Research

Despite offering few details for how the Buffett Rule would be implemented, fact-checkers know enough about the President’s proposal to deduce that it just doesn’t add up. Based on the analysis below it’s clear that Obama was more concerned with how well his new “guiding principle” polled than how many jobs it would destroy in practice.

The Associated Press Fact Check: “The Data Tell A Different Story”

AP Fact Check: Obama Claims That The Wealthy Are Paying Less In Taxes Than The Middle Class But “The Data Tell A Different Story.” “The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.” (Stephen Ohlemacher, “Fact Check: Are Rich Taxed Less Than Secretaries?” The Associated Press, 9/20/11)

• Millionaires Will Pay An Average Effective Tax Rate Of 29.1 Percent Versus 15 Percent For Families Making Between $50,000 And $70,000. “This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank. Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes. Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.” (Stephen Ohlemacher, “Fact Check: Are Rich Taxed Less Than Secretaries?” The Associated Press, 9/20/11)
• When Pressed, Treasury Secretary Timothy Geithner Could Not Say How Many Millionaires Are Paying Less In Taxes Than The Middle Class. “Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.” (Stephen Ohlemacher, “Fact Check: Are Rich Taxed Less Than Secretaries?” The Associated Press, 9/20/11)

The Wall Street Journal: “The Entire Buffett Rule Premise Is False”

The Wall Street Journal: “The Entire Buffett Rule Premise Is False.” “There's one small problem: The entire Buffett Rule premise is false, as the nearby table shows. In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%.” (Editorial, “The Buffett Alternative Tax,” The Wall Street Journal, 9/20/2011)

• WSJ: Millionaires Are Taxed At Between Two To Three Times The Rate Of Those Who Earn Less Than $100,000. “But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000. The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum.” (Editorial, “The Buffett Alternative Tax,” The Wall Street Journal, 9/20/2011)
• WSJ: “Capital Gains And Dividends Are Taxed Twice” Meaning The Real Rate Of Taxation For That Income Is Closer To 45 Percent. “Capital gains and dividends are taxed twice, first as corporate profits and then as payouts to individuals. Their real capital gains tax rate is closer to 45% than 15%, which is why politicians of both parties have long supported a capital-gains rate differential.” (Editorial, “The Buffett Alternative Tax,” The Wall Street Journal, 9/20/2011)

WSJ: “Mr. Obama Could Tax Every Billionaire In America At A 100% Rate And Still Wouldn't Make A Dent In The Federal Deficit.” (Editorial, “The Buffett Alternative Tax,” The Wall Street Journal, 9/20/2011)

Bloomberg: The Buffett Rule Is “Easier Said Than Done”

Bloomberg: Obama’s Hypothetical Teacher “Illustrated The Difficulty Of Applying The Buffett Principle In Practice.” “The example that Obama gave during his speech illustrated the difficulty of applying the Buffett principle in practice. He said that a teacher earning $50,000 shouldn't pay a higher tax rate than an investor making $50 million. Obama's example isn't as straightforward as it appears. Under current law, that teacher would have a maximum taxable income of $40,500, after subtracting the standard deduction and personal exemption. The teacher's federal income tax would be $6,250, or 12.5 percent of the $50,000 income.” (Richard Rubin, “’Buffett Rule’ For Millionaire Tax Seen As Easier Said Than Done,” Bloomberg, 9/20/11)

• Bloomberg: The Teacher’s Tax Rate Is Lowered By A Range Of Deductions That Middle Income Taxpayers Are Eligible To Take. “The middle-income tax rate would be lower if the teacher took advantage of the specific breaks available to middle-income taxpayers: those for retirement savings contributions and health-care flexible spending arrangements, and deductions for student loan interest and out-of-pocket expenses of educators.” (Richard Rubin, “’Buffett Rule’ For Millionaire Tax Seen As Easier Said Than Done,” Bloomberg, 9/20/11)
• Bloomberg: It’s Possible That The Hypothetical Teacher Could Pay No Income Taxes At All.  “A married couple with two children can earn as much as $45,776 without paying income taxes this year, according to the Tax Policy Center, a nonpartisan Washington research group.” (Richard Rubin, “’Buffett Rule’ For Millionaire Tax Seen As Easier Said Than Done,” Bloomberg, 9/20/11)

Los Angeles Times: Buffett Rule “A Political Statement”

Los Angeles Times: “The Proposed Buffett Rule Is More A Political Statement Than A Deficit-Reduction Tool …” “The proposed Buffett rule is more a political statement than a deficit-reduction tool, given how little money it may raise. In that sense, it's like Obama's oft-repeated call to eliminate tax breaks for corporate jets.” (Editorial, “The ‘Buffett Rule,’ And More,” Los Angeles Times, 9/20/11)

Tax Policy Center: Buffett Rule Would Hardly Make A Dent In Deficits

Roberton Williams Of The Tax Policy Center Estimated That Taxing All Millionaires At 50 Percent, “A Tax Rate That’s So High It Probably Would Never Happen”, Would Only Solve 10 Percent Of The Deficit Problem. “But Williams points out that more heavily taxing CEOs, celebrities, sports stars and hedge fund managers isn't the answer to the nation's deficit woes — not even close. He put together an estimate based on a tax rate that's so high it probably would never happen — 50 percent — and says that if you taxed all income above $1 million at that rate, you'd only get 10 percent of what most experts say is needed to tackle the nation's deficit.”  (Tamara Keith, “Does Buffett Rule Add Up For Obama Deficit Plan?” NPR, 9/19/11)

The Tax Foundation: Obama Fuels “Misconception” About Capital Gains

Tax Foundation: “Obama Once Again Fueled The General Misperception” That Taxes On Capital Gains Are Taxed At A “Lower Rate Than Salaried Workers Who Pay At The Individual Rate.” “During his Rose Garden speech yesterday, President Obama once again fueled the general misperception that people who pay the 15 percent tax rate on their capital gains and dividend income are paying a lower rate than salaried workers who pay at the individual rate (which ranges from 10 percent to 35 percent).” (Scott A. Hodge, “Correct Obama And Buffett: U.S. Capital Taxes Among Highest In The OECD,” The Tax Foundation, 9/20/11)

• Tax Foundation: Capital Gains Have Already Been Taxed At The 35 Percent Corporate Rate. “The reality is that capital gains and  dividends are taxed at a lower rate at the individual level because this income has already been taxed at 35 percent at the corporate level before it was distributed to shareholders.” (Scott A. Hodge, “Correct Obama And Buffett: U.S. Capital Taxes Among Highest In The OECD,” The Tax Foundation, 9/20/11)
• Tax Foundation: The United States Has The Fourth Highest Rate Of Taxes On Dividend Income In The OECD. “Both Mr. Obama and his tax advisor Warren Buffett seem unaware that the U.S. has the 4^th highest overall tax rate on dividend income among the largest industrialized countries in the OECD at 52.1 percent. Only Denmark (56.5 percent), France (57.8 percent) and the United Kingdom (54 percent) tax dividends at a higher rate.” (Scott A. Hodge, “Correct Obama And Buffett: U.S. Capital Taxes Among Highest In The OECD,” The Tax Foundation, 9/20/11)

Tax Foundation: “With The U.S. Corporate Tax Rate Already The 2^nd Highest In The Industrialized World, The Country Can Hardly Afford To Become Such A Hostile Environment For Capital Income.” (Scott A. Hodge, “Correct Obama And Buffett: U.S. Capital Taxes Among Highest In The OECD,” The Tax Foundation, 9/20/11)

ABC News: How Many Buffetts Are There – “Not Many”

ABC News: “How Many Millionaires And Billionaires Pay Lower Tax Rates Than Middle-Income Families? The Answer Appears To Be This:  Not Many.” (Jonathan Karl, “Fact Check: The Rich, Their Secretaries And Taxes,” ABC News, 9/20/11)

• ABC: “For The Most Part, The Wealthy Pay A Significantly Higher Percentage Of Their Income In Taxes Than Middle-Income Workers.” “The nonpartisan Tax Policy Center has crunched the numbers and found that Warren Buffett and his secretary are the exception to the rule.  For the most part, the wealthy pay a significantly higher percentage of their income in taxes than middle-income workers. The key numbers:  this year those earning over $1 million will pay, on average, 29.1 percent on federal taxes.  Those earning between $50,000 and $75,000 will pay 15 percent.” (Jonathan Karl, “Fact Check: The Rich, Their Secretaries And Taxes,” ABC News, 9/20/11)

Congressional Budget Office: Obama’s Idea Is Based On An Atypical Scenario

The CBO Estimates That Households In The Top 1 Percent Of Income Distribution Pay An Average Effective Tax Rate Of 30 Percent Versus 14 Percent For Those With Incomes Around $64,500. “In 2007, households in the bottom one-fifth (quintile) of the income distribution (those with an average income of $18,400, under a broad definition of income) paid about 4 percent of their income in federal taxes; those in the middle quintile, with an average income of $64,500, paid 14 percent; and those in the highest quintile, with an average income of $264,700, paid 25 percent. Average tax rates continued to rise within the highest quintile. Households in the top 1 percent of the income distribution faced an average tax rate of about 30 percent.” (“Reducing The Deficit: Spending And Revenue Options,” Congressional Budget Office, March 10, 2011)

• The Average Tax Rate Of All Federal Taxes For An Individual In The Top 1 Percent Of Incomes (Average Income Of $1,873,000) Is 29.5 Percent And Their Average Individual Income Tax Rate Is 19.0 Percent. (“Average Federal Tax Rates In 2007,” Congressional Budget Office, June 2010)
• Among All Households, The Average Federal Tax Rate Is 20.4 Percent And The Average Individual Income Tax Rate Is 14.4 Percent. (“Average Federal Tax Rates In 2007,” Congressional Budget Office, June 2010)

Executive Secretaries And Executive Administrative Assistants Makes A Mean Annual Wage Of $45,860. (Bureau Of Labor Statistics, “Occupational Employment Statistics,” BLS.gov, May 2010)

• The Average Tax Rate Of All Federal Taxes For An Individual Making $42,500 A Year Is 10.6 Percent And Their Average Individual Income Tax Rate Is -0.4 Percent. (“Average Federal Tax Rates In 2007,” Congressional Budget Office, June 2010)

CBO: Those In The Bottom 20 Percent Of Incomes Have Seen The Largest Reduction In Income Taxes Between 1979 And 2007. “Between 1979 and 2007, the average rate for all federal taxes combined declined for every income group. The average individual income tax rate also dropped over that period, with the lowest quintile seeing the greatest decrease.” (“Reducing The Deficit: Spending And Revenue Options,” Congressional Budget Office, March 10, 2011)

CBO: The Share Of Taxes Paid By The Top 20 Percent Of Incomes (Over $263,7000 A Year) “Grew Sharply Between 1979 And 2007” And Now Account For 70 Percent Of All Taxes. “The share of taxes paid by the top quintile grew sharply between 1979 and 2007, almost entirely because of an increase in that group’s share of before-tax income. In 2007, households in the highest quintile earned 55 percent of the nation’s before-tax income and paid almost 70 percent of federal taxes. For all other quintiles, the share of federal taxes was less than the share of income.” (“Reducing The Deficit: Spending And Revenue Options,” Congressional Budget Office, March 10, 2011)