Capping weeks of calls by President Obama for more “fairness” in the federal tax code, the Democratic controlled Senate staged a vote with a preordained outcome on Obama’s “Buffett Rule” legislation that would slap a minimum 30 percent tax rate on millionaires. As expected, the measure was stymied when the Democrats were unable to muster the 60 vote super majority needed to proceed with a debate.
In a campaign year in which symbolic gestures and posturing are frequently more important than substantive legislative action, yesterday’s vote offered a good preview of how the rest of the political season is likely to play out. More and more, lawmakers are operating in a parallel universe of fantasy governance in which scoring political points, not passing legislation, is the name of the game. The vote was largely along party lines, although Sen. Susan Collins, R-Maine, voted with Democrats to allow the bill to proceed and Democratic Sen. Mark Pryor (Ark.) voted to block it.
The “Buffett Rule” was named for billionaire investor Warren Buffett who has frequently complained about how unjust it is that he pays a much lower effective tax rate on his massive capital gains than his secretary pays on her relatively paltry income . Democrats viewed the 51 to 45 vote – nine votes short of what was needed -- as a fitting capstone to “Tax Day,” the Internal Revenue Service deadline for filing 2011 tax returns.
The vote was also clearly aimed at reminding voters that Mitt Romney, the wealthy presumptive GOP presidential candidate, and his wife paid an effective tax rate of only about 14 percent on reported earnings of $21.7 million in 2010. The top tax rate is 35 percent. Obama and his wife, Michelle, disclosed last week that they paid 20.5 percent in federal taxes on $789,674 in adjusted gross income for 2011, injecting their personal finances into the political fight over tax policy.
Obama has been urging Congress to approve a 30 percent minimum tax on individuals with an adjusted gross income of more $1 million a year. Instead, the Senate yesterday voted on a version offered by Sen. Sheldon Whitehouse, D-R-I., that would impose the 30 percent tax on people making at least $2 million annually, and gradually phasing that rate in for those earning at least $1 million.
A DROP IN THE FISCAL DEFICIT BUCKET
Whitehouse said the bill would raise between $47 billion over 10 years that could be used for deficit reduction or to create hundreds of thousands of infrastructure jobs or to keep students’ interest rates at 3.4 percent. He said it would put an end to “the absurd inequity in our tax code that lets a hedge fund billionaire pay a lower tax rate than a Rhode Island truck driver.” In rallying Republicans to help defeat the measure, Sen. Pat Toomey, R-Pa., denounced the “Buffett Rule” as an effort “simply to engage in class warfare, generate envy and resentment and try to use that for political gain.”
“Everyone knows this is not going to pass, it’s a political exercise,” said Senate Republican Whip Jon Kyl of Arizona. “This legislation would do nothing with regard to job creation, with regard to gas prices, with regard to economic recovery or any of the other matters that the American people care about.”
The outcome was the first phase of a weeklong congressional discussion about taxes, timed by both parties to coincide with Tuesday’s deadline for submitting federal tax returns. On Thursday, the House will vote on an alternative promoted by House Majority Leader Eric Cantor (R-Va.) that would cut taxes by 20 percent for businesses with 500 or fewer employees.
Far from being disappointed, Senate Democrats viewed last evening’s defeat of the Buffett Rule as a good day’s work – one that once again forced the Republicans to side with the wealthiest Americans against the middle class. The latest Gallup Poll shows that 60 percent of Americans back the idea of the Buffett rule. Only around 210,000 taxpayers—a bit over one of every 1,000—would face higher federal taxes if the measure were enacted, according to one estimate.
Senate Majority Leader Harry Reid, D-Nev., engineered a similar maneuver late last month when the chamber held a floor vote on a measure to strip the five largest oil companies of $24 billion of tax exemptions within hours of Obama demanding such action in a campaign speech. That bill also was blocked by the Republicans, but the Democrats didn’t mind because they could argue that the GOP was siding with oil companies despite skyrocketing gas prices and record industry profits.