President Obama on Tuesday continued to beat the drum for the Buffett Rule, his campaign-ready tax proposal aimed at millionaires and billionaires.
A central message of Obama’s re-election campaign is his argument that the very rich should pay more in taxes.
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"When it comes to paying down the deficit and investing in our future, should we ask middle-class Americans to pay even more at a time when their budgets are already stretched to the breaking point? Or should we ask some of the wealthiest Americans to pay their fair share?" Obama said recently.
Obama’s not alone in pushing the Buffett Rule. Next week, Senate Democrats hope to vote on legislation modeled on Obama’s proposal.
The legislation is not expected to advance very far, if at all. But you’ll be hearing a lot about the Buffett Rule in coming months.
And like most campaign planks, the Buffett Rule doesn’t necessarily make for the best policy, at least from the perspective of many tax experts.
What is the Buffett Rule exactly? The general principle behind the proposal is that millionaires and billionaires like investor Warren Buffett shouldn’t pay a lower percentage of their income in federal taxes than middle-class households.
Obama has even set a threshold for how much they should pay: At least 30% of their income.
The president proposed the rule last year as a guiding principle for tax reform, and he later touted it as a replacement for the Alternative Minimum Tax.
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On Capitol Hill, the Senate will hold a procedural vote on one version that would apply to today’s tax code and serve as an "interim step" to tax reform.
The "Paying a Fair Share Act," introduced by Rhode Island Democrat Sheldon Whitehouse, would apply to anyone whose adjustable gross income exceeds $1 million. Those who itemize their deductions would get a credit equal to the value of their charitable contribution deductions, so as not to discourage charitable giving.
To measure whether a millionaire is paying at least 30% of his income in taxes, the bill would take into account what the individual paid in federal income and payroll taxes plus the new 3.8% Medicare surtax set to take effect in 2013.
The minimum effective tax rate would be phased in for those with incomes between $1 million and $2 million electronic check payday advance.
The independent Tax Policy Center estimates that 35% of the richest would pay higher taxes under the bill than they do today.
How much revenue would it raise? The Joint Committee on Taxation, which analyzes tax legislation, has estimated that the "Paying a Fair Share Act" would raise $47 billion over 10 years, or an average of less than $5 billion a year, assuming the Bush tax cuts expire.
That wouldn’t do much to help reduce federal deficits. In recent years, annual deficits have ranged from several hundred billion dollars to more than $1 trillion.
And if the rule were to serve as a replacement for the AMT, as Obama has proposed, it wouldn’t come close to making up for the $1 trillion-plus in revenue that the AMT is expected to generate over 10 years.
What do independent tax experts think of the Buffett Rule? Tuning out the partisan rhetoric on both sides, tax experts say the Buffett Rule would further complicate an already complex tax code by adding a new minimum tax on top of the old AMT.
What’s more, the evidence that the Buffett Rule is correcting a big disparity in the tax code is not so clear cut.
For example, even without a Buffett Rule, most millionaires already pay more in taxes as a percentage of their income than those in the middle class, said Roberton Williams, a senior fellow at the Tax Policy Center. Not always as much as 30%, but a higher percentage of their income than the vast majority of the middle class.
And the Congressional Research Service notes that today’s tax code doesn’t violate the Buffett rule as egregiously as Warren Buffett and others have asserted. Using 2006 data, the CRS found the average tax rate among millionaires is almost 30% — with about a tenth of them paying a rate higher than 35% and another tenth paying a rate below 24%.
Lastly, tax reform done right shouldn’t create a need for a Buffett Rule, an AMT or any other accessory to the tax code, Williams said.
The only reason policymakers call for such measures is when they don’t like the outcomes of the system they’ve got. Tax reform is their chance to design a better system. And if one goal is to tax the rich more, they can do that in a simpler, more effective way than the Buffett Rule.
Fisker automotive executives said Wednesday the company is open to building its new Atlantic electric car someplace besides the former General Motors factory in Delaware where they originally planned the car’s assembly.
While they say they are still committed to the former GM plant, Fisker spokesman Russell Datz told CNNMoney that the company is flexible enough to make the car elsewhere, should a better offer materialize.
Company chairman Henrik Fisker told CNNMoney on Tuesday that the automaker has secured about $400 million in private equity financing.
Prior to Tuesday’s announcement, Fisker had been waiting on funding from a $529 million U.S. government loan so it could begin retooling the Delaware factory. The plant used to make the Pontiac Solstice, Saturn Sky and Opel GT convertibles for GM (, Fortune 500).
Fisker has already received $193 million of the government money and recently began selling its luxury, $103,000 plug-in "range extended" electric car called the Karma.
But the rest of the money has been held up due to what Fisker says were some missed production targets with the Karma guaranteed pay day loans.
The Karma is assembled in Finland.
Vice President Joe Biden, Delaware Gov. Jack Markell and Fisker CEO Henrik Fisker were together in 2009 to announce plans for the Delaware production facility.
At the time, union workers were promised the chance to fill many of the 2,000 factory jobs producing the plug-in electric sedan.
Besides the money issues, Fisker has experienced other problems of late.
They include a battery recall and some less-than-positive reviews of the Karma. Critics say the car does not perform as well as it should to justify its price.
The DOE has also come under intense scrutiny for its loan program in light of Solyndra, the failed solar panel maker that got a $535 million government backed loan.
CNNMoney’s Peter Valdes-Dapena contributed to this report.
New Zealand authorities have filed charges against the owners of a cargo ship that ran aground on a reef here six months ago, creating what authorities describe as the country’s worst maritime environmental disaster.
Maritime New Zealand on Thursday charged Daina Shipping with discharging harmful substances from the vessel Rena. The charge carries a maximum fine of 600,000 New Zealand dollars ($489,000) plus another 10,000 New Zealand dollars ($8,100) for each day the offending continues.
The Rena ran aground Oct. 5 on the Astrolabe reef near Tauranga, spilling 400 tons of fuel oil.
Daina Shipping, incorporated in Liberia, is one of 80 subsidiaries of Greek shipping giant Costamare. Costamare reported 2011 profits of $88 million on revenues of $382 million.
BATS Global Markets says it will replace Joe Ratterman as chairman of the board, even as the company’s directors expressed support for him as chief executive.
The announcement Tuesday came after technical difficulties derailed the exchange operator’s initial public offering last week.
BATS operates electronic markets for stocks and stock options in the United States and Europe. The Kansas-based company is a leading platform for high-frequency, computer-driven trading.
In a brief statement, BATS directors said Ratterman "continues to do a tremendous job as CEO of BATS."
"We fully support his leadership, vision and strategic direction as BATS continues to enhance competition and foster innovation in markets worldwide," the statement said.
But the directors still voted to replace Ratterman as chairman under "an enhanced corporate governance structure."
Ratterman, who has been the company’s chairman since 2007, will hold the position until a replacement is named, the directors said cash advance.
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BATS officially withdrew its IPO late Friday after it was forced to halt trading in its own stock and others because the company’s technology malfunctioned.
Ratterman publicly apologized for the problem, saying in a letter to customers that the company’s failure to perform "has no excuses."
BATS is third largest exchange operator in the United States after NYSE Euronext (, Fortune 500), which operates the New York Stock Exchange, and the NASDAQ OMX Group. ()
The company said this week that its troubles have not impacted its market share.
As of Monday, BATS boasted a 10.3% share of the U.S. equities market and a 25.4% share of the European market.
Thailand kept its key interest rate unchanged, pausing after two reductions as it raised its forecast for economic growth this year and predicted inflation pressure may increase. Stocks and the baht rose.
The Bank of Thailand held its benchmark one-day bond repurchase rate at 3 percent, it said in Bangkok today, a decision predicted by 19 of 21 economists in a Bloomberg News survey. The other two forecast a 0.25 percentage-point cut.
Central banks from Australia to South Korea refrained from cutting rates this month as higher energy costs boosted inflation risks, reducing the scope for monetary stimulus to counter a Chinese slowdown and Europe
U.S. stocks rose slightly Monday in a ho-hum opening after their best week of the year.
The Dow Jones industrial average spent most of the morning in the red, then climbed to 13,247, up 15 points. The Standard & Poor’s 500 and Nasdaq composite fell in the early minutes of trading but then rose. The S&P 500 was up five points to 1,410, and the Nasdaq was up 18 to 3,074.
Last week, the Dow and S&P 500 rose 2.4 percent apiece, their best showing of the year. For the first time, the Dow closed above 13,000 and the Nasdaq above 3,000 on the same day.
In the absence of any major economic news, the markets latched on to announcements from a few well-known companies.
Apple rose about 2 percent to $595.88 after announcing that it would pay a shareholder dividend and buy back $10 billion of its stock over three years. The stock hit an all-time high of $600.01 last week.
The dividend is expected to expand the company’s shareholder reach because value-oriented mutual funds that focus on dividends will buy it. Apple’s stock has already risen from $405 this year, partly in anticipation of the dividend.
UPS rose 4 percent after announcing it would buy TNT Express, the second-largest express mail company in Europe, further cementing UPS’ status as the world’s largest delivery company.
Citigroup rose 4 percent after announcing it had sold its share in a Shanghai bank for $668 million. The move should help the bank establish its own businesses in China. The bank is slimming down to try to shake off the vestiges of the financial crisis.
Sprint Nextel fell 5 percent after a Sanford C. Bernstein analyst downgraded the stock to underperform and predicted that future incarnations of the iPhone will not work too well with the Sprint network. The analyst, Craig Moffett, also expressed concern about the company’s heavy debt burden.
There was little in the way of major economic indicators. The National Association of Home Builders index of builder confidence came in unchanged from the previous month.
“There’s not really a lot to say,” said Stephen Carl, head equity trader at Williams Capital Group. “I guess we could just toss a coin in the air and see which way it goes.”
Prices for U.S. Treasury debt slid for the ninth day in a row, and the yield on the 10-year Treasury note hit 2.32 percent, the highest since October. Investors feeling more confident in the economy are putting their money in riskier assets like stocks.
European markets were mixed. The main stock indexes fell less than 1 percent in France, Britain and Germany. Stocks rose 1.7 percent in Greece and 0.7 percent in Spain.
Though Greece’s debt crisis has faded from the spotlight, Greece remains in deep recession, and uncertainty lingers. Unions throughout Europe are protesting cuts in benefits, making it difficult for governments to rein in their spending.
Leadership questions are also bubbling up, with the Greek finance minister stepping down to run the majority Socialist party and France gearing up for presidential elections.
At a conference Sunday in Beijing, International Monetary Fund chief Christine Lagarde said that European leaders need to stay vigilant about debt.
“The world economy has stepped back from the brink, and we have causes to be a little bit more optimistic,” she said. “But optimism should not give us a sense of comfort and certainly should not lull us into a false sense of security.”
The price of oil continued to rise, climbing to $107.70, up 63 cents. The average price for a gallon of regular gasoline rose a penny over the weekend to $3.84 and is up 30 cents in a month, pushed higher by tension in Europe over Iran’s nuclear program..
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Gasoline prices have never been higher this time of the year.
At $3.53 a gallon, prices are already up 25 cents since Jan. 1. And experts say they could reach a record $4.25 a gallon by late April.
“You’re going to see a lot more staycations this year,” says Michael Lynch, president of Strategic Energy & Economic Research. “When the price gets anywhere near $4, you really see people react.”
Already, W. Howard Coudle, a retired machinist from Crestwood, Mo., has seen his monthly gasoline bill rise to $80 from about $60 in December. The closest service station is selling regular for $3.39 per gallon, the highest he’s ever seen.
“I guess we’re going to have to drive less, consolidate all our errands into one trip,” Coudle says. “It’s just oppressive.”
The surge in gas prices follows an increase in the price of oil.
Oil around the world is priced differently. Brent crude from the North Sea is a proxy for the foreign oil that’s imported by U.S. refineries and turned into gasoline and other fuels. Its price has risen 11 percent so far this year, to around $119 a barrel, because of tensions with Iran, a cold snap in Europe and rising demand from developing nations. West Texas Intermediate, used to price oil produced in the U.S., is up 4 percent to around $103 a barrel. That’s 19 percent higher than a year earlier.
Higher gas prices could hurt consumer spending and curtail the recent improvement in the U.S. economy.
A 25-cent jump in gasoline prices, if sustained over a year, would cost the economy about $35 billion. That’s only 0.2 percent of the total U.S. economy, but economists say it’s a meaningful amount, especially at a time when growth is only so-so. The economy grew 2.8 percent in the fourth quarter, a rate considered modest following a recession.
Gas prices are already an issue in the presidential campaign. Republican candidate Newt Gingrich spoke several times this week about opening up more federal land to oil and gas drilling as a path toward U.S. energy independence _ and lower pump prices.
“Our goals should be to get gasoline to $2.50 or less so that working families can actually get to work and retired families can travel,” Gingrich said at a campaign event in Los Angeles Thursday.
High oil and gas prices now set the stage for even sharper increases at the pump because gas typically rises in March and April.
Every spring, refiners suspend operations to switch the type of gasoline they make. Supplies of wintertime gas are sold off before March, when refineries need to start making a new formula of gasoline that’s required in the summer.
That can mean less supply for service stations, resulting in higher gas prices. And summertime gasoline is more expensive to make. The government mandates that it contain less butane and other cheap organic compounds because they contribute to the formation of ground-level ozone, a primary constituent in smog. That means more oil, a costlier component, is needed to produce each gallon.
The Oil Price Information Service predicts that gasoline could peak at $4 online payday loan lenders.25 a gallon by the end of April. That would top the record of $4.11 in July 2008.
The national average for gasoline began the year at $3.28 a gallon. The average price for February so far is $3.49 a gallon. That’s up from $3.17 a gallon last February, a record at the time. Back in 2007, before the recession hit, the average for February was $2.25 a gallon.
Prices are higher on the East and West Coasts, where gasoline has risen above $3.70 in Connecticut, New York, Washington D.C. and California. This isn’t unusual _ states on the coasts charge some of the nation’s highest gas taxes.
High gas prices put a strain on many people’s budgets.
Americans spent 8.4 percent of their household income on gasoline last year when gas averaged an all-time high of $3.51 a gallon. That’s double the percentage a decade ago. They could pay even more this year, even though demand is the lowest in 11 years as people drive fewer miles in more efficient cars, says Tom Kloza, chief oil analyst at OPIS.
Gary Goodman commutes into Manhattan from Edgewater, N.J., because gas, tolls and parking make the cost of driving prohibitive.
Goodman, an accountant, commutes by bus. He uses his car mostly for trips to the grocery store or for occasional nights out. He says he has no choice but to eat the higher gas costs.
“I already drive as little as possible,” he says.
Paul Dales, a senior economist at Capital Economics says it would take a bigger shift in the global economy _ say, a deep recession in Europe or a slowdown in Asia’s manufacturing _ for pump prices to drop noticeably. Either event would slow oil demand, depressing prices.
But experts expect demand to keep rising. World oil demand is expected to increase by another 1.5 percent to 89.25 million barrels a day in 2012, according to the Energy Information Administration.
In the short term, tensions with Iran are feeding fears that oil supplies could be blocked.
The U.S. and Europe are tightening economic sanctions against Iran over what the West believes is Iran’s attempt to build a nuclear bomb. World leaders fear Israel may be planning a strike against Iran, the world’s third largest oil exporter.
In response, Iran has threatened to withhold its own oil deliveries and to block the Strait of Hormuz, a waterway along its coastline through which one-fifth of the world’s oil flows.
On Friday, an international banking clearinghouse crucial to Iran’s oil sales said it is prepared to discontinue services to Iranian financial institutions being targeted by the EU and U.S. sanctions. That could ratchet up the pressure on Iran, but also send oil prices soaring.
The price of Brent crude fell 53 cents on Friday to $119.58. WTI gained 93 cents to $103.24.
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Reporter Beth Fouhy in Atlanta contributed to this report.
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