President Obama says it's just not fair that 1,470 Americans who made more than $1 million in 2009 paid $0 in federal income tax, so sometime next week, the U.S. Senate will consider his "Buffett Rule," a bill he says simply "asks everyone to pay their fair share" of income tax. So what is the "Buffet Rule" and who is "everyone?"
Shoving the piles of politics aside, the Buffet Rule is the Paying a Fair Share Act of 2012 (S. 2059), a bill that would amend the federal income tax law by requiring that persons with adjusted gross annual incomes exceeding $1 million pay a minimum 30% effective tax rate. The bill would allow deductions for charitable contributions.
Statistics the White House says it got from the IRS show that at least 22,000 of the 236,883 U.S. households that reported more than $1 million in adjusted income for 2009 paid less than 15% of their income in federal taxes, and 1,470 of them paid no income tax at all. At the same time, the average middle class family paid about 16% of its income in taxes, according to the White House.
In addition, says the White House, the 400 richest Americans - all making at least $110 million a year - paid only 18% of their income in income taxes in 2008.
"Today, the wealthiest Americans are paying taxes at one of the lowest rates in 50 years," said President Obama in his March 31 radio address. "Meanwhile, over the last 30 years, the tax rates for middle class families have barely budged. That's not fair. It doesn't make any sense."
Overall, base federal income tax rates in the U.S. range from 15% of income to 35% of income for the wealthiest Americans. The effective tax rate is the percentage of income paid in taxes after taking legal deductions.
Also See: Who Pays the Most Income Tax?
The Buffet Rule is named in honor of mega-investor Warren Buffett, who famously remarked how unfair it is that his secretary, who we must assume is not also a multi-billionaire, pays a higher percentage of her income in federal taxes than he does.
According to the White House, enactment of the Buffett Rule law would raise $47 billion in additional revenue over the next 10 years.
"If you make more than $1 million a year, you should pay at least the same percentage of your income in taxes as middle class families do," said President Obama. "On the other hand, if you make under $250,000 a year -- like 98 percent of American families do -- your taxes should not go up." Should not? I guess if their taxes do go up, something went wrong.
Also See: Obama's 2010 Tax Return
Oh, the Politics Part... Does the Buffet Rule bill have a chance of being approved by Congress? Well, most Democrats support it, most Republicans oppose it. Democrats control the Senate, Republicans control the House. Both Democrats and Republicans are reluctant to vote for laws raising taxes - on anybody - during presidential election years.
Also See: How Much Do You Pay in Income Taxes?
Photo: Warren Buffett's secretary, Debbie Bosanek (left) -- Win McNamee/Getty Images