WASHINGTON — Senate Republicans derailed a Democratic “Buffett rule” bill Monday forcing the nation’s top earners to pay at least 30 percent of their income in taxes, using the day before Americans’ taxes are due to defy President Barack Obama on one of his signature election-year issues.
By a near party-line 51-45 tally, senators voted to keep the bill alive but fell nine votes short of the 60 needed to continue debating the measure. The anti-climactic outcome was no surprise to anyone in a vote that was designed more to win over voters and embarrass senators in close races than to push legislation into law.
At the White House, Obama denounced the vote, saying Republicans chose “once again to protect tax breaks for the wealthiest few Americans at the expense of the middle class.” In a statement issued after the vote, he said he would keep pressing Congress to help the middle class.
“It’s just plain wrong that millions of middle-class Americans pay a higher share of their income in taxes than some millionaires and billionaires,” he said.
Republicans called the measure a divisive Democratic distraction from the nation’s real problems that would not address the economy’s real woes.
“This legislation will do nothing with regard to job creation, with regard to gas prices, with regard to economic recovery,” said Sen. Jon Kyl of Arizona, the No. 2 Senate GOP leader.
Democrats’ goal, he said, was “to try to draw attention away from the issues that the American people are most concerned about.”
Sen. Susan Collins of Maine was the only Republican to join Democrats in voting to keep the measure alive, arguing that it was a way to begin considering a badly needed, broad revamping of the entire tax code.
The lone defecting Democrat was Sen. Mark Pryor of Arkansas, who said making the rich pay a fair share of taxes should occur as part of an overall tax overhaul, “not as a political ploy meant to score points.”
Monday’s vote was the first time a “Buffett rule” proposal has come to a Senate vote this election year, though Democrats have tried unsuccessfully in recent months to impose modest surcharges on the income of the wealthy.
With presidential and congressional elections approaching in November, it was also a microcosm of the broader battle the two parties are waging over an economy that is still having a tough time creating enough new jobs. And the fight isn’t confined to the Senate floor.
On Thursday, the House plans to vote on a plan by House Majority Leader Eric Cantor, R-Va., to provide 20 percent tax deductions to all businesses with fewer than 500 workers — a threshold that includes 99.9 percent of all U.S. companies.
Republicans say that plan would spur job creation, while Democrats call it a giveaway to business because firms would not have to hire employees to receive the reduction. That bill is expected to pass the GOP-run House but die in the Democratic-led Senate.
The Senate vote was on a measure by Sen. Sheldon Whitehouse, D-R.I., that would impose 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 has called for higher taxes on the rich.
The fight has been politically irresistible for both sides.
It allows Democrats to take shots at Mitt Romney, the wealthy, all-but-certain GOP presidential nominee. He has released data showing he paid an effective tax rate of only around 14 percent in 2010 and about 15 percent last year, both years earning around $21 million.
For Republicans, it’s a chance to accuse its Democratic backers of pressing for tax increases that will divert money employers could otherwise use to expand and hire more workers.
The Senate measure would raise $47 billion over the coming decade, barely enough to notice against the roughly $7 trillion in budget deficits expected over that period. Administration officials have conceded that by itself it would do little to trim those shortfalls, instead emphasizing its fairness.
“The administration believes that 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 written statement.
Obama’s tax return shows he earned nearly $790,000 last year and paid an effective tax rate of almost 21 percent.
Republicans said the bill underscored an effort by Obama and Democrats to scapegoat the wealthy with a gimmick that would accomplish nothing.
Campaigning in Philadelphia, Republican presidential contender Mitt Romney ridiculed the Buffett rule, telling a tea party audience in Philadelphia the revenue it would produce would fund the government for only about 11 hours. Obama generally says the proposal is to make sure the very wealthy do to not pay an abnormally low tax bill, and doesn’t advocate it as a source of significant federal revenue.
Sen. Rob Portman, R-Ohio, called the measure a proposal “that no one can credibly argue will create a single job.”
On average, the wealthy already pay higher income tax rates than those who make less.
People making $1 million or more annually paid an average effective rate of 25 percent last year in federal income and payroll taxes that finance Social Security and Medicare, according to the nonpartisan Tax Policy Center, a Washington group that studies taxes. Those earning $50,000 to $75,000 paid an average effective rate of 12 percent, the group said.
The White House complaint was that even so, some millionaires end up paying lower rates than many of those earning less. That is largely because many wealthy people earn income from dividends that are taxed at just 15 percent, instead of the top 35 percent rate on salaries.
A report in October by the Congressional Research Service, an agency that conducts research for lawmakers, said about a quarter of those earning $1 million or more per year — 94,500 taxpayers — had a lower tax rate than 10.4 million moderate-income people.