The U.S. Senate has a variety of members And then there is the one who spends her time devising ways to help the working and the middle classes. Think Progress' Mason Atkins reports that at an event at CAP on Thursday, Massachusetts Democrat Elizabeth Warren
argued that America faces a choice: “Do we invest in students, or millionaires?” Warren plans to introduce a bill that would create an “America that invests in those who get an education” by revising the tax code and enacting the Buffet rule.
The Buffet rule is named after billionaire Warren Buffet and would establish a minimum tax on income in excess of $1 million. The measure, which never got out of Congress, raises approximately $50 billion in revenue and ensures that millionaires do not pay lower tax rates than middle-class families.
Congress acted to lower the federal unsubsidized student loan interest rate to 3.86 percent for undergraduates for the 2012-2013 academic school year. But unless it acts again, the $1.2 trillion in outstanding student loan debt will continue to grow.
Warren’s plan would allow students with outstanding student loans to refinance at lower rates. The cost of the change would be covered by a “dollar for dollar” effort where for “every dollar the Buffet rule brings in, we use that dollar to refinance student loan debt,” she explained. She estimated that recent graduates who borrowed the maximum in undergraduate loans could see their payments drop by $1,000 a year and total interest paid over the life of the loan could be cut nearly in half. Students with graduate loans or borrowers from private lenders would save even more, Warren projected.
If the Buffet rule exceeds its expected revenue, then the plan would call for lowering the interest rates even further. All college graduates still repaying federal student loans would have the option to refinance to a lower rate, saving graduates thousands of dollars per year.
Warren is not a Johnnie-come-lately or, rather, a Jennie-come-lately. In February, The Daily Beast noted she "helped lead an unsuccessful fight against the Bipartisan Student Loan Certainty Act in the summer of 2013, which allowed the interest on future student loans to float freely at market rates, rather than face a government cap."
Expect howls of outrage from the right. Still, millionaires can afford it ; they're the ones with it, as the graph below from Business Insider displays.
Emanuel Saez has found
From 2009 to 2012, average real income per family grew modestly by 6.0% (Table 1). Most of the gains happened in the last year when average incomes grew by 4.6% from 2011 to 2012.
However, the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011. In 2012, top 1% incomes increased sharply by 19.6% while bottom 99% incomes grew only by 1.0%. In sum, top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover.
As this graph from Business Insider indicates, the top 1% averaged only (only!) approximately $350,000 in annual income. The revenue which Warren's bill would capture would come from only the higher earners in the group. And the tax would apply to only that portion of income above $1 million.
This should be a no-brainer. But unless Warren and others can convince the GOP-controlled House of Representatives that it will increase the supply of non-renewable energy, endanger health and safety regulations, restrict women's reproductive choices, or somehow cut income taxes for the privileged, it will be a herculean task to get it approved.