President Barack Obama walks to the Rose Garden of the White House prior to signing the Jumpstart Our Business Startups (JOBS) Act, April 5, 2012, in Washington.
There’s someone who urgently needs to talk to you about your taxes this week, and it’s not your panicked procrastinating CPA. President Obama wants you to know what your tax rate is. He wants you to know what the tax rates are for about 400 of the very wealthiest Americans. And most of all, he wants you to know that if those top earners are paying a lower rate than you are, he has a plan to make them pay more.
On Tuesday, April 10, the President is traveling to Florida to give a speech about the Buffett Rule, a tax proposal that would require anyone who makes more than $1 million annually to pay at least 30% of the income in federal taxes before charitable deductions and payroll taxes are factored in. Named for Omaha investor Warren Buffett, whose executive assistant got a balcony seat at this year’s State of the Union address because her billionaire boss pays a lower percentage of his income to Uncle Sam than she does, the Buffett Rule would primarily affect those whose income largely derives from capital gains. Investment earnings are taxed at a lower rate than other types of income, and the superrich are increasingly getting more of their money from capital gains. The result: an average effective tax rate of 18% for the 400 or so U.S. households that make $110 million–plus a year, according to the White House.
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But the Buffett Rule is not just a policy tool; it’s also central to Obama’s re-election message. For the first time this cycle, every cog in the Democratic messaging machine is whirring in synchrony. On Monday, Obama’s re-election campaign convened a conference call with reporters to discuss the plan’s political potency. Hours later, members of the White House policy shop briefed the media on their new report touting the rule’s (thin) economic merits. An arm of the liberal think tank Center for American Progress sent around a video showing Ronald Reagan talking about how a wealthy guy’s secretary paid less than her boss in taxes because of loopholes. Both Obama and Vice President Joe Biden are giving speeches on the Buffett Rule this week. Democratic leaders in the Senate have penciled in a vote next week on the measure, though it is sure to fall to Republican opposition.
The legislative version of the Buffett Rule is brand new, but its role as a key Democratic talking point is not. Introduced into the political lexicon in 2011, the proposal featured prominently in Obama’s State of the Union speech early this year, in which he addressed rising income inequality at length and proposed a slate of what he’s dubbed “fair share” policies to combat it. The Buffett Rule was chief among them.
Back then, Obama was billing it as part inequality antidote and part deficit panacea. “If the country was in a surplus like it was back in 2000, I’d understand us saying, Well, let’s try to let millionaires keep every last dime,” he told an Iowa crowd in January. “I get that. But that’s not the situation we’re in. And so we’ve got to make choices. Do we want to keep investing in everything that’s important to our long-term growth — education, medical research, our military, caring for our veterans — all of which are expensive? Or do we keep these tax cuts for folks who don’t need them and weren’t even asking for them? Because we can’t do both.”
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Obama’s stark binary — enact higher tax rates on top earners or lose core government services — was a false one. According to the the Joint Committee on Taxation, the Buffett Rule would increase government revenue by $47 billion over 10 years, or roughly three times that if one assumes the full spectrum of Bush tax cuts would be extended over that period. That’s not insignificant, but it’s coins in the couch cushion compared with projected long-term federal deficits driven by rising health care entitlement costs.
Despite the buzz of activity this week, Obama’s team may now be willing to let that part of the argument go. On Monday, Jason Furman, principal deputy director of Obama’s National Economic Council, said that “this is not the President’s entire tax plan” and that the rule “was never our plan to bring the deficit down and get the debt under control.” “We’re not trying to say this solves all our budget problems,” he added.
The other pieces of the Democrats’ Buffett Rule strategy may be proving more effective anyway. On Monday, the president of a Republican super PAC told the New York Times that “Mr. Obama’s campaign has started to gain traction among critical swing voters by arguing that Republicans, including [Mitt] Romney, favor an ‘economic plutocracy’ in which middle-class voters can no longer count on financial security, even though they work hard and play by the rules.” It was essentially an admission that Obama’s “fair share” push is making headway.
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With Romney as the prohibitive Republican nominee, Democrats have further reason to press the Buffett Rule. A former private-equity chief whose income is still overwhelmingly composed of capital gains, Romney is among those Americans who would see their effective tax rate soar under the Buffett Rule. He currently pays close to 15%; under Buffett, that figure would double. Romney’s own tax plan, meanwhile, would cut the capital-gains tax altogether for households making less than $250,000 a year, while keeping it unchanged for higher earners. As TIME wrote in January:
For Democrats, this is the perfect campaign issue. It lies at the intersection of the personal, professional and political identities they plan to foist on Romney in the general election: the privilege they hope will make it hard for voters to relate to Romney, the erstwhile career in private equity that they hope will taint him as an economic predator rather than a turnaround artist, and the regressive tax policies they hope can drive a wedge between the Republican Party and the middle class.
That’s exactly what Obama campaign manager Jim Messina tried to do on Monday’s call, slamming Romney for not releasing more than two years of tax records and tying that complaint to the Buffett Rule. “Romney supports tax policies that reward people like him, and now he’s just trying to obscure just how much he would benefit by hiding his own financial records,” Messina said. Obama may be next to make that connection. The April 17 IRS filing deadline will come and go, but you’ll be hearing from Democrats about your taxes — and Mitt Romney’s — again soon.
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