April 17, 2012

Republicans in the U.S. Senate blocked the so-called Buffett rule, President Barack Obama’s proposal to set a minimum 30-percent federal income tax rate for the highest earners. The name of the bill refers to billionaire investor Warren Buffett, who has long complained that his secretary pays a higher rate of tax than he does. The vote, 51-to-45, was largely along party lines. Under the Senate cloture rule, the bill needed 60 votes to move forward for full debate. For most of the rule’s history, the threat of blocking legislation through filibuster was rarely used. In recent years, however, it has become commonplace.

President Barack Obama, a Democrat, argues that raising taxes on Americans earning more than $1 million per year would help reduce the deficit and make the tax code more fair. Most Republicans oppose the measure, calling it a political stunt that would actually kill jobs. “By wasting so much time on this political gimmick that even Democrats admit won’t solve our larger problems, it’s shown the president is more interested in misleading people than he is in leading,” noted Senate Minority Leader Mitch McConnell. The president responded that Senate Republicans chose “once again to protect tax breaks for the wealthiest few Americans at the expense of the middle class.”

Warren Buffett, one of the world's richest men, has long complained that his secretary pays a higher rate of income tax than he does. (Courtesy of Berkshire Hathaway, Inc.)

Most American pay approximately 30 percent tax on earned income; by contrast, the income tax on capital gains–that is, money realized from stocks, bonds, real estate, and business partnerships–is about 15 percent. The income of many wealthy Americans, such as Warren Buffett, comes from capital gains, rather than from regular employment.