Because of Republicans, the rich will continue to get richer. GW Bush is the one who gave those outrageous tax exemptions to the rich, and Mitt Romney will continue them. Obama is trying to reverse them.
Senate rejects 'Buffett rule'
Updated at 7:06 pm ET On the eve of the federal tax filing deadline, the Senate blocked consideration of a Democratic bill to ensure that taxpayers making over $1 million a year pay more in federal taxes.
The vote, mostly on party lines, was 51 to 45, short of the 60 votes needed to advance the bill.
The bill, sponsored by Sen. Sheldon Whitehouse, D-R.I., is a version of a proposal made last year by investor Warren Buffett.
President Barack Obama had been rallying support for the “Buffett Rule” for the past several months and especially in the past week.
The tax proposal, Obama said on Sunday, is “not an argument about redistribution” of wealth. Instead, he said, "we're making an argument about how do we grow the economy so that it's going to prosper in this competitive 21st century environment," he said. "The only way we're going to do that is if people like me, who have been incredibly blessed, are willing to give a little bit back so that the next generation coming along can succeed as well.”
Democrats have tried to use the alleged unfairness of the tax code as a campaign weapon against GOP presidential candidate Mitt Romney, who paid federal income tax of $3.2 million on income of nearly $21 million in 2011, for an effective tax rate of 15 percent. Much of Romney’s income came from capital gains on his investments. Capital gains are taxed at 15 percent, while the top marginal tax rate on earned income is 35 percent.
In Monday’s vote, Whitehouse and other proponents of the higher tax rate had been expected to fall short of the 60 votes they need on the motion to move ahead on the tax proposal.
But the vote will put senators on record and create a campaign benchmark that they or their opponents can use.
The Senate vote on Monday is only a prelude to a contentious debate at year’s end over what to do about the current income tax provisions which expire on Dec. 31.
According to the nonpartisan Tax Policy Center, in 2011 taxpayers in the top one percent of the income distribution paid, on average, 24 percent of their income in federal incomes taxes. Taxpayers in the middle quintile of the income distribution paid, on average, 4.1 percent of their adjusted gross income in federal income taxes.
Whitehouse said on the Senate floor Monday that his bill would “restore some fairness to our tax system” and counteract what he called the “glaring tax inequity” of taxpayers such as Buffett, most of whose income comes from investments, paying a lower effective tax rate than people who earn most or all of their income from wages or salaries.
A critic of the bill, Sen. Rob Portman, R- Ohio, told the Senate that the Whitehouse bill was “bad economics, bad fiscal policy, and... a distraction from the broader bipartisan effort underway to achieve fundamental tax reform that is necessary to unleash a true economic recovery.”
The new tax would be phased in for taxpayers with incomes between $1 million and $2 million. The Whitehouse bill would not change the existing alternative minimum tax, which serves as kind of back-up system to ensure that higher-income people with lots of tax deductions end up paying higher taxes.
The bill would raise $46.7 billion over the next ten years, according to the nonpartisan staff of the Joint Committee on Taxation, so it would in itself do little to reduce the long-term mismatch between revenues and spending.
Cumulative budget deficits over the next ten years will be about $10.7 trillion, if current income tax rates remain in effect, according to the Congressional Budget Office’s estimate. If current tax rates expire at the end of this year and revert to the higher rates that were in effect prior to 2001, then cumulative deficits over the next ten years will be about $2.8 trillion.
At a Tax Policy Center panel discussion Friday, former CBO director Douglas Holtz-Eakin, who served as an economic advisor to 2008 presidential candidate John McCain, called the Buffett proposal “an empty policy. It doesn’t create a single job or help growth. It’s less than a tenth of a penny of every dollar of the current deficit. And it adds another layer of tax administration on top of the regular tax, the alternative minimum tax, and thus goes in the wrong direction from the point of view of real tax reform.”
Also at that panel discussion, David Levine, the former chief economist for investment firm Sanford C. Bernstein & Co. and a supporter of Responsible Wealth, a group of millionaires who believe high-income Americans should pay higher taxes, said instead of the Buffet rule, he’d prefer reverting to the 39.6 percent top income rates as it was in 2001 and adding a series of higher marginal income tax rates for people with incomes over $1 million, over $5 million, and over $25 million.