Buffett Rule

The Issue
The Buffett Rule was first discussed in a “blueprint” released by the White House following President Obama's 2012 State of the Union address. The Buffett Rule was initially part of a proposed overhaul of the tax code that would ensure that households making more than $1 million pay an effective tax rate of at least 30 percent. The minimum tax rate is phased in linearly beginning at $1 million and would be fully phased in at $2 million.

Under the Buffett Rule, the charitable deduction would be the only tax deduction that affected taxpayers would be allowed to take.

President FY17 budget request includes Buffett Rule
Released in February 2016, President Obama's budget request for Fiscal Year 2017 included the Buffett Rule as a source of revenue for further deficit reduction. The budget would implement the Rule by creating a new "Fair Share Tax" which would institute a 30% minimum effective tax rate (after charitable contributions) for joint-filing taxpayers on income in excess of $1 million Adjusted Gross Income (AGI).

IS Position
In March 2012, Independent Sector sent a letter to Sen. Sheldon Whitehouse (D-RI) and Rep. Tammy Baldwin (D-WI), as well as all of the original co-sponsors of the Senate and House versions of the Paying a Fair Share Act, to show our appreciation for the specific provision that carves out the charitable deduction for preservation under the Buffett Rule. The letter did not take a position on the broader legislation and included the names of almost 50 nonprofit organizations from around the country.

Following the inclusion of the so-called Buffett Rule in President Obama's 2012 State of the Union blueprint, lawmakers in Congress have introduced legislation to preserve special consideration for charitable giving in any application of the rule for high-income taxpayers.

Sen. Sheldon Whitehouse (D-RI) first introduced the Paying a Fair Share Act (S.2059 and later S.2203) in February 2012, which would have both applied a minimum 30 percent income tax rate for taxpayers with adjusted gross incomes above $1 million and maintained current incentives for charitable giving. The legislation also would have permitted high-income taxpayers to continue to receive a credit equal to the value of the charitable deduction under the regular income tax. The Joint Committee on Taxation estimated that S. 2059 would raise $46.7 billion over 10 years. Rep. Tammy Baldwin (D-WI) introduced a companion bill (H.R. 3903) in the House in February 2012. Sen. Whitehouse introduced similar legislation during the 113th and 114th Congresses, and was joined in his efforts by Rep. David Cicilline (D-RI) in the House.

Conflicting reports have emerged to determine the overall economic impact of the Buffett Rule. The White House National Economic Council (NEC) argued in April 2012 that the provision will address income inequality, saying 8 percent of the 400 highest-income Americans have an effective federal income tax rate of less than 10 percent and one-third pay a tax rate of less than 15 percent. In response to the NEC report, Senate Finance Committee Republicans the same month released a fact sheet to make the case that the Buffett Rule would not have a net positive economic impact.


IS letter to Sen. Whitehouse in support of charitable deduction carve-out (March 2012)

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