Greenwich Times: ‘Buffet Rule’ would hit Connecticut hard
media mentionCharles J. Lewis
Published 06:18 p.m., Saturday, April 14, 2012
WASHINGTON — Many well-heeled Connecticut taxpayers are likely to pay close attention to how the state’s two senators vote Monday when the U.S. Senate considers the “Buffet Rule,” President Barack Obama’s bid to raise taxes on millionaires.
Senators will take up legislation, dubbed the “Paying a Fair Share Act,” which would require millionaires to pay a minimum tax rate of 30 percent.
Sponsored by Sen. Sheldon Whitehouse, D-R.I., and co-sponsored by Sen. Richard Blumenthal, D-Conn., the bill is strategically timed for a Senate floor vote on the eve of the IRS deadline for taxpayers to file their tax returns for 2011.
Sen. Joe Lieberman, I-Conn., has not decided how he will vote. A spokesman, Jeremy Kirkpatrick, said last week that the senator “is currently reviewing the issue and has not yet made a decision.”
By contrast, Blumenthal has spoken enthusiastically for the bill. “This legislation would ensure that people with the highest income — including millionaires and billionaires — pay their fair share of taxes,” said Blumenthal, who, with his wife Cynthia’s income, qualifies for millionaire status. “They should pay the same rates as hard-working, middle-class Americans. Unconscionably, current tax loopholes allow the wealthiest Americans who make most of their income from investments to pay a lower tax rate than middle-class families.”
The Whitehouse bill, which has been endorsed by Obama but has no chance of actually becoming law this year, is widely seen as a political device that will enable Democrats who vote for the measure to accuse Republicans who vote against it of coddling millionaires. The issues of growing income disparity and tax breaks are being used by Obama as wedge issues in the 2012 presidential race.
Connecticut ranks fourth among the states in the number of millionaire households, according to a widely used measure compiled annually by Phoenix Marketing International.
The firm defines millionaire households as those with $1 million or more in liquid assets, which excludes real estate. That definition does not include income, the real measure that determines tax liability.
Nonetheless, by the asset metric, Connecticut has 98,392 millionaire households, or 7.13 percent of all households in the state. Maryland is No. 1, with 7.22 percent of millionaire households, followed by Hawaii (7.21 percent), New Jersey (7.19 percent) and Connecticut. Massachusetts comes in fifth, with 6.41 percent.
Both Blumenthal’s and Lieberman’s households are among them. The independent Center for Responsive Politics estimates the Blumenthal family’s 2010 net worth, based on required public disclosure reports, at $73,151,590, among the top 10 in the Senate.
Lieberman’s net worth was estimated at $1.95 million.
Sarah Kaufman, spokeswoman for the Connecticut Department of Revenue Services, said there were 8,760 income tax returns filed with the state last year that reported adjusted gross incomes of $1 million or more.
The Whitehouse bill would impose the 30 percent minimum tax on adjusted gross income minus charitable contributions, which means taxpayers would still be able to take advantage of capital gains, tax-exempt interest and charitable deductions.
Supporters of the bill frame their arguments in terms of tax fairness. Obama said last week “that it is just plain wrong that middle-class Americans pay a higher share of their income in taxes than some millionaires and billionaires.”
Deficit reduction is hardly mentioned. Whitehouse’s bill would raise an estimated $47 billion over 10 years, a drop in the bucket at a time when the federal budget deficit is expected to hit $1 trillion this year for the fourth year in a row. The Whitehouse bill is the only legislative outcome of the debate triggered last year when Warren Buffett, the Omaha-based billionaire, complained his 2010 income was taxed at a rate of 17.4 percent, lower than the rate paid by his secretary. He urged tax reforms so the rich and the super-rich paid higher tax rates.
Matt Gardner, executive director of the liberal Institute on Taxation and Economic Policy, says the best way to implement the Buffett rule would be to simply eliminate tax breaks for investment income, such as dividends and capital gains, the two sources of income that Buffett cited as enabling him to pay a relatively low tax rate. Congress should take a straightforward approach by “simply ending the tax preferences for investment income, which would simply require that all income be taxed at the same rates.”
Republican supporters of the existing tax breaks contend that they encourage job-creating investment.