WASHINGTON (AP) — President Barack Obama's proposal to impose a "Buffett rule" tax on the rich is generating enormous political wattage, but the plan itself would directly affect only a tiny fraction of Americans.
Only around 210,000 taxpayers — a bit over 1 of every 1,000 — would face higher federal taxes if the measure were enacted, according to an estimate by one respected bipartisan research group.
In addition, while Republicans say the plan would be a job killer, only a small proportion of businesses would potentially be subject to the tax, according to data from a 2011 Treasury Department study. These firms make disproportionately large amounts of money, but many of them don't employ any workers.
Republicans, calling the Buffett rule a political sideshow designed to distract voters from the economy's problems, seem certain to round up enough votes to block the bill when the Democratic-run Senate votes on it Monday. But Democrats are eager to hold repeated votes on it this election year to demonstrate that they favor economic equality while Republicans prefer coddling the wealthy, so it's unlikely to disappear soon.
Following are some questions and answers about the proposal and its potential impact:
Q: What would the Buffett rule do?
A: Citing complaints from billionaire Warren Buffett that he pays a lower tax rate than his secretary, Obama says everyone earning at $1 million a year or more should pay at least 30 percent of their income in taxes. He has been vague on details.
Monday's Senate vote will be on legislation by Sen. Sheldon Whitehouse, D-R.I., who would impose the 30 percent tax on people making at least $2 million annually and phase it in gradually for those earning at least $1 million.
Q: Isn't the top income tax rate already 35 percent?
A: Yes, that is the rate owed this year on salaries over $388,350. Yet very few people pay that rate because they get to subtract credits and deductions. In addition, some sources of income like certain dividends and capital gains — more common among upscale earners — are taxed at a lower, 15 percent rate.
As a result, households making more than $1 million in 2011 owed an average of around 25 percent of their earnings in federal income taxes and payroll taxes for Social Security and Medicare, according to the Tax Policy Center, a nonpartisan group in Washington that studies federal taxes.
Q: How does that compare to lower earners?
A: On average — and that is the key — the rich pay higher rates. The center computes that families earning $30,000 to $40,000 owed an average 6 percent of it in income and payroll taxes last year. People making $50,000 to $75,000 owed an average 12 percent, while those making $75,000 to $100,000 paid an average 13 percent.
Q: Then what's the problem?
A: The White House says it's not the averages that bother them. It's that thousands of individual million-dollar earners pay lower rates than millions of middle-income workers.
