Today, the Senate will vote on a motion to proceed to the Buffett rule, formally known as the Paying a Fair Share Act. This concludes a two-week push by Senate Democratic leaders and the Obama Administration on the bill, and the larger conversation around tax fairness and the need for the rich to pay a higher amount than those in the middle class. On a conference call just now, Senator Sheldon Whitehouse, the primary sponsor of the bill, described it as a return to a progressive tax code, rather than a gimmick. “Until very recently, this has been the economic policy of this country for decades if not generations,” Whitehouse said. “The gimmick has been the little trick that has allowed high income earners to pay less on taxes.”
Unfortunately, Whitehouse is mistaken on a couple fronts. This is a gimmick in the sense that nobody expects the legislation today to pass. While Whitehouse and Chuck Schumer both said on this call that they “expect to pick up some Republicans” in the vote today, they made no guarantee that they would get the seven Republicans needed to push past the 60-vote threshold and move the Paying a Fair Share Act to the floor. In fact, I would actually be surprised if they got more than Susan Collins’ vote today on the Republican side, if that. The schedule calls for a vote at 5:30 pm ET. [cont’d]
Schumer described “cracks in the dam” of Republican opposition to higher taxes on millionaires generally. The aforementioned Collins (R-ME) endorsed a millionaire’s surtax that would somehow exempt small businesses, and Congressman Rick Crawford (R-AR) suggested a millionaire’s tax in broader legislation that included a balanced budget amendment. But these are hedged positions, and none of them relate to the Buffett rule, which would set what amounts to a millionaire’s minimum tax.
The legislation has been criticized for not taking in a great deal in revenue. The CBO forecasts it as raising $47 billion over 10 years. However, if the Bush tax cuts are extended, that number rises to close to $160 billion, according to outside projections. Anyway, Whitehouse said, this is a matter of tax fairness as much as it is revenue. “It’s a little bit ridiculous that we have people making these enormous incomes and paying lower tax rates than those who are solidly in the middle class and working hard to get by,” he said. “This is a question about Washington, whether this town is so captive to the special interests that they can’t do something that is sensible and fair.”
“If (Republicans) think fairness is a gimmick then they’re just completely out of touch with the American people,” Schumer added.
Other observers have wondered why Democrats wouldn’t simply move to change the underlying policies that create the tax inequity on high-income earners. For example, most of the reason that so many millionaires pay a smaller percentage in taxes than middle-class earners comes from the preferential tax treatment on capital gains and dividends. Why not just raise them back to 35%, instead of their current position at 15%? Whitehouse claimed that his legislation catches the capital gains tax break “but also many others that might be involved.” Since you can defer capital gains and time their release to whatever tax year you choose, that’s not entirely true.
When the bill fails today, Schumer says that Senate Democrats will continue to press the issue. He suggested that they may tie the revenue increases from the Buffett rule to specific items that revenue would pay for. “We could tie it to helping kids pay for college… helping small businesses with the R&D tax credit… we could tie it to deficit reduction,” Schumer said. “There are lots of ways the American people would prefer to spend $47 billion than tax breaks for millionaires and billionaires.”