Parameterize a "Buffet Rule"

[MattHJensen]

Clinton's tax plan includes a Buffet Rule.

All I can find from Clinton's own documents is this:

Hillary will reiterate her call for the “Buffett Rule,” which ensures that those making more than $1 million per year pay at least an effective tax rate of 30 percent.

TPC implemented something much more complicated in their analysis of her proposal:

From TPC::

Q2. The documentation states that Secretary Clinton would propose the “Buffett Rule” to ensure
that “millionaires must pay at least a 30 percent effective rate.” Does Secretary Clinton’s
version of the Buffett Rule differ in any way from the version that was proposed in the
Administration’s FY2016 budget, described as follows in the Treasury Green Book (available
at https://www.treasury.gov/resource-center/tax-policy/Documents/GeneralExplanations-FY2016.pdf):

The proposal would impose a new minimum tax, called the Fair Share Tax (FST), on high income
taxpayers. The tentative FST would equal 30 percent of AGI less a credit for charitable
contributions. The charitable credit would equal 28 percent of itemized charitable contributions
allowed after the overall limitation on itemized deductions (so called Pease limitation). The final
FST would be the excess, if any, of the tentative FST over the sum of the taxpayer’s (1) regular
income tax (after certain credits) including the 3.8-percent net investment income tax, (2) the
alternative minimum tax, and (3) the employee portion of payroll taxes. The set of certain credits
subtracted from regular income tax would exclude the foreign tax credit, the credit for tax
withheld on wages, and the credit for certain uses of gasoline and special fuels. The amount of
FST payable (i.e., the excess of tentative FST over regular tax) would be phased in linearly
starting at $1 million of AGI ($500,000 in the case of a married individual filing separate
return). The FST would be fully phased in at $2 million of AGI ($1 million in the case of a married
individual filing a separate return).

A2. We assume the Secretary’s version of the Buffett Rule would be the same as the
Administration’s proposal with the exceptions that the AGI thresholds would be indexed for
inflation after 2015 and that the proposal would be effective 01/01/2017.

I don't think we need to go to so much work to implement something Clinton hasn't proposed.

How about a simpler approach:

X% of AGI minimum tax for taxpayers with AGI over Y, with the tax phased in linearly at Z% for every dollar of AGI.

Defaults would be X = 0, Y = $1mm, Z = 1

The final FST would be the excess, if any, of the tentative FST over the sum of the taxpayer’s (1) regular income tax (after certain credits) including the 3.8-percent net investment income tax, (2) the alternative minimum tax, and (3) the employee portion of payroll taxes.

Note that this will need to be calculated after the benefit surtax, if any.

[MattHJensen]

@andersonfrailey, could you take this one?

[andersonfrailey]

@MattHJensen I'm a little confused by differences between the example in the Treasury document and the Clinton tax plan.

From what I'm understanding Clinton wants a 30% tax on those making above $1 million (e.g. a person making $1.25 million will pay $375,000).

The Treasury seems the define the FST as a proportion of the difference between 30% of a person's income and their regular taxes where if you make $2 million you pay all of the difference and if you are below $2 million you pay a proportion of the difference. In this case the person making $1.25 million and facing $250,000 in regular taxes pays $31,250.

Which of these is closest to what we would like to do?

[MattHJensen]

@andersonfrailey, the second is closer -- except for the phase in over the 1-2 million range, I also think that also describes what Clinton has proposed.

The tentative fst (buffet tax) is the 30%. The final fst is the 30% - what they have already paid.

[martinholmer]

Merge of pull request #904 resolves issue #862.

Tax-Calculator estimates of the extra revenue added by such a reform are noticeably larger than the estimates generated by other models. These differences are being investigated and the results of those investigations will be reported in another issue.

@MattHJensen @feenberg @Amy-Xu @GoFroggyRun @andersonfrailey