in addition to savings of almost as much through steps such as reducing Medicare subsidies and cutting prices the elderly pay for medications.
‘Everything’ on Table
Matthew Beck, a spokesman for the Ways and Means Committee, declined to comment about the surtax option, saying only that “everything’s on the table.”
Michael Steel, a spokesman for House Minority Leader John Boehner of Ohio, the chamber’s top-ranking Republican, said his party would oppose a surtax because it would “disproportionately” affect small businesses, whose owners often include business income in amounts taxed on their individual returns.
“With unemployment nearing double digits, we need to help small businesses grow and create jobs, not squeeze the life out of them with even higher taxes,” Steel said.
According to the Tax Policy Center, a Washington research group, about 4.3 million of 150 million U.S. households filing tax returns will earn more than $200,000 this year.
A surtax would be levied on adjusted gross income, before deductions for items such as mortgage interest and charitable gifts. Regular income taxes are assessed after such write-offs.
Different Objectives
Eugene Steuerle, vice president of the Peter G. Peterson Foundation, a non-profit federal budget watchdog group, said the surtax and a levy on benefits reflect “very different objectives.” A surtax would make the tax code more progressive, and cutting tax incentives for employer-provided insurance is intended to discourage unnecessary use of medical services, he said.
Mark Weinberger, vice chairman of New York-based Ernst & Young LLP, said that while Republicans won’t back higher tax rates, House Democrats at this point don’t need bipartisan support.
“Strategically, what Democrats have to do is just move the ball forward,” Weinberger said. “Whatever revenue raisers they have in the House or Senate bills will change throughout the process.”
To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.
Last Updated: July 7, 2009 06:23 EDT
By Sarah Lovenheim
Citizens for Tax Justice (CTJ), a nonprofit group which targets corporations and the rich, has released a state-by-state cost-assessment of two proposals to pay for health-care reform: a White House plan to limit the benefits of itemized deductions for high-income Americans and one of its own to reform the Medicare tax.
CTJ found that both proposals would save significant funds to help cover reform but concluded that expanding the Medicare tax would save the most money. The White House plan, CTJ reported, would raise more than a quarter trillion dollars over 10 years, while it’s own would save one trillion in tax increases over the next decade.
Director of CTJ Bob McIntyre said both proposals “would be good policy even if Congress wasn’t trying to raise the money in particular for health care.”
McIntyre said critics have complained that the White House proposal “is going to be too harsh on wealthy states that have progressive income taxes,” as it involves limiting tax savings from itemized deductions to 28 cents on the dollar for everyone. Yet according to CTJ’s findings, “the range among states is really quite narrow,” he said.
For example, the report finds that in Connecticut, the state with the highest percentage of taxpayers expected to be affected, only two and a half percent of taxpayers would be impacted. In Vermont, the state with the lowest number of taxpayers expected to be affected, only four percent of taxpayers would be impacted. According to McIntyre, “that is not much of a range” to be concerned about.
The bottom line, he explained, is that the plan would save money by decreasing the amount of tax savings high-income Americans could receive, in order to help cover the cost of health-care reform.
As for CTJ’s own proposal to expand the Medicare tax?
Its plan to expand the Medicare tax would mean including Americans with unearned income, such as dividends and capital gains. Currently, the tax is limited to Americans reporting wages and earned income.
It “would impose the worker side of the Medicare tax — the 1.4 tax — to unearned income and then it would add a second rate of two and a half percent for very wealthy people and for elderly couples,” McIntyre said.
He calls it “a low-rate tax,” as the tax is lower than the total Medicare tax now, he says (2.9 percent when you account for the employer side). For most people, he believes this change would signify “virtually no tax at all.”
Eighty percent of the tax hikes would be paid for by 5 percent of all taxpayers. “We do have very small tax hikes in other income groups, but they’re not burdensome. For the bottom 60 percent for instance, the average tax hike would be less than 50 cents per week,” he said.
The report’s release is part of a broader campaign aimed at promoting cost-saving proposals to support health-care reform without burdening low-income Americans. CTJ has teamed up with the SEIU and USAction to promote its findings nationwide.
Ann Kempski, director of Health Policy at SEIU, said the numbers reported today “show members of Congress that they are fair and fiscally-responsible approaches to pay for the urgently-needed transformation that we need to make in our nation’s health-care system.”
Members of Congress “who say that we should wait, we should go slow, we should take only slow steps are actually saying to American workers to brace themselves for more hikes in their premiums, more hikes in their out-of-pocket costs, in fact, costs that could rise by 68 percent over the next 10 years if we do nothing,” she said.
A copy of the report lives here.
Taxing Matters: Progressive Tax Reforms Vital to Rebuild America
Krista Brewer, Sam Pizzigati, Michael Shuman, Chuck Collins and Alison Goldberg present on revenue proposals at the Campaign for America’s Future Conference.
