JAMIE DIMON/BUFFET RULE
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Jamie Dimon says the ‘Buffett Rule’ around taxing rich Americans would help reduce the nation’s $35 trillion debt — here’s how it would work
PBS NewsHour
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Updated Aug 29, 2024
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JPMorgan Chase CEO Jamie Dimon recently sat down with PBS NewsHour to discuss a range of issues, including potential changes to U.S. tax policy.
Senior correspondent Judy Woodruff asked about a column Dimon recently published in The Washington Post in which he described policies he hopes the next U.S. president will enact, like expanded earned income tax credit.
He wrote, “These national policies should include facing — and fixing — our failure to create equal opportunity for all, expanding the economy by encouraging investments, sharing the wealth, addressing our national debt, maintaining the world’s strongest military, taking control of our borders, strengthening the social safety nets, and renewing national pride by unabashedly teaching civics and American exceptionalism without papering over our mistakes.”
When asked how he proposes paying for new government initiatives while also bringing the national debt down, he said after “maximizing growth” there would be “a little bit of deficit.” He added, “You would maybe just raise taxes a little bit, like the Warren Buffett-type rule, I would do that, and we would be fine.”
But what is the Buffett Rule and how would it potentially help the country?
How the Buffett Rule works
The Buffett Rule is a principle named for billionaire investor Warren Buffett who famously expressed concern that his effective tax rate is lower than his secretary’s because of tax rules that favor the wealthy. It says that no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay.
“The question is what is fair when you have to raise multi-trillions to fund the United States of America,” Buffett told ABC News in 2012. “[Raising taxes] will not change my behavior. I have paid all different kinds of rates and I’ve always been interested in making money. I believe this should be a defining issue. [My secretary] Debbie works just as hard as I do and she pays twice the rate I do.”
In 2011, the Congressional Research Service said the current U.S. tax system violates the Buffett rule as “roughly a quarter of all millionaires (about 94,500 taxpayers) face a tax rate that is lower than the tax rate faced by 10.4 million moderate-income taxpayers (10% of the moderate-income taxpayers).”
Soon after, President Obama proposed the Buffett Rule and said to achieve it no millionaire should pay less than 30% of their income in taxes. As a result, rich households would enjoy fewer tax subsidies, like lower rates on investment income (capital gains and dividends) than other income, and be limited in their ability to employ tax avoidance strategies.
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What’s the impact?
The Buffett rule was a policy proposal that gained popularity during the Obama era. Several think tanks analyzed its potential impact at the time.
Brookings Institute found it would increase tax revenue by around $260 billion in the decade following its passage, which wouldn’t significantly impact the country’s deficits. The Center for American Progress estimated that an extra $73 billion would have been collected annually over the prior three years had the rule been in place. The Center for Public Integrity argued the tax code is already progressive, that Buffett’s low tax rate is an exception rather than the norm, and that the impact on the deficit would be minuscule.
It’s unclear which of these competing analyses would have proved correct because the Buffett rule never became law. Instead, there were other changes — including President Donald Trump’s major overhaul of the tax code.
While a small number of lawmakers reintroduced a bill with a version of the Buffett rule in 2021, it hasn’t been a part of most recent major tax reform proposals. Vice President Kamala Harris reportedly supports President Biden’s plan to raise the top marginal rate on long-term capital gains and qualified dividends for the highest earners to 44.6%.
Whether Dimon gets his wish and taxes are increased so the government can invest in solving problems will depend in large part on who wins the next election in November 2024. We won’t know that for months, and until then, predicting future tax changes is a difficult endeavor.
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Christy BieberFreelance Writer
Christy Bieber a freelance contributor to Moneywise, who has been writing professionally since 2008. She writes about everything related to money management and has been published by NY Post, Fox Business, USA Today, Forbes Advisor, Credible, Credit Karma, and more. She has a JD from UCLA School of Law and a BA in English Media and Communications from the University of Rochester.
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- Comment by Danny Lattrell.DLDanny Lattrell11 hrs agoBuffet says that higher taxes would have no effect on how he invests. If so, he’s probably the only wealthy person where that would be the case. Most wealthy people invest for tax efficiency. Also, most wealthy people are perfectly capable of investing their money somewhere else if the U.S. taxes them too highly and that is exactly what most of them would do.reply 0sharereport
- Comment by Aaron Hitson.AHAaron Hitson14 hrs agoI have a better plan Mr. Dimon. No foreign aid, no foreign wars, and no expansion of government, period.reply 1sharereport
- Comment by Phil Sheo.PSPhil Sheo14 hrs agoBig deal. So $25B a year. Government probably manages to lose that in its couch cushions.I look at it like I look at losing weight. Which is easier: working out more or eating less? Eating less is also much more effective. Go walk a treadmill for any amount of time. In an hour, I would burn roughly 500 calories. In contrast, I could run the same daily net calories by simply eating less than I would have. Not eating that ice cream sandwich is at least half that – without breaking a sweat or taking any time out of my day.Why can’t government go on a diet? They don’t NEED that ice cream sandwich – they WANT it.reply 1sharereport
- Comment by Gregory Allen.GAGregory Allen14 hrs agoHow about the government stop recklessly spending trillions of our hard earned money and then coming to us to bail them out of debt, with more of our hard earned money!reply 2sharereport
- Comment by Ian Hill.IHIan Hill19 hrs agoThe think tanks had a huge number difference.Yes the rich should pay 20% with no loop holes and then they would not hide their moneyreply 0sharereport
- Comment by Dave L.DLDave L23 hrs agoCut federal, state and city governments by 30% WILL restore the lost in earning power of the average working class below a $2 million annual income earner!!!!reply 2sharereport
- Comment by Mark Hsu.MHMark Hsu1 day agoNot gonna work. Rich will go back to sheltering income from taxes resulting in less revenue. Happens every time. If you confiscated all the money from the rich it wouldn’t fund the government for a year. Guess who pays taxes after that? The real answer is to cut spending and only increase with the rise of GDP.reply 4sharereport
- Comment by Monkeywrench Willow.MWMonkeywrench Willow1 day ago2 things:1st: Flat tax of 10%. Everyone pays the same amount. No deductions allowed for anyone.2nd: Anytime the national debt is more than 3% of the national gdp, no politician is eligible for re-election.reply1 reply 7sharereport
- Reply by Phil Sheo.PSPhil Sheo14 hrs agoReply to Monkeywrench WillowI think you mean deficit. The national debt is already more than 100% GDP. Even then, 3% would require a 50% reduction in expenditures.reply 0sharereport
- Comment by g martin.gmg martin1 day agoTaxes aren’t the problem, spending is.reply 5sharereport
- Comment by douglas culham.dcdouglas culham1 day agoIf Buffett wants to give his Billions away then go for it. It’s easy for these super rich liberal people to tell people to give their money away!!!! The government and their stupidity costs me a fortune and I only make $125,000 a year!reply 4sharereport
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