Bloomberg News

Carney Says No Differences With Buffett on Tax Principle

September 30, 2011

(Adds quotes from Buffett, Sperling beginning in fifth paragraph.)

Sept. 30 (Bloomberg) -- No differences exist between the Obama administration and billionaire investor Warren Buffett on the principles of a White House tax proposal that bears his name, said Jay Carney, President Barack Obama’s spokesman.

Comments Buffett made in television interviews this morning have been “misconstrued, at best” by the president’s opponents, Carney said at a daily briefing with reporters.

Obama has adopted a “Buffett rule” as the centerpiece of his campaign to overhaul the tax code. In an interview with Bloomberg Television today, Buffett said his proposal, which would ensure the wealthiest Americans pay at least as great a share of their income in taxes as middle-class wage-earners, would only raise taxes on “about 50,000 people.” He said it would cover extremely wealthy people who pay “very low” taxes because investment income is taxed at a lower rate than wages and salaries.

Buffett, the chairman of Berkshire Hathaway Inc., said he didn’t intend to promote a general increase in taxes on all higher-income taxpayers.

“It would simply mean that if you made tens of millions of dollars and your tax rate was 16 or 17 percent, you would start paying like the person who made $100,000 or $10 million who paid normal tax rates,” Buffett told Bloomberg Television. “An athlete making 10 million dollars, he would not have a change in his tax rate at all.”

Principle for Reform

Carney said the Buffett rule as proposed by Obama is “a principle” for tax reform that is consistent with that view. The administration hasn’t estimated how many people it would affect or how much revenue it would raise.

Buffett said he estimated changing the tax structure would raise about $20 billion.

“If you give me a choice between taking 1,000 dollars from 20 million families or hitting 50,000 people who shuffle around money all day, I’ll take it from the people who shuffle money,” Buffett said.

The White House budget office estimates the deficit for the fiscal year ending today will be $1.3 trillion.

House Speaker John Boehner, an Ohio Republican, has criticized plans to raise taxes on the wealthy as “class warfare.”

In a Sept. 21 blog post on the White House website, Gene Sperling, director the president’s National Economic Council, said the Buffett rule would mean taxpayers who make at least $1 million wouldn’t pay lower rates than middle-income taxpayers.

Tax Rates

Sperling said that would be accomplished by limiting higher-income taxpayers’ ability to use lower tax rates for investment income and deductions for expenses to bring their effective tax rates below that paid by middle-income families.

Middle-income families may pay marginal tax rates of 25 percent and 28 percent on their income, Sperling said. While higher-income families pay tax rates up to 35 percent on wages and salaries, in many cases their investment income is taxed at a 15 percent rate.

Sperling cited a U.S. Treasury Department analysis of data from the Internal Revenue Service that found 22,000 households making more than $1 million annually paid less than 15 percent of their income in taxes in 2009. Among the 400 richest Americans -- those with income of at least $110 million per year -- the average effective tax rate was 18.1 percent in 2008, according to the IRS.

Obama has cited Buffett, who has been an informal adviser to the president since before the 2008 campaign, in highlighting the disparity as he has traveled the country in recent weeks to promote his economic agenda.

Loopholes

“A construction worker who’s making $50,000 or $60,000 a year shouldn’t be paying a higher tax rate than the guy who’s making $50 million a year,” Obama said in Cincinnati, Ohio, on Sept. 22. “That’s how it’s working right now because they get all these loopholes and tax breaks that you don’t get.”

Buffett, 81, is hosting a fundraiser for Obama tonight in New York. The event will be held at the Four Seasons restaurant and will feature an economic discussion led by Austan Goolsbee, a former Obama economic adviser now at the University of Chicago Booth School of Business. About 100 people are expected to attend the $10,000-a-ticket session.

In a separate interview on Fox Business, Buffett said that while he doesn’t necessarily support every administration policy, “I support the president 100 percent.’

--Editors: Joe Sobczyk, Don Frederick

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net; Mike Dorning in Washington at morning@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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