• “I couldn’t think of a more direct contrast with the Democrats believing that you ought to raise taxes,” House Majority Leader Eric Cantor (R-Va.) told POLITICO, comparing the “Buffett rule” with his own tax cut designed for small businesses.
• The public is “overwhelmingly receptive to the idea that finally, finally, Washington seems to be listening to the cry of small businesses,” Cantor added. “It’s just been too hard to start up a business or keep a business in business with all of the regulatory actions and higher taxes that are threatened by Washington.”
Hill Girds For Tax-Bill Battle
Seung Min Kim
April 15, 2012 11:25 PM EDT
With the glare of the public spotlight trained on Tax Day, Congress is readying for a political fight with dueling tax votes this week that will define each party’s priorities in this election year.
In one corner are Republicans, who are touting a tax cut to help boost the bottom line for small businesses. In another corner are Democrats who want to make sure the wealthy are paying their fair share — as a matter of tax fairness and to relieve the burden on the middle class.
Neither bill has a clear path to President Barack Obama’s desk. But Republicans and Democrats alike are confident their respective measures will create a clear distinction for the public on where each party stands.
“I couldn’t think of a more direct contrast with the Democrats believing that you ought to raise taxes,” House Majority Leader Eric Cantor (R-Va.) told POLITICO, comparing the “Buffett rule” with his own tax cut designed for small businesses.
The Senate moves first with a procedural vote Monday on the Buffett rule, which would ensure that millionaires pay an effective 30 percent tax rate on their income. The House follows suit Thursday with a vote on the small business tax cut, which would allow qualifying companies to take a 20 percent tax break that Republican lawmakers say will spur more hiring and investment.
Hovering over the congressional tax debate is the 2012 presidential battle in which Democrats both on and off Capitol Hill are all too eager to make likely Republican nominee Mitt Romney’s personal wealth a liability for his campaign. Romney’s tax returns show he paid a 13.9 percent tax rate in 2010 because his income came primarily through investments.
Democrats launched an all-out offensive promoting the Buffett rule through White House events, campaign speeches, television interviews in key swing states and an interactive online tool that helps people calculate how many millionaires in the country pay a lower rate than themselves. The Obama administration also released a report noting that 22,000 households that made in excess of $1 million in 2009 paid lower than 15 percent in income taxes, while 1,470 of them paid no federal income tax at all.
The Buffett rule is named after billionaire investor Warren Buffett, who disclosed in 2011 that he was paying a tax rate of 17.4 percent — far lower than the rates paid by staffers in his Omaha, Neb., office, which averaged around 36 percent.
“I’d just point out that the Buffett rule is something that will get us moving in the right direction toward fairness, toward economic growth,” Obama said at a recent White House event. “It will help us close our deficit and it’s a lot more specific than anything that the other side has proposed so far.”
Obama traveled to Florida to pressure lawmakers to back the Buffett rule and to rouse public support for the measure. During a campaign speech in New Hampshire, Vice President Joe Biden upped the ante by comparing the Buffett rule with what he termed the “Romney rule” – the former Massachusetts governor’s tax plan that Biden said would cost $1 trillion over the next decade, with most of that profiting the rich.
In response, congressional Republicans have renamed the measure the “Buffett tax” and argued that it would do nothing to boost job growth or notably pay down the nation’s ballooning debt.
The Joint Committee on Taxation estimated that implementing the Buffett rule would raise about $46.7 billion over a decade — assuming that the Bush-era tax rates expire at the end of 2012, which is hardly a certain scenario. Other estimates, such as one issued by the progressive group Citizens for Tax Justice, push the figure upward to $171 billion over 10 years. Neither calculation would make much of a dent in a government that’s $15.6 trillion in debt and facing its fourth consecutive year of trillion-dollar deficits.
“This has nothing to do with sound economic policy to get our economy moving again and everything to do with politics,” said Utah Sen. Orrin Hatch, the top Republican on the tax-writing Finance Committee. “It’s a spit in the ocean in terms of confronting our debt or fixing the alternative minimum tax — all while making our Tax Code more burdensome, when we need to come together to reform it in a meaningful way.”
Monday’s cloture vote on the Buffett rule bill — sponsored by Sen. Sheldon Whitehouse (D-R.I.) and which would affect about 223,000 wealthy taxpayers — is all but certain to fail to get the 60 votes needed to clear the Senate. But regardless, undeterred Senate Democratic leaders have vowed to press Republicans on the measure through November.
Meanwhile, House Republicans are prepping their small-business tax cut vote that will come later this week. The $46 billion, one-year tax cut would apply to all businesses with fewer than 500 employees, and the tax break would benefit 22 million small businesses, according to Cantor’s office.
“In order to address the pessimism felt by small businesses, we must provide more stability and relief on issues like taxes,” House Small Business Committee Chairman Sam Graves (R-Mo.) said.
On the heels of the successful signing of his JOBS Act into law earlier this month, Cantor, the second-ranking House Republican, has actively promoted the tax cut — using his first campaign ad of the 2012 election cycle to tout the measure.
But the tax cut doesn’t appear to be headed toward the same bipartisan fate as the JOBS Act, which sailed through both chambers of Congress with overwhelming majorities; Cantor’s tax cut cleared the House Ways and Means Committee on a strict party-line vote, while Democrats complain the measure is essentially a giveaway to the wealthy dressed up as a break for small businesses.
Because of the way the tax break is defined, Democrats argue that it gives an opening for celebrities, professional sports teams and other wealthy enterprises to qualify for it.
“Unless by small businesses and mom-and-pop businesses you mean Paris Hilton and Larry Flynt, Republicans are peddling a Trojan horse to America’s small businesses,” Rep. Xavier Becerra (D-Calif.) said.
In an interview, Cantor dismissed the Democrats’ arguments.
“I just find it hard to understand why I should have to go home to a small business owner and tell her that we’re not going to allow her to benefit from a tax cut … just because someone else who may have a benefit is also using that benefit,” the Virginia Republican said.
The public is “overwhelmingly receptive to the idea that finally, finally, Washington seems to be listening to the cry of small businesses,” Cantor added. “It’s just been too hard to start up a business or keep a business in business with all of the regulatory actions and higher taxes that are threatened by Washington.”
If and when it passes the House, the tax cut isn’t likely get a friendly reception in the Senate, where Democratic leaders have released their own small-business relief plan and Sen. Chuck Schumer (D-N.Y.) scoffed in response to the Cantor bill: “the Republicans’ panacea to everything is to reduce taxes on everyone.”
Polling shows both measures are popular. A January poll by the Republican firm McLaughlin & Associates found that about 80 percent of likely voters approve of a 20 percent tax cut for small businesses. And a Gallup Poll released Friday reported that 60 percent of Americans — including 63 percent of independents — were in favor of Congress giving the green light to the Buffett rule.
Scott Wong contributed to this report.