GOP, Dems clash over Obama tax boosts on wealthy

By Alan Fram

Associated Press

Published: Monday, April 16 2012 2:11 p.m. MDT

FILE - In this Feb. 16, 2012, file photo House Minority Leader Nancy Pelosi of California and Rep. Sander Levin, D-Mich., a member of the House-Senate conference committee negotiating the extension of the payroll tax break, talk on Capitol Hill during attempts to reach an agreement. Democrats and Republicans are forcing votes in Congress this week of April 2012 on competing tax plans that they know are doomed from the start. But little does that matter to either party.

J. Scott Applewhite, File, Associated Press

WASHINGTON — Republicans accused President Barack Obama of pitting Americans against each other as they moved Monday toward blocking a Democratic attempt in the Senate to impose Obama's "Buffett rule" taxes on the rich. Democrats said it was time for the tax code to treat the wealthy and the middle class fairly.

A day before Americans' taxes were due at the Internal Revenue Service, the partisan clash previewed themes that will echo throughout this year's presidential and congressional election campaigns. But while the two parties competed for the stronger message to voters, one thing was sure — Republicans had enough votes to derail the Democratic bill.

As debate began, Senate Majority Leader Harry Reid, D-Nev., said the gap between the wealthiest Americans and everyone else had grown into a gulf.

"They shouldn't be allowed to hide behind tax loopholes that rig the system in their favor," Reid said.

But Senate Minority Leader Mitch McConnell, R-Ky., said the legislation would do virtually nothing to fix the economy or stem the federal budget's massive deficits, and was an attempt by Obama and his fellow Democrats to mask those problems.

"The problem is, we've got a president who seems more interested in pitting people against each other than he is in actually doing what it takes to face these challenges head-on and to solve them in a bipartisan manner," McConnell said.

The "Buffett rule" bill, sponsored by Sen. Sheldon Whitehouse, D-R.I., would slap a minimum 30 percent income tax on people making over $2 million yearly and phase in higher taxes for those earning at least $1 million. The measure is nicknamed for billionaire Warren Buffett, who backs higher taxes on the rich.

Democrats think the Buffett rule vote will underscore their commitment to economic fairness and GOP favoritism for the rich, a prominent election theme. Hammering at it lets Obama shine a spotlight on Romney, a former private equity executive who has paid an income tax rate of about 15 percent on annual earnings of $21 million, which is a lower rate than many middle-class families pay.

The Buffett rule is clearly popular. An Associated Press-GfK poll in February showed that nearly 2 in 3 favor a 30 percent tax for those making $1 million annually, including most Democrats and independents and even 4 in 10 Republicans.

Yet the measure would raise just $47 billion over a decade, a smidgen of the $7 trillion in federal deficits expected during that time.

Monday's vote wasn't the only showdown over taxes scheduled for Congress this week.

The GOP-run House plans a Thursday vote on legislation providing a 20 percent tax deduction for businesses that employ fewer than 500 workers, which covers 99.9 percent of all companies. The proposal, sponsored by House Majority Leader Eric Cantor, R-Va., seems certain to pass, but fail in the Senate.

Republicans believe the business tax measure will spotlight their efforts to lower taxes and create jobs, contrasted with Democrats' preference for higher taxes to finance ever-larger government. They believe they win the debate by keeping the focus on those subjects, not what the wealthy pay.

While a 20 percent tax deduction would be welcomed by any company, the $46 billion in lower taxes Cantor's bill would provide over the next six years would barely register on the $100 trillion in U.S. economic activity projected for that period.

This week's votes are probably just a start in a campaign year in which each party is trying to persuade voters that they have the answer to how to heal the economy.

Senate Democrats later this year may hold additional votes tied to the "Buffett rule," using the money it would raise to provide money for proposals to create jobs and keep student loan rates from rising.

With trillions in tax cuts dating from President George W. Bush set to expire in January, House and Senate leaders also are considering campaign-season votes on extending popular parts of those reductions, such as preventing the $1,000 child tax credit from being cut in half.

The votes were occurring just as many Americans stare at their own tax returns. The Internal Revenue Service says that through April 6, it had received 99 million of 145 million expected returns. So far, 80 million refunds have been issued averaging $2,794, down $101 from last year.

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