Republicans on Monday banded together in the Senate to block President Obama’s “Buffett Rule” tax, halting one of his chief legislative goals but leaving him with what the White House believes is a potent political weapon heading into November’s elections.
Congressional Democrats also said the 51-45 vote, which left them nine shy of the 60 needed to advance in the Senate, will not be the last word legislatively.
“We’re going to come back to this issue repeatedly,” vowed Sen. Charles E. Schumer, a New York Democrat who has vociferously pushed for imposing the tax increase.
And even before the vote Mr. Obama’s presidential re-election campaign sent supporters an email arguing that the tax is needed in order to force likely GOP opponent Mitt Romney to “pay his fair share” of taxes.
The Buffett tax — named for billionaire investor and Obama supporter Warren Buffett — would impose a 30 percent minimum tax on taxpayers with adjusted incomes of at least $1 million a year.
Right now, many of them pay a lower overall rate because their income derives from dividends or capital gains, which is taxed at 15 percent, rather than salary or wages, which can be taxed up to a marginal rate of 35 percent.
Republicans said tax policy should encourage investment, not punish it — which is what they said the Buffett tax would do, particularly dinging small businesses.
And they said Mr. Obama, who has made passage of the Buffett tax his chief legislative priority over the last month, is overselling its benefits.
“By wasting so much time on this political gimmick that even Democrats admit won’t solve our larger problems, it’s shown the president is more interested in misleading people than he is in leading,” said Senate Minority Leader Mitch McConnell, Kentucky Republican.
A similar proposal in the House has already failed multiple times. In the House Budget Committee, a stand-alone Buffet tax was defeated 22-15, with one Democrat siding with all Republicans in opposing the tax. Several 2013 federal budget plans written by Democrats included the tax, but they were also defeated on the House floor last month.
Still, the tax has proved to be popular with voters, according to pollsters, who say support stands at better than 50 percent.
Democrats in recent weeks have tried to rebrand the Buffett tax as the “Romney tax” — a reference the former Massachusetts governor’s own personal fortune.
Mr. Romney has released his 2010 tax return and an estimate of his 2011 taxes, showing he paid a rate of 13.9 percent on income of $21.6 million in 2010 and 15.4 percent on income of $20.9 million in 2011.
Mr. Obama released his 2011 tax return last week, showing income just beneath the level that could have qualified for the Buffett Rule tax. The president paid 20.5 percent of his income in federal taxes.
“Continuing to allow some of the wealthiest Americans to use special tax breaks to avoid paying their fair share simply cannot be justified,” the White House said in a statement backing the Buffett tax on Monday.
While administration officials blamed “tax breaks,” the chief target of the Buffett Rule would be those who make money from investments. Under the 2003 Bush tax cuts, later extended by President Obama, both dividend and interest income are taxed at 15 percent — well below the top income tax rates.
Republicans said even at 15 percent it still amounts to double-taxation, since that income was already taxed at the corporate tax rate of 35 percent on the business side, and then is taxed again when disbursed to investors.
The Buffett tax would apply to about 223,000 taxpayers.
If imposed, the tax could bring in anywhere from $4.6 billion up to $16.2 billion in an average year over the next decade. Even at that high range, however, it’s still just 2.5 percent of the deficits Mr. Obama’s budget plans would produce during that same 10-year period.
Democrats said every little bit can help.
Mr. Schumer vowed to try to use the Buffett tax as a way to pay for expanded college access or a research and development tax credit. He predicted the GOP will have a hard time voting against the tax increase when the revenue raised is used for one of those purposes.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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