Over the past 30 years, the divide between the wealthy and the rest of America has ballooned. The "great contraction" of the past few years has only accelerated the trend. Recently, the top 1% owned approximately one-third of the nation's wealth; the top 10% own more than half. Soaring sales at Coach (NYS: COH) and lululemon athletica (NAS: LULU) alongside weak numbers at Best Buy (NYS: BBY) and Aeropostale (NYS: ARO) attest to a redistribution of wealth toward the top.

Much of the increasing disparity results from tax policies that disproportionately favor the wealthy, ranging from various tax breaks to the 15% capital gains tax rate. Since the ultra-wealthy make the majority of their income from investing, rather than wages, they tend to pay a lower rate. Additionally, employees at private equity shops like Blackstone (NYS: BX) and American Capital (NAS: ACAS) are often able to have their income taxed at the much lower capital gains rate.

Last month, Warren Buffett, the world's third-richest person, took to the op-ed pages to argue that, at a time of national hand-wringing about budget deficits, it's absurd he pays a lower tax rate than his secretary:

The megarich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It's a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot. ...

My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice.

That op-ed spurred President Barack Obama to propose the "Buffett Rule" over the weekend, which would essentially require everyone making more than $1 million a year to pay at least the same tax rate as middle-income taxpayers.

In a recent appearance on the CBC's Lang and O'Leary Exchange, Motley Fool macroeconomics editor Ilan Moscovitz discussed Buffett's op-ed, noted that U.S. economic growth isn't particularly dependent on low tax rates for the wealthy, and answered some questions about tax options for the U.S.

You can see the interview, which begins at the 36:50 mark, here.

What do you think of the proposed Buffett Rule? Share your thoughts in the comment box below. You can also check out more Foolish coverage on the Buffett Rule and taxes here:

At the time this article was published Ilan Moscovitz owns shares of Lululemon. The Motley Fool owns shares of Best Buy, Coach, lululemon athletica, and Aeropostale. Motley Fool newsletter services have recommended buying shares of Coach and lululemon athletica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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lsloanpdx

Buffet NEVER called for a special tax for ppeople earning over $1.

Go back and read his letter and it says for those Having TAXABLE INCOME OVER $1M. AND A 2ND SURCHARGE FOR THOSE HAVING TAXABLE INCOME OVER $10M.

http://www.dailyfinance.com/2011/10/12/billionaire-warren-buffett-earned-62-855-038-in-2010/?icid=maing-grid107Cdl27C103855

On the front of your 1040 tax form is TOTAL INCOME followed by ADJUSTED GROSS INCOME and on the next page about ten lines down is TAXABLE INCOME.

Buffets adjusted gross was $63m. and his TAXABLE INCOME ABOUT 67% OF THAT.

We never pay taxes on our "INCOME".

We pay taxes on our TAXABLE income which is always less that our Adjusted Gross income.

3 classes of income but only one that we pay taxes on

October 14 2011 at 4:34 PM Report abuse rate up rate down Reply
mascjock75

its about time that the wealthy of this country give back to the country that has been so generous to them. ive been saying this for years.. they pay less in taxes.. and make most of their money from investing.. and we all know they are the first to be warned when a company or investment is going to tank.. and they get out way b4 average joe who's left holding the worthless stock.. I say the wealthy making more than a million a year so be taxed at 40% PERIOD.. we ALL pay the same amount of sales tax, gasoline tax etc.. so i believe to be EQUAL.. they should be taxed MORE than the middle class to make up for the decades of SPECIAL TREATMENT they have been given.. PERIOD.... if the wealthy dont like it.. they can move to abu daubi or iraq.. as they couldnt work in any western european coutnry cause they would be taxed at 60%..

September 19 2011 at 3:28 PM Report abuse rate up rate down Reply