Senate torpedoes 'Buffett Rule' bill

Story by The Hill
By Bernie Becker, Pete Kasperowicz, and Vicki Needham

The Senate on Monday rejected a Democratic proposal intended to ensure millionaires pay a minimum tax rate.

In a mostly party-line 51-45 vote, Democrats fell short of the 60 votes they needed to move forward with a debate on the so-called “Buffett Rule” legislation, with all but one Republican, Sen. Susan Collins (Maine), voting to oppose proceeding on the legislation.

Sen. Mark Pryor (Ark.) was the only Democrat to vote against the motion, though Sen. Joe Lieberman (I-Conn.), who caucuses with Senate Democrats but missed Monday’s vote, released a statement announcing his opposition to the Buffett Rule.

Fifty Democrats supported the motion to proceed to the bill, including Sen. Ben Nelson (D-Neb.), who previously had opposed similar efforts. Nelson cited the deficit for changing his position, but his decision to retire and not seek reelection at the end of this Congress might also have played a role.

Both parties expected the result, and the issue of whether wealthier households should pay higher taxes on investment income appeared likely to remain at center stage through November’s presidential election.

The two sides believe they will benefit from an extended debate over taxes this election season.

Democrats believe they have a winner in the Buffett Rule’s proposition that those making north of $1 million a year should pay a higher effective tax rate than middle-class families.

The Obama White House and party lawmakers have been determined to amplify the issue, with the president using the bully pulpit last week to pressure Republicans on the message of tax fairness and economic equality.

But Republicans say Democrats are overplaying their hand by pushing for a tax increase, and believe a proposed small-business tax cut scheduled for a House vote this week sets up a nice contrast.

Top GOP lawmakers have repeatedly called the Buffett Rule a political gimmick, and derided the president for campaigning heavily on the issue.

Republicans have also said that the Senate proposal, which the Joint Committee on Taxation says would raise roughly $47 billion over a decade if current income tax rates expire, would put only a little dent in the federal debt.

“President Obama looked at the options in front of him, sat down with his political advisers, and he said, ‘you know what, let’s go with the poll-tested tax increase on investment and job creation that won’t fix anything and won’t pass anyway, instead of actually doing something about the debt and the deficit,’ ” Senate Minority Leader Mitch McConnell (R-Ky.) said Monday.

Democratic lawmakers said before the vote that they were willing to force repeated votes on the Buffett Rule to press their case.

“Republicans in Congress would rather end Medicare as we know it and slash education funding than ask the richest of the rich to contribute even a penny more,” Senate Majority Leader Harry Reid (D-Nev.) said on the chamber floor on Monday.

Democrats believe that, in presidential hopeful Mitt Romney, they have an ideal foil as they make their push for the Buffett Rule, which is named after billionaire investor Warren Buffett, who has said he pays a lower tax rate than his secretary.

Romney, the likely GOP presidential nominee, has released tax records showing that he paid a 13.9 percent tax rate on $21.6 million in 2010 income.

But Republicans think the Democratic effort could backfire with an electorate focused on unemployment and high gas prices. They latched on to comments from Sen. Sheldon Whitehouse (D-R.I.), the sponsor of the legislation, who said the bill’s goal was not to lower gas prices or the jobless rate.

Whitehouse’s legislation would mandate that taxpayers making more than $2 million a year, counting proceeds from capital gains and dividends, pay at least a 30 percent federal tax rate. The rule would be phased in for those making between $1 million and $2 million.

House Republicans have scheduled their own tax vote for this week, a proposal to allow businesses with less than 500 employees a 20 percent tax deduction.

Signs also emerged over the weekend that Romney was interested in showing he’s willing to raise some taxes on the wealthy.

Romney, whom Democrats have repeatedly tried to cast as out of touch, floated the idea of limiting the deduction for mortgage interest of wealthy taxpayers’ second homes, according to reporters who heard his pitch at a private Florida fundraiser.

Still, Democrats, citing poll data showing that Americans support the Buffett Rule, appear confident that that they have a tax message that is better tailored to the middle class.

Whitehouse implied on the Senate floor on Monday that the Buffett Rule legislation could keep the United States from becoming a country that is too tilted toward the rich, and suggested to reporters he believed the proposal would eventually have enough votes to proceed in the Senate.

“I think once we hit 60 votes, it will flood well beyond,” Whitehouse said on a Monday conference call. “We must keep up the continued pressure on special interests that will hold their own for awhile.”