DAVID SHUSTER: Billionaire Berkshire Hathaway Chairman Warren Buffett says he pays a tax rate of 17.4 percent. His secretary? She pays 35.8 percent. He doesn't think that's fair. And neither does President Obama or a group of Democratic senators who are now trying to do something about it.
In our fourth story on the "Countdown" — new legislation has been introduced in the Senate based on President Obama's proposed "Buffett rule." The bill would require the wealthiest Americans to pay their fair share at a tax rate of at least 30 percent. During his State of the Union address last week, President Obama noted that the "Buffett rule" was key to tax reform.
(Excerpt from video clip) OBAMA: We need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes. You can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.
SHUSTER: The Senate bill, formally called the "Paying a Fair Share Act," was introduced on the chamber floor Wednesday by Senator Sheldon Whitehouse of Rhode Island.
(Excerpt from video clip) SHELDON WHITEHOUSE: This bill would do a lot of good things. It would simplify taxes. There is no point chasing loopholes if you know you're going to have to pay the 30 percent minimum. With all the advantages that do come with enormous income, paying a lower tax rate than regular, working families should not be one of those advantages.
SHUSTER: The plan would ensure that anyone earning more than one million dollars in income each year, including capital gains, would pay a minimum 30 percent federal tax rate.
But not all millionaires would be subjected to that rate immediately. It would be gradually phased in for those earning between one and two million dollars a year. The Congressional Research Service estimates that about a quarter of all millionaires — 94,500 taxpayers — currently pay a rate lower than most middle-income earners.
The liberal policy group Citizens for Tax Justice says the bill would bring in about $50 billion a year while the Bush tax cuts are still in effect, $25 billion annually once those cuts expire, as they are scheduled to do in 2012. Congressional Republicans have argued that raising taxes on the wealthy could hurt small business owners, who report their profits on their individual tax returns.
Joining us now to discuss his proposed legislation, Democratic Senator Sheldon Whitehouse of Rhode Island. Senator, thanks for your time tonight.
WHITEHOUSE: Good to be with you, David. Thank you.
SHUSTER: Fair to say this is largely an issue about fairness, given that the revenue that comes in — $50 billion — won't have a huge impact on the overall deficit?
WHITEHOUSE: Well, we've certainly fought in the Senate over numbers that are a lot smaller than that and when you go to the budget debate — which is usually done in 10-year increments — and you multiply by 10, you're close to half a trillion dollars if your number is $50 billion. So, it's pretty real money actually.
It's not going to solve the budget problem on its own, but it's significant.
SHUSTER: What about the argument from Republicans that raising the capital-gains rate may hurt, for example, home sales at a time when the industry is already reeling?
WHITEHOUSE: I don't see any connection whatsoever. We have had a number of people look at this and see what the offsets would be, in terms of depression of the economy, against the revenues that it would create and there's really very little.
It's basically people who aren't paying their taxes, who are paying a rate far lower than what everybody expects that they pay — the nominal rate is 35 percent and these are people paying 18 percent, 14 percent, in some cases 11 percent — where regular, working families are paying, you know, in the 20s. So, it's just a loophole. It needs to be closed and we intend to do it.
SHUSTER: Mitt Romney argues that the 15-percent rate on capital gains and carried interest is misleading because, he says, corporations pay taxes on those profits as well. Your response?
WHITEHOUSE: You know, if you want to tax a dollar and then say that that dollar never gets taxes again, there are lots of different ways to do it. It's true when you spend it in the hardware store, and the hardware store guy takes it in and then he spends it in the diner down street, and then the diner takes it in and — that's just not the way we work. We pay what the — we tax the transaction.
SHUSTER: Reuters wrote yesterday that the "Paying the Fair Share Act of 2012" has almost no chance of passage this year, as the Republican-controlled House of Representatives has sworn off tax increases. What are the odds that you see?
WHITEHOUSE: I think the odds are good. I think they depend, first of all, on how engaged the American public becomes in this. There are things like Buffettrulebill.com, where Americans can go and register their support for this bill. If people stand up and make their voices heard, Congress will listen. Heck, we had Arabs Spring across a bunch of tyrannical countries. We can certainly have "Buffett Rules Spring" here in the United States.
SHUSTER: And back to the issue of Mitt Romney. I wonder, given the fact that he released his tax returns, a lot of Americans, thanks to the publicity about him, are realizing that a lot of millionaires pay a 15-percent rate on capital gains and that, in fact, he — two years ago — paid 13.9 percent. How has that impacted the overall debate and, perhaps, even the understanding that people have of this issue?
WHITEHOUSE: I think it's expanded people's understanding. You have Warren Buffett out there. I've given frequent Senate floor speeches on the Helmsley building, where the occupants pay a 14.7 percent rate compared to the doormen who pay a 24 percent rate. The highest 400 income earners in the country are reported by the IRS, they pay less than average families do.
So, it's a widespread phenomenon, but I think the presidential campaign has put a spotlight on it. Certainly, when I go around Rhode Island, it's an issue that people are aware of and virtually nobody defends it. I mean, it's really indefensible.
SHUSTER: The spotlight has also come on this issue, in part, though, because of social media — Facebook and Twitter and all the attention that that has been driving. What are your plans, as you try to essentially build up support for this legislation in terms of both traditional interviews like this one but also, for example, using Twitter to try to explain what your legislation would do?
WHITEHOUSE: Well, I think that's important. We want to reach out across new media, it's one of the reasons we set up Buffettrulebill.com, to be able to capture people who believe in this and want to go on record as arguing for a change here. So, I think there's a lot of be done.
In addition to trying to get direct support for the bill, to try to get it to pass on its own, we also are coming up to some very significant decisions at the end of the year as we face the end of the Bush tax cuts and the so-called sequester, and I think if we continue to put pressure on to get this solved — in that context, at the end of the year is a second bite at the apple and we should take both bites. And I think we'll be successful if we are strong.
SHUSTER: And, Senator, have you heard anything from your Republican colleagues? Those across the aisle who — maybe they agree in principle, but they talk about the politics in an election year and what sort of vote this may be for them?
WHITEHOUSE: I don't want to out anybody or name names, but there are number of offices that have expressed considerable interest in the bill. I think they're running into intense leadership pressure not to break from the caucus position but, once again — if the American public stands up and they let their senators know that they care about this — people ultimately, I think, will do the right thing by their voters. But the voters have to be willing to stand up and be heard.
SHUSTER: Senator Sheldon Whitehouse. Senator, thanks so much for joining us, we appreciate it.
WHITEHOUSE: Thank you, David. I appreciate it.
SHUSTER: You're welcome.
