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Warren Buffett Rule: Class Warfare or Tax Fairness?

Pixland/Thinkstock(WASHINGTON) -- In proposing the "Buffett Rule," President Obama is invoking a name synonymous with success to raise taxes for the wealthy in what political analysts are saying will be a tough sell to Congress.

The chairman and chief executive of investment company Berkshire Hathaway is widely known to have friends on both sides of the aisle, including former Treasury Secretary Henry Paulsen and Federal Reserve chairman Ben Bernanke -- both Republicans.  Of course, he is known for being a billionaire businessman who lives rather modestly in Omaha, Nebraska.

In opposition to the Buffett Rule, Republicans have attacked the president's proposed tax hikes, crying "class warfare."

"Class warfare will simply divide this country more.  It will attack job creators, divide people and it doesn't grow the economy," Rep. Paul Ryan said on FOX News Sunday.  "Class warfare may make for really good politics, but it makes for rotten economics."

Joseph Stiglitz, Nobel Prize winner in economics and professor at Columbia University, said he disagrees.

"It's not class warfare to ask everyone in the country to pay their fair share.  To say the wealthy have taken advantage of their political position and have not paid their share of taxes is not class warfare.  It's a statement of fact," Stiglitz told ABC News.  "The fact is they are paying lower taxes and most Americans think this is unjust and unfair.  Tax loopholes don't just appear out of thin air.  They are the result of big political investments that rich people have particularly made to get tax preferences."

In an ABC/Washington Post poll in July, 72 percent of those surveyed supported raising taxes on people with incomes of more than $250,000 a year to help reduce the national debt, while 55 percent supported it strongly.  That was the most popular of nine different debt-reduction approaches tested and the only one to win majority "strong" support.  The next closest was raising the amount of income taxable for Social Security purposes.

Stiglitz said there is "no justification" why hedge funds should be taxed at a lower rate than workers.  He said it is possible that raising taxes by 0.5 percent, particularly with millionaires, could raise gross domestic product (GDP) by 1 to 1.5 percentage points.

"This could make a significant contribution to the country, especially if we spend it well," he said.  "So from an economic point of view, the current tax system is a distortion and this is a partial fix for that distortion."

Buffett and billionaire George Soros have also said if the wealthy make certain sacrifices, it could be a sign of national solidarity.

Copyright 2011 ABC News Radio

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