Republicans reject Obama’s plan for tax on rich

Obama's plan for tax on rich

WASHINGTON: Senate Republicans defied President Barack Obama on one of his top election-year issues Monday, derailing a Democratic bill forcing the top U.S. earners to pay at least 30 percent of their income in taxes.

The vote came the day before Americans’ annual taxes are due.The 51-45 count along party lines was designed more to win over voters and embarrass senators in close races this election year than to push legislation into law.Obama denounced the vote, saying “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.”Republicans called the measure a divisive Democratic distraction from the nation’s real problems.“This legislation will do nothing with regard to job creation, with regard to gas prices, with regard to economic recovery,” said Sen. Jon Kyl, the No. 2 Senate Republican leader.

Monday’s vote was the first time a so-called “Buffett rule” proposal has come to a Senate vote this election year. Citing complaints from billionaire Warren Buffett that he pays a lower tax rate than his secretary, Obama has said everyone earning at least $1 million a year or more should pay at least 30 percent of their income in taxes.With presidential and congressional elections approaching in November, the vote was a glimpse of the broader battle the two parties are waging over an economy that’s still having a tough time creating enough new jobs.

The Senate vote was on a measure 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 fight has been politically irresistible for both sides.It allows Democrats to take shots at Mitt Romney, the wealthy, all-but-certain Republican 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, earning around $21 million both years.

For Republicans, it’s a chance to accuse the measure’s 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.Obama’s tax return shows he earned nearly $790,000 last year and paid an effective tax rate of almost 21 percent.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 the safety-net programs 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 says that even so, some millionaires pay 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. – TOI