This week, President Obama announced a new way for the government to make more money: put a floor on the tax rates that millionaires face. He coined the idea the "Buffett Rule," after billionaire investor Warren Buffett, who recently complained that he didn't pay enough taxes. Even though incomes are taxed progressively, so those making more money are supposed to pay more, capital gains -- like income from stock gains -- can escape those marginal rates. That's one way in which wealthier Americans enjoy lower tax rates than marginal rates would imply.
So how much would the so-called Buffett Rule bring in? It's hard to say, because Obama didn't define precisely how it would work. But he did say it would create a tax rate floor for those who make more than $1 million per year. So let's use 2009 tax return data from the IRS to imagine some possible scenarios for how much additional tax revenue the new tax could bring in. Here's a chart:
Let me explain what's going on here. I used IRS data for 2009* adjusted gross income (which I know isn't perfect, but it was the best they had). I then calculated the effective tax rate based on its data to be 29.1% for all Americans who earned more than $1 million. I consequently took the total income of the group and multiplied by different tax rates (as shown). I subtracted the taxes already paid (at the 29.1% effective rate) to figure out how much additional revenue they'd provide to the U.S. government at those new tax floors.