South Carolina Republican Sen. Lindsey Graham denounced President Barack Obama's proposal to impose a new levy, which some are calling a “Buffett Tax,” on those earning more than $1 million a year as a “political act” that is nothing short of “class warfare.”
Graham said on CNN’s “State of the Union” today that he supports parts of Obama’s jobs bill, including a plan to cut the payroll tax and some of the proposed infrastructure spending.
But he assailed the president's plan to propose a new levy on U.S. taxpayers who make more than $1 million as a means to help trim the nation’s debt, adopting a suggestion from billionaire investor Warren Buffett.
On Monday Obama will call for new deficit cuts of $3.0 trillion but also warn Republicans that he will veto any bill that trims healthcare for the elderly without hiking taxes on the rich.
Obama will lay out a series of proposals that include a broad overhaul of the tax code designed to raise $1.5 trillion dollars, mostly by letting previous tax cuts for the wealthy expire and by closing corporate loopholes.
Officials said the plan would ensure America's long term fiscal future at a time of deep economic gloom, and permit continued investment in education, new generation energy and job creation.
Specifically, Obama will lay out a plan for tax revenue raises and spending cuts which he will suggest a congressional supercommittee charged with coming up with up to $1.5 trillion dollars in spending cuts should adopt.
Other Republicans echoed Graham’s disdain for the millionaire tax idea. Rep. Paul Ryan, chairman of the House Budget Committee, and Senate Minority Leader Mitch McConnell said such a proposal would limit growth and hurt corporate investment in an already stagnating economy.
"It adds further instability to our system, more uncertainty and it punishes job creation and those people who create jobs," Ryan said today on “Fox News Sunday.” "Class warfare may make for good politics but it makes for rotten economics."
McConnell said Congress debated the issue last year, when Obama and Republicans hatched a compromise that extended the reduced tax rates, approved during the administration of George W. Bush, for high-earners for two years.
"It's a bad thing to do in the middle of an economic downturn," McConnell said on NBC's “Meet the Press.” "There is bipartisan opposition to what the president is recommending already."
As far as Obama’s $447 billion jobs proposal, the president has demanded quick action in Congress, but even Democrats acknowledge that’s not likely. On CNN’s “State of the Union today,” Illinois Sen. Dick Durbin, the second-ranking Democrat in the Senate, said it’s “most likely” the Senate will start debate on the jobs bill next month.
Regarding increasing taxes on the wealthy, which Obama himself tabs as the "Buffett Rule," will be part of the recommendations the president will make Monday to a special congressional supercommittee charged with finding ways to trim $1.5 trillion from the nation’s long-term deficit, according to a White House official, who wasn’t authorized to speak on the record.
However, White House Communications Director Dan Pfeiffer said in a tweet Saturday that the tax would act as "a kind of AMT" (alternative minimum tax) aimed at ensuring millionaires pay at least as much tax as middle-class families.
Obama will lay out his recommendations in White House Rose Garden remarks at 10:30 a.m. Monday, when he is expected to urge steps to raise tax revenue as well as cuts in spending.
Two former government economists said during CNN interviews Sunday they would like to see a broader approach than just increasing taxes on the rich.
The economists, Alice Rivlin, who directed the White House Office of Management and Budget under President Bill Clinton, and Douglas J. Holtz-Eakin, who led the Congressional Budget Office during George W. Bush’s presidency, said Obama’s “Buffett Tax” proposal would add another complicated layer to a tax code that needs basic reform reform.
The congressional supercommittee has a chance to “reform entitlements and reform the tax code and put us on a sustainable deficit track,” Rivlin said.
Congress is at liberty to ignore Obama’s suggestions, and Republicans, who control the House, have said that they will not agree to tax hikes. Republicans argue that raising taxes on higher-income individuals would hurt small businesses and stifle investment.
A spokesman for House Speaker John Boehner of Ohio didn’t immediately respond to a Bloomberg News request for comment on the new plan, which The New York Times first reported on Saturday.
But during a speech Thursday to the Economic Club of Washington, the Ohio Republican said the 12-member panel should focus solely on cuts to federal spending and overhauling Social Security, Medicare, and Medicaid to reach the $1.5 trillion in deficit cuts. He rejected tax increases.
“Tax increases, I think, are off the table, and I don’t think they’re a viable option for the joint committee,” Boehner said.
The president hasn’t settled on the new minimum tax rate for top earners, which is designed to make sure the wealthiest taxpayers aren’t paying a lower effective tax rate than middle-income earners, the unidentified White House official said. Obama has already proposed limiting some tax deductions for those in the highest income brackets, taxing carried interest as regular income and ending breaks for gas and oil companies to pay for the $447 billion jobs package.
The bipartisan supercommittee has a Nov. 23 deadline to reach agreement on a plan. On taxes, the group is likely to consider setting targets for major changes to be considered over the next year, before income-tax cuts first enacted under President George W. Bush are set to expire at the end of 2012.
With the nation’s jobless rate at 9.1 percent, the economy is a top issue for both parties in next year’s elections for president and Congress. Obama is confronting skepticism from voters about his policies as public opinion polls show his approval ratings are dropping.
A majority of Americans don’t believe his jobs plan will help lower the unemployment rate, a Bloomberg National Poll conducted Sept. 9-12 shows. The poll found 62 percent disapprove of his handling of the economy. The president’s overall job-approval rating was 45 percent, the lowest since he was inaugurated in January 2009.
Gross domestic product climbed at a 1 percent annual rate in the second quarter, down from a 1.3 percent prior estimate, according to revised Commerce Department figures released last month. Combined with the 0.4 percent annual rate of growth in the first three months of the year, the past two quarters were the weakest of the recovery that began in mid 2009.
Buffett has served as an informal adviser to the president since Obama’s 2008 election campaign and conferred with the president before his Sept. 8 address to Congress. Buffett plans to hold a Sept. 30 fundraiser in New York City for Obama’s re- election bid.
Obama has cited Buffett to counter critics of his policy proposals, particularly on taxes.
During his bus tour last month through rural areas of Minnesota, Iowa, and Illinois, Obama quoted from a New York Times opinion article in which Buffett wrote that the nation’s richest individuals have been “coddled long enough by a billionaire- friendly Congress.” Buffett argued for raising taxes for the “mega rich” in the U.S.
In the article, the 80-year-old chairman and chief executive officer of Berkshire Hathaway Inc. said his federal tax bill last year, or the income tax he paid and payroll taxes paid by him and on his behalf, was $6,938,744.
“That sounds like a lot of money,” Buffett wrote. “But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”
Capital gains from most assets held for longer than a year are taxed at a top rate of 15 percent, while wage income is taxed at a top rate of 35 percent. The difference between those two accounts for Buffett’s lower rate.
About 8.4 million U.S. households had assets of $1 million or more, excluding primary residences, according to a March report by Spectrem Group, a Chicago-based consulting firm. It also showed that the number of U.S. millionaires increased by 8 percent in 2010.