Members Say Taxes Favor Rich

Proposed Surtax Would Hit at Least 18 Members

Posted October 7, 2011 at 5:58pm

Some wealthy Republican and Democratic lawmakers agree that the tax code is skewed toward them, but the two camps remain at odds over whether they should shoulder the burden for fixing the nation’s financial woes.

“I am unapologetic in saying we, who make a large income … should be paying their fair share,” said Rep. Darrell Issa (R-Calif.), whose estimated wealth is at least $220 million and who is the second-most-affluent Member of Congress on Roll Call’s annual 50 Richest list.

Rep. Scott Rigell agreed with Issa, but he said the answer is tax code reform, not singling out the wealthy for new taxes as Democrats and the president have suggested.

“To the extent that there are loopholes, or provisions, that are available to some taxpayers and not to others, I have a real problem with that,” said the Virginia Republican, whose minimum net worth is nearly $11 million. “I [hope] that Congress, both parties, can come together and simplify our tax code. That is an effort that every one of us must embrace regardless of political party affiliation.”

Issa, who made his fortune in the car alarm business, and Rigell, who owns a group of car dealerships with his wife, are two of 12 lawmakers — six Democrats and six Republicans — on Roll Call’s 50 Richest list who would likely be hit by the “Buffett Rule,” according to an analysis of their financial disclosure forms for the 2010 tax year.

Named for billionaire investor Warren Buffett, President Barack Obama’s proposed Buffett Rule holds that individuals making more than $1 million a year should pay at least the same percentage of their earnings as middle-income taxpayers. The Buffett Rule would hit millionaires who get a large percentage of their income from capital gains and dividends. That’s because investment income is typically taxed at a lower rate — 15 percent — than what many middle-class taxpayers pay on their regular income. The president would use the revenue to pay for deficit reduction.

Besides Issa and Rigell, others that Roll Call identified as being possible targets of the Buffett Rule are Sens. Bob Corker (R-Tenn.), Dianne Feinstein (D-Calif.), Ron Johnson (R-Wis.), John Kerry (D-Mass.) and Mark Warner (D-Va.) as well as Reps. Diane Black (R-Tenn.), Rodney Frelinghuysen (R-N.J.), Nancy Pelosi (D-Calif.), Tom Petri (R-Wis.) and Jared Polis (D-Colo.).

Obama defended the idea last week in a speech in Mesquite, Texas.

“Here’s the principle: Middle-class families, working families, should not pay higher tax rates than millionaires or billionaires,” Obama said. “I don’t know how you argue against that; seems pretty straightforward to me. Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.”

Regardless of their belief that they may not be paying their fair share into federal coffers, Republicans said Obama’s Buffett Rule is an effort to score political points and help win re-election rather than engage in a constructive dialogue.

“So basically it’s the president baiting people to be envious and to stick it to the rich,” Issa said. “Is that the worst of the worst in politics? It’s pretty close.”

Last week, Senate Majority Leader Harry Reid (D-Nev.) proposed that Obama’s $447 billion jobs package be paid for with a 5.6 percent surtax on anyone with an income of more than $1 million, regardless of the source. The move gives Democrats a poll-tested package that most can run on for the next year — even though the surtax itself is political poison with Republicans.

“Of course,” Sen. Jay Rockefeller (D-W.Va.) said, when asked whether he’d be affected by the new millionaire surtax. “What you have to understand is that there is a large majority of the wealthy and the very wealthy in this country who want to pay more taxes. Poll them.” Rockefeller ranks fourth richest on Roll Call’s list.

At least 18 of the wealthiest 50 lawmakers, including the 12 potentially affected by the Buffett rule, would have been hit by this millionaires’ tax if it had been in place for the 2010 tax year, according to financial disclosures. The six additional lawmakers are Rockefeller and Sens. Richard Blumenthal (D-Conn.), Herb Kohl (D-Wis.) and Claire McCaskill (D-Mo.) as well as Reps. Rick Berg (R-N.D.)and Michael McCaul (R-Texas). McCaul tops Roll Call’s list this year as the richest Member of Congress.

Johnson, who ranks 41st with more than $8 million in net worth, said the Democrats’ plan was unfair. “The fact that a few high income earners pay a lower effective rate by utilizing existing tax law should not drive the enactment of punitive tax increases on the most productive members of our society,” Johnson said in a statement. “It should drive significant tax reform that simplifies the code and lowers marginal rates. The goal of any tax reform should be a system that collects the necessary revenue while minimizing economic harm and uneconomic activity.”

Democrats argue that the taxes should increase for the wealthy because federal spending has been cut as a result of Republican pressure to reduce the deficit. They contend that cutting further will hurt programs that help the poor and unemployed, which are needed now more than ever because of the high unemployment rate, which remained at 9.1 percent in September.

Federal Reserve Chairman Ben Bernanke “is saying we’ve got to take action, but he’s saying don’t make it too steep because of the problems out there” and because of weak economic growth, said Feinstein, whose minimum net worth is $45 million. “The only way you can take action and pay for the package is with some revenues. There are a lot of deductions that people can take, and I think the surcharge is fine.”

In April, a deal to fund the remainder of fiscal 2011 was reached only after Democrats agreed to cut about $30 billion from fiscal 2010 spending levels. A deal to raise the debt ceiling reached in August sliced $900 billion in discretionary spending over 10 years and charged the new Joint Committee on Deficit Reduction with finding at least $1.2 trillion more in deficit reduction.

Kerry, a joint committee member who is married to ketchup heiress Teresa Heinz Kerry, said, “I think it’s the right thing to do [for the wealthy to] … pay their share of making America stronger. I think the vast majority of Americans believe the system is out of whack.”

McCaskill, who is married to real estate developer Joseph Shepard and comes in at No. 18 on the list, said, “The tax code is currently tilted toward people who have a lot of money and complicated business dealings and that has happened because people with power and money have come to Washington and gotten all kinds of goodies in the tax code. So making it flatter and fairer is the thing to do. If that means my husband — we file separately — that he has to pay more in taxes, then he is going to have to live with that.”

But the GOP doesn’t see tax increases of any kind as a viable option. Rigell said it “is very telling” that Democrats could not pass a millionaires’ tax increase even when they controlled both chambers of Congress.

Steven T. Dennis contributed to this report.