Obama's 'Buffett Tax': Time for America's Mega-Rich to Pay Up

Legendary investor Warren Buffett misses the mark more often than most people realize, but his view, shared by President Barack Obama, that the richest Americans should be taxed at the same rate as middle-class Americans, is on the money.

Republicans, of course, are already crying foul over Obama's expected proposal coming Monday that's being called the Buffett Tax, ensuring that Americans making more than $1 million a year have a federal tax rate that is at least equal to middle-income workers.

Obama's proposal is being labeled the Buffett Tax because it is a direct result of an op-ed essay written by Buffett titled Stop Coddling the Super-Rich in The New York Times last month. In that essay, the billionaire wrote: My (rich) friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice.

After the op-ed piece was published, Obama criticized the American tax code for that very reason -- that rich Americans are being coddled with cushy tax loopholes that get them largely off the hook while middle-income Americans bear the brunt.

Right now, Warren Buffett pays a lower tax rate than his secretary -- an outrage he has asked us to fix, Obama said in a speech to Congress this month. We need a tax code where everyone gets a fair shake and where everybody pays their fair share.

Already, income tax brackets for the wealthiest Americans are higher than those of middle-income Americans. But most wealthy Americans in the investor class -- including Buffett -- don't make their money from wages. Thus, they escape significant tax burdens.

In 2008, for instance, 88 of the top 400 income earners in the U.S. reported no wages whatsoever. However, each of them reported income from capital gains, interest and dividends -- categories taxed differently than earned wages. The long-term capital gains tax is just 15 percent, as one example.

Last year my federal tax bill -- the income tax I paid, as well as payroll taxes paid by me and on my behalf -- was $6,938,744. That sounds like a lot of money, Buffett wrote in the August op-ed piece. 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.

As a result, Obama, smartly, will propose a new levy on U.S. taxpayers who make more than $1 million per year, in an effort to trim to the federal budget deficit -- effectively taking a cue from Buffett, who has been an Obama contributor and supporter. The tax will be part of recommendations that Obama will send to the congressional super-committee charged with cutting $1.5 billion from America's long-term deficit.

But we could have guessed -- Republican leaders are calling Obama's proposal class warfare, suggesting that a move to raise taxes will cause further economic damage.

If [Buffett] is feeling guilty about it, I think he should send in a check, said Senate Majority Leader Mitch McConnell on NBC's Meet the Press on Sunday. But we don't want to stagnate this economy by raising taxes.

Senator Lindsey Graham, a Republican from South Carolina, isn't in favor of raising taxes on rich Americans, either. He said Obama is just making a political move.

Tax code should be reformed for one purpose -- generate jobs, said Graham, appearing on CNN's State of the Union talk show. When you say we'll tax one percent of the economy, that's class warfare.

Another Repubilcan, Representative Paul Ryan from Wisconsin, said class warfare makes for really good politics but for rotten economics.

But these Republicans miss one very important point: Rich Americans aren't pulling their weight in the nation's tax code. Middle-class Americans work hard, and they have to fork over money because wealthy Americans get out through a bunch of loopholes and exceptions.

We've already been involved in class warfare -- the rich getting richer while middle-income spare change evaporates and poverty rates expand.

Income is income, earned or not, and the wealthiest Americans don't need to get off easier than everybody else.

Buffett is right on this one, and the wealthiest Americans and their Republican cronies should stop crying about it. It's time for the wealthiest Americans to contribute fairly, whether they like it not.