Let's focus on these 7,000 tax payers. I think they help to show why, even if the Buffett Rule is a sensible principle, it wouldn't be a commonsense law.
As Roberton Williams of the Tax Policy Center explained to me, there are three buckets of factors that can bring taxable income down from $1 million to zero. One is tax tricks. The IRS should crack down more. Two is relying heavily on investments. The administration can try to level taxes for earned income and investment income. Third is great misfortunes. When investments lose significant income, a house or business is destroyed (i.e. a casualty loss), or a family member gets sick and incurs high medical costs for the self-insured, all these things chop away at taxable income and eventually bring a millionaire's income taxes to zero.
"You can attribute some of those 7,000 non-tax payers to investment choices they made, like tax exempt bonds," Williams told me, "but a lot of this might be unfortunate happenstance. A tornado tore through your home, you got a very expensive form of cancer, you lost hundreds of thousands of dollars in an investment. Those aren't choices people made, they're just legal deductions under the law."
The fact that 7,000 millionaires didn't pay income tax in 2011 is a Rorschach test for the Buffett Rule. Are you outraged by the figure? Then you probably think the rule should be enshrined into law. But if you see the figure as an artifact of a complicated tax code doing its best to account for a varied and complicated country of 150 million tax units, you might not be so outraged. We can, and we should, raise taxes on millions of more Americans, and we should start with the rich, because they can afford to pay sooner. But it's best to see the Buffett Rule as a political tool designed to drive a wedge between the White House and Republicans who have written off tax increases forever.