On Monday, the Senate is set to vote on whether to begin debate on the Paying a Fair Share Act (S. 2230) sponsored by Sen. Whitehouse (D-RI). By requiring that all households with incomes above $1 million pay at least a 30 percent tax rate (with a phase-in for incomes between $1 million and $2 million), this bill would implement the tax policy often referred to as the “Buffett Rule” (after Warren Buffett, the billionaire who famously pays a lower effective income tax rate than his secretary).
On Monday, the Senate is set to vote on whether to begin debate on the Paying a Fair Share Act (S. 2230) sponsored by Sen. Whitehouse (D-RI). By requiring that all households with incomes above $1 million pay at least a 30 percent tax rate (with a phase-in for incomes between $1 million and $2 million), this bill would implement the tax policy often referred to as the “Buffett Rule” (after Warren Buffett, the billionaire who famously pays a lower effective income tax rate than his secretary). The details of the bill are rather complex, but the principle behind it is simple – and true: millionaires and billionaires shouldn’t be paying a lower tax rate than many middle-income families pay.
So why do I think millionaires aren’t already paying their fair share? And why should women care? I’m glad you asked:
The rich are getting richer, while the poor are getting poorer.
I’m sure you’ve heard this maxim before, but it’s especially true today. Since the 1970s, incomes at the very top have grown much faster than incomes for the rest of us; a recent CBO study found that for the highest-income one percent, average after-tax household income grew by 275 percent between 1979 and 2007. 275 percent! That dwarfs the 37 percent income growth experienced by the middle-income 60 percent of households over the same period. And for the poorest 20 percent of the population, income was only about 18 percent higher in 2007 than in 1979.
During the recession (December 2007 - June 2009), average household incomes dropped across the board, including high-income households. But guess who bounced back first? Yep: the one percent. To be more precise, during the first full year of the recovery in 2010, 93 percent of income gains went to the top one percent. And no one in the bottom 90 percent saw any income gains at all; in fact, their average adjusted gross income of $29,840 in 2010 was $127 less than in 2009 and nearly $5,000 less than in 2000 (adjusted for inflation). Record numbers of women were living in poverty in 2010, and the percentage of women living in extreme poverty – with incomes below half the poverty line – was the highest ever reported.
Taxes on the rich are at historically low levels.
In 2009 (the last year for which data is available), millionaires paid an average tax rate of 22.4 percent – down by a quarter since 1995, when they paid an average of 30.4 percent. One major reason for this trend is the tax cuts enacted during the Bush administration that are still in effect today, which disproportionately benefit the highest income-earners – especially those who make money from capital gains and dividends more than from work. Our current tax system allows many very wealthy people to pay smaller share of their incomes in federal taxes than large segments of the middle class. For example, in 2009, people with incomes of $50,000 to $75,000 (mostly from their paychecks) paid about 15 percent of their income in federal income and payroll taxes, while people with incomes over $1 million who received more than two-thirds of their income from capital gains and dividends paid a 12 percent rate. Nearly 1,500 people who reported income higher than $1 million in 2009 paid no federal income tax at all.
When millionaires don’t pay their fair share, it especially hurts women.
Women – who face a persistent wage gap and are more likely than men to be poor – disproportionately rely on programs funded by federal tax revenues to protect their health, access higher education, obtain quality child care, meet their basic needs, and achieve a secure retirement. But unfair tax preferences for the very wealthy shortchange needed investments in critical programs. This year, millionaires will receive an average tax cut of $143,000 as a result of tax cuts enacted since 2001. As our new infographic shows, that amount could send 18 children to Head Start, provide child care assistance to 24 children, help 37 students attend college with Pell Grants, deliver a meal a day for a year to 249 seniors, or provide 551 people with family planning services. The Center for American Progress estimates that if millionaires had paid an average tax rate of 30 percent over the last three years, the U.S. would have collected $73 billion in additional revenue annually – revenue that could have funded the investments we need to promote a broadly shared economic recovery.
For all of these reasons, the National Women’s Law Center strongly supports the Paying a Fair Share Act. You can tell your Senator what you think!