Millionaire tax 'class warfare'

WASHINGTON: Leading Republicans have rejected as ''class warfare'' a White House proposal dubbed ''the Buffett rule'' that would ensure millionaires are taxed at the same rate as the middle class.

The US President, Barack Obama, was expected to make the proposal last night, picking up on a repeated complaint by billionaire investor Warren Buffett that he pays taxes at a lower rate than his secretary.

Senator Lindsey Graham, a Republican from South Carolina, said increasing taxes on millionaires would add a ''de minimis amount of money'' to the Treasury to pay off debt.

''Tax code should be reformed for one purpose - generate jobs. When you say we'll tax 1 per cent of the economy, that's class warfare,'' said Mr Graham.

He has called for reforms that would eliminate deductions and flatten income tax rates overall.

Republican Paul Ryan from Wisconsin said: ''Class warfare … may make for really good politics but it makes a rotten economics. We don't need a system that seeks to divide people. We don't need a system that seeks to prey on people's fear, envy and anxiety.''

Some millionaires get a big break because investment gains - such as capital gains, dividends and ''carried interest'' compensation paid to investment managers and hedge fund partners -are taxed at a lower rate than wages.

Millionaires also pay the social security payroll tax only on the first $US106,800 ($103,500) of their income, the cut-off point for the tax.

The millionaires' rate would affect just 0.3 per cent of taxpayers, or fewer than 450,000 of the some 144 million returns filed for last year, according to The New York Times.

Google's chairman, Eric Schmidt, said the political focus in the US on cutting the deficit and spending was ''ludicrous'' and politicians should instead support more government stimulus packages to prompt companies to hire.

''The economy … needs a lot of encouragement,'' he said.

''It needs not just something like the [Obama] jobs bill, but also significant government stimulation in terms of buying power and investment. Otherwise, we're set up for years of extraordinarily low growth in the economy and no real solution to the jobless problem.''