A dozen Democrats and an Independent in the Senate have re-introduced a bill that would impose a minimum 30% income tax on taxpayers who earn more than $1 million as a way to help reduce the ballooning federal deficit.
The bill, Paying a Fair Share Act of 2013 (S. 321) or so-called "Buffet Rule," was introduced by Sen. Sheldon Whitehouse, D-R.I. on Feb. 13.
Imposing a 30% tax rate on high income earners would be attractive for muni investors and give them an advantage over other forms of investments.
"It's pretty clear from looking at the bill that tax-exempt interest wouldn't be included and considered by itself it would be a plus for the muni market," said Bill Daly, director of governmental affairs for the National Association of Bond Lawyers. "It's an incentive for high income earners because munis wouldn't be taxed at the 30% rate."
Similar to the bill that Whitehouse introduced in February 2012, this legislation says it is the "sense of the Senate that Congress should enact tax reform that repeals unfair and unnecessary tax loopholes and expenditures, simplifies the system for millions of taxpayers and businesses, and makes sure that the wealthiest taxpayers pay a fair share."
Last year Whitehouse introduced the bill after President Obama's State of the Union Address said "tax reform should follow the Buffet Rule."
The Buffet Rule is named after billionaire investor Warren Buffet, chairman of Berkshire Hathaway Inc., who has complained that it's wrong that he pays an effective lower tax rate than his secretary. Buffet urged Congress to require the wealthy to pay their fair share of taxes.
"This Act is an interim step that can be done quickly and serve as a floor on taxes for the highest-income taxpayers, cut the deficit by billions of dollars a year, and help encourage more fundamental reform on the tax system," Whitehouse said in the bill.
The bill would apply to taxable years beginning after Dec. 31, 2013.
Sens. Tammy Baldwin, D-Wis., Richard Blumenthal, D-Conn., Patrick Leahy, D-Vt., Jack Reed, D-R.I., Frank Lautenberg, D-N.J., Carl Levin, D-Mich., Bernie Sanders, I-Vt., John Rockefeller, D-W.Va., Tom Harkin, D-Iowa., Al Franken, D-Minn., Jeff Merkley, D-Ore., and Elizabeth Warren, D-Mass., are co-sponsors of the legislation.
The bill was referred to the Senate Finance Committee.