Buffett Rule

Definition of 'Buffett Rule'


A tax rule proposed in 2011, by President Barack Obama, stating that individuals in the highest income bracket must pay at least 30% of their income in federal taxes. The Buffet Rule requires that no household earning more than $1 million should be taxed less on income than less-affluent families. The bill that was inspired by this rule, Bill S. 2059, known as the "Paying a Fair Share Act of 2012," was later rejected by the Senate in April 2012.

Also called the Fair Share tax.

Investopedia explains 'Buffett Rule'


The Buffett Rule was named after the legendary investor, Warren Buffett, who made a note that he pays a lesser federal tax rate than his secretary does. While some Americans believe the rich do not pay enough tax, the Rule was proposed as a measure of tax impartiality asking that everyone pay their fair share in taxes. Critics of the Buffett Rule state that there would be no significant difference to rich individuals' pockets if their income tax rates were increased, since the majority of their accumulated income and wealth is made through investment dividends and capital gains, not necessarily income. Supporters of the Rule, on the other hand, believe it is a first step in closing the loophole in the tax code.



comments powered by Disqus
Hot Definitions
  1. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
  2. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  3. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  4. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  5. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  6. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
Trading Center