Senate Democrats unveil Buffett bill

Senate Democrats formally unveiled legislation Wednesday to ensure that all millionaires would pay a minimum federal tax of 30 percent.

The legislation comes as the relatively low tax rate for some high earners --like investor Warren Buffett and GOP presidential candidate Mitt Romney-- takes center stage in both the policy and political arenas in Washington.

President Obama and congressional Democrats have made enactment of the "Buffett Rule," which they say would force high earners pay a higher tax rate than their secretaries, a central part of their re-election messages. They argue it's both a matter of fairness and the best way to reduce the staggering deficit.

Buffett supports the Democrats' legislation.

"These middle class families are really struggling to get by and then they find out that some people with really extremely high incomes are actually paying lower all-in federal tax rate than they are. That's, to them, just not common sense," said Sen. Sheldon Whitehouse, D-Rhode Island, and author of the bill. "Americans deserve a straight deal and right now they are not getting one from our tax system."

A key reason Buffett and Romney pay a lower tax rates is because most of their income comes from investments. Taxes on capital gains from investments are capped at 15%.

The legislation would apply to people earning more than $1 million a year, be it from salaries or investments or both. They could still take some deductions -- such as for charitable giving -- but after all is said and done, they must pay an effective tax rate of at least 30 percent of their income as federal taxes.

Whitehouse says his legislation would raise billions for the government but there is no official estimate from the Congressional Budget Office about how much it would raise.

Most Republican strongly oppose raising the capital gains tax because they argue taxing investments at a higher rate will stifle job creation and hurt the economy.

Senate Democratic leaders have not decided when they will push for a vote on the legislation, which is called the "Paying a Fair Share Act of 2012." They want to consider first a handful of bills they consider to be job creation measures, including a highway funding bill, the FAA funding bill, and postal reform bill, according to aides.