An estimated $46.7 billion could come in 10 years from a minimum 30 percent tax on millionaires. Senate Dems back to Buffett Rule

Senate Democrats, looking to forestall the across-the-board spending cuts set to take place in March, are planning to push their latest version of the Warren Buffett-style minimum tax on millionaires.

The political advantage is it builds on the 2012 elections in which President Barack Obama and many Democrats campaigned on the idea. And it avoids divisive fights over a series of individual loophole closings in the Tax Code, some of which tax writers prefer to deal with in the context of corporate tax reform.


Past tax estimates indicate that as much as $46.7 billion could be raised over 10 years from the so-called Buffett Rule — a minimum 30 percent tax on millionaires.

Indeed the revenues generated could be considerably higher, according to some economists, because of the tax deal last month that allowed dividend income — important to the wealthy — to be taxed at a lower 20 percent rate.

The hope is to marry this revenue with more select spending cuts, chiefly at the expense of farm subsidies and defense. For example, as much as $25 billion could be taken from direct cash payments to producers, an outdated system of subsidies that has been harder to defend given the level of farm profits in recent years.

Whatever cuts are made from defense will be significantly less than the $43 billion in reductions threatened in March. Moreover there is a new push by Senate Appropriations Committee Chairwoman Barbara Mikulski (D-Md.) to enact an omnibus appropriations bill to replace the expiring continuing resolution March 27. And that could provide immense relief for the military services which have been hobbled by the CR’s limits on operating and maintenance accounts.

The final package — being ironed out by Mikulski, Majority Leader Harry Reid (D-Nev.), Finance Chairman Max Baucus (D-Mont.) and Budget Chairwoman Patty Murray (D-Wash.) — is not expected to be rolled out until next week. Votes may not occur until after the Presidents’ Day recess, putting the issue in front of the Senate on the eve of the March sequester deadline.

But the goal is come up with a 50-50 blend of revenues and savings sufficient to offset the sequester through the end of the calendar year. That could require as much as $120 billion in spending and revenue altogether, and the commitment to the minimum tax for those earning over $1 million is clearly central to that effort.

Democrats appear less likely now to target a series of loophole closures they have long pushed to close — on corporate jet owners and a tax break known as carried interest for private equity executives and venture capitalists. And rather than raise taxes squarely on oil companies, they are looking at paring back that idea that could give comfort to Democrats from energy-producing states. They also are looking at ending a provision in the Tax Code that allows multinational firms to avoid paying taxes on profits generated in other countries when they keep that cash offshore

Rather than focusing chiefly on closing loopholes, the idea would be to concentrate on the increased revenue mainly on taxes from ultra-wealthy taxpayers, making it an easier message to sell to the public in the face of the across-the-board spending cuts set to take place next month.

Nevertheless, Republicans are dead-set against any new taxes and would undoubtedly block such a proposal, which stands little chance of passage in the House.

“No more taxes,” Senate Minority Whip John Cornyn (R-Texas) said Thursday.

The precise tax language is not available but the $46.7 billion revenue estimate dates to last year and a bill that that would apply the 30 percent rate to taxpayers with adjusted gross income (AGI) in excess of $1 million and $500,000 for married individuals filing a separate return.

The tax would be phased in for taxpayers with AGI between $1 million and $2 million and the AGI thresholds indexed for inflation. And one issue will be what provision is made to adjust the AGI threshold to continue to encourage charitable contributions.